Monday, January 31, 2011

The Robots Strike Again!

Anyone who believes the trading robots aren't controlling the stock market must look at the chart below:

Quick Take:

This isn't some thinly traded penny stock folks.  This is the VIX which is highly liquid and it's used to measure volatility. 

There is no way the VIX can drop this violently.  This is especially true today because the volatility on Wall St has been very low.  The DOW has traded in a range of up 20-50 points all day.

The Bottom Line

This is why you should not be playing around in the markets long or short.  Stocks today are bought and held for seconds as the trading robots sell back and forth to one another in blazing speed.

Essentially there is no investing in the stock market anymore.  We now trade stocks versus investing in them.  Stocks used to be held for an average of 8 years back in the 1960's.   Today they are held for about the same amount of time as it takes you to sneeze.

Why anyone would invest their life savings in something as ridiculous as today's robot controlled stock market is beyond me.  

One day this is all going to end very badly.


Anonymous said...

When the robots go hay-wire, it's going to be a mess.

ManHands said...

I know Ive mentioned it before, but what fascinates me is not the instant recovery, but the massive move down in the first place.

The instant recovery makes sense. I could see someone writing an algorithm, if it goes down by X% over Y time then buy. However, what was the algo that prompted the move down?

At the time of the massive dip, the vix was trading within a normal days range - nothing special. So why, suddenly a massive dip out of nowhere? Did someone suddenly write a program, at 2:30, while the VIX is well within its normal trading range, sell everything, just for the fun of it?

Jeff said...


Who knows.

I just try and point out this crap.

I'll have something up tonight but it's going to be late.

Inflation showed up huge today in the ISM.