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Morning Market Briefing – Friday – 08/23/2013

You can always count on Thursdays for market glitches and fat fingers.  I remember when on Thursday May 6, 2010, the DOW dropped 1,000 points.  Everyone was quick to identify the problem; a huge bearish E-mini bet caused all markets to go into sell mode.  The selling kept escalating to a point that no robots were buying, only selling.  While traders (smarter than robots) attempting to buy ridiculously priced stocks were having orders reversed, canceled, or simply neglected.  Personally, I don’t think it was an accident. Ironically, those crazy days are the days that make me feel sane.  Can only be because I love the game, I love the challenge, and I’m ridiculously good at it.

Yesterday, another robotically challenged Thursday, was fun.  For a second there, I thought I called the top perfectly (around 11:00AM eastern).  I was all out, in cash, confident I made the right call.  The market was going down.  I was anxiously waiting Jim Cramer’s Hi Five tweet when suddenly the NASDAQ flat lined.  For over 3 hours, no one could fix the problem.  Yet, an army of glorified TV economic advisors fixed the blame.  Some, blamed bearish bets on Apple, others blamed each other, while I blamed Number 5.  That silly robot came alive and no longer followed its code.

As it turned out, NYSE Arca was sending out locked bids.  Some believe that the Apple was poisoned and used as a weapon of mass destruction.  I think that in a market which market makers can post 100,000 bids in a nanosecond and remove the bids before the actual orders can be fulfilled, glitches like yesterdays are bound to happen.

From the WSJ

NYSE Arca’s connection to the data feed Thursday morning Eastern time was temporarily intermittent, according to the people familiar with internal Nasdaq discussions. Arca in the morning reported to the market problems processing order messages, but then said the issues were resolved.  But inside Nasdaq, executives pointed to those issues as triggering software and hardware problems on the data feed Nasdaq operates, according to people familiar with the discussions.  It couldn’t be determined what specific hardware and software issues were caused by connectivity problems with a single exchange, which shouldn’t have brought down so key a system used by market-wide.”

Arca issues are the least of my concerns.  When 99.9% of the bid/asks are phantom, the majority of the 0.1% of actually offers are executed in dark pools, and robots are trading off internet news written by robots, it’s not hard to see why the market is so miss priced.  This morning, I’m just going to wait and see if the robots are playing nice with each other.

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