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Mayhem In The Stock Market As The Machines Run Wild
Over the weekend, someone asked me, how they would regain confidence in the stock market after Friday’s over 2 percent decline. My response, never. You should never be confident in the market; it is when you get lulled to sleep that shit happens.
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Sharp Declines Continue
The past two trading days have been breath-taking, as I watched the Dow, and the stock market fall and just blow through various levels, it might have very well been Bitcoin trading at that point because the market was moving at speeds, honestly, I have never seen before. I have been in this business for over 20 years. I started my first summer internship in about 1997 when I was 19, but I began trading the market when I was 18 and started tracking the markets, even younger when I was 16. I repeat, I have never seen the market move with such speed.
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Incredible Speed
To show the speed of the market above is a one minute chart, and this so necessary to understand. At 2 PM the S&P was trading at roughly 2,730. By 3 PM it had declined by 40 points or nearly 1.5 percent. But from then it fell to a low of 2,638 by 3:10 PM. That is in 10 minutes; the S&P 500 fell by 1.93 percent, in just ten mins! That is not human, that is all ETF’s and ALGO’s just driving the prices down, and bids get pulled.
It is just a vicious cycle of the algorithm pushing stock prices, and ETF’s selling the stocks in the basket of the ETF’s holdings. It is the nature of the beast, and the effects can result in sharp downturns like today.
To sit here and say that at some level the S&P 500 is going to find support is crazy because as we saw today when the market is moving, it does not matter. The machines ran wild, and this is the what the human investor is up against.
As the chart above shows, the markets finished near the lows today, so to not see more selling to start the day would be surprising. In fact, what I would like to see is a gap lower on heavy volume, followed by a period of stabilization, and then a sharp turn higher mid-afternoon, with a positive close on the day.
Where would that turn occur? It is a good question, and I shall take a stab at it, and say 2,633. Again, this merely a guess and for entertainment purposes.
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The Rest Of The Market
But despite all the craziness in the equity market, which resulted in the VIX spiking by 115 percent to 37, as investors scrambled to buy puts for protection. Yields, the dollar, and gold remained relatively tame.
Gold hardly moved today, which is very surprising, because investors tend to hedge bets by running to gold as haven trade.
Even yields on the 10-year did not fall all that much, by maybe 8 bps, which doesn’t feel like a big move given the velocity of trading in the equity markets.
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[youtube-feed feed=7]Even the dollar index didn’t rise much.
If there is one piece of good news, it is that for now, this misery seems contained in the equity market, how long it will stay that way is an excellent question.
Any people ask me why I only invest for the long-term and gave up on the day-to-day to trading. Now you know.
Good luck.
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Tags: #sp500 #flashcrash #yields #vix #nasdaq #djia
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This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.