No Market Rhythm

At night when you turn off all the lights
There's no place that you can hide
--Miami Sound Machine

Among several interesting remarks made by Stan Druckenmiller in this interview snippet was this one concerning algos and price distortions:

"These algos have taken all the rhythm out of the market, and have become extremely confusing to me."



The commentator subsequently observes that the machines, which now manage a very large fraction of dollars currently in US stock markets, have been buying the uptrend for years. We really haven't seen them sell to any large degree...yet. He asks Druck how he is protecting himself against the downside when the indicators that help him tune into market rhythm are not working.

Druck replied that while he will trust his skills and instincts, "I will say, and I have proved it to my own detriment the last few years, the minute the risk/reward gets a little dodgy, I get a little more cautious than I would be without this [algos] in the background."

Add to this Fleck's comments in his Friday Rap:

"Based on conversations with friends of mine who have been successful at the investing business for 30-plus years, every one of them is frustrated and feels like they don't know anything anymore. In fact, I made a comment to one recently where I said, 'I feel like I knew more when I started out in the investment business in 1980, when I literally knew nothing, than I do about the market today, because it makes so little sense.'"

Massive distortions by central banks coupled with automated trading have destroyed sense-making, intuition, rhythm. It may take a crash before market rhythm returns.