Algo Rhythms

So if you see me acting strangely
Don't be surprised
I'm just a man who needed someone
And somewhere to hide
--Styx

Monday's 600+ pt down day in the Dow was the worst Christmas Eve showing since the Great Depression. The pre-market gap higher in the futes this am was probably not what the bulls really needed as it has been getting sold out of the gate.

WSJ article speculates that automated trading, which makes up over 80% of daily volume, is exacerbating downside movement. The thesis, something that these pages have discussed for some time, is that black box trading is largely grounded in trend-following algorithms.

Just as they amplified moves on the way up, the robots are likely to amplify moves on the way down.

In the near term, stochastics suggest an oversold condition ripe for a snapper (i.e., snap-back rally). Then again, in bear markets, oversold often becomes more oversold.

no positions