We'll get him to share some of these shortly. In the meantime here's a strategy-related post about 2-27-2007:
This vacillation is the product of:
- Thin markets (i.e., low liquidity)
- Algorithmic market making
Here are some facts and observations:
The market has been quite schizophrenic since 2-27-2007 and is still terribly over done. How many months now without a 10% correction? We are in the longest period without one.
Everything's out of whack for old school thinkers like me - people that make a few trades a day, they won't even notice.
Take a look at the smooth action in the S&P before 2-27 and then after. The market is extremely thin with average transaction size being 400 shares on the NYSE these days.
Figure 1.0: Pre 2-27-2007
What happened on 2-27-2007? They pushed the STOP button pure and simple -the system operators weren't even supposed to put trading curbs in until the Dow was down 1200 points. The NYSE simply pushed the stop button - a do over - whatever you want to call it. Then they blamed it on a 'network problem'. Hmmmm.
Figure 2.0: Post 2-27-2007
As far as strategies go, I have many that are working – unfortunately most of them are designed for automation.
Tuesday, May 22, 2007
Schizophrenic Since 2-27-2007
Jamie Hodge submits his thoughts in response to recent observations on the high degree of vacillation in the markets: