machines run wild fall

Mayhem In The Stock Market As The Machines Go Wild


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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Machines Gone Wild

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.

S&P 500


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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.

stock market

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.

^VIX Chart

^VIX data by YCharts

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.


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