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Program Robot Hysteria


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Mark?s Market Commentary ? March 5, 2003

 

Unable to watch the afternoon action today, so today?s discussion will be brief.

 

Today?s market action in the morning is a perfect illustration of how Program Robots are now dominating the tape. With over 1000 stock screening programs being used by millions of eyeballs all watching the same action, its no wonder that the stock market is moving like a herd of Wildebeasts.

 

As Buddha says, best to follow the Simpleton Method of trading. Buy at the end of any day with a TRIN reading over 3.50. Sell at end of any day with TRIN reading below .40.

Fade broad market direction a week before Options Racketeering, and always go long at end of month. It seems that the Program Robots can never outgame the options market makers or the desperate 27-year old fund managers painting the tape.

 

Trying to out gun the Program Robots is fruitless. Note the chart from Paul Kedrosky's column at TheStreet.com: "Program Trading Casts a Pall on Mr. Market", which shows that Program Robots are accounting for over 40% of market action now. Joe Sixpack is petrified, sitting on the sidelines, waiting for the War Rally and/or Second Half Recovery. So the trillions of funds invested in over 6000 funds is now being gamed by computers. Daytraders are simply hapless rats, clinging to the edge of a boat in 100 foot seas. Some hang on, but most are swamped by the volatility and are thrown overboard.

 

Still waiting for Louis Rukeyser to interview 3 Program Robots, with the special guest being the U.S. Treasury and Federal Open Market Committee Robot.

 

According to Kedrosky:

 

?Is this a market dominated by program trading so devoid of human emotion that it becomes impossible to trade? Trading is largely a game of measuring and anticipating human emotions. All trading is done by computers.?

 

Kedrosky goes further to explain that all inefficiencies are discovered by the Robots, so eventually the inefficiency is eliminated. That explains the Black and White market, where all chart breakdowns and crashes are bought, and hysteria jamming and euphoric upside runs eventually collapse, because the Robots are all gaming in real time, all on the same side of the trade, so the prevailing direction eventually reverses when the Program Robots have stopped buying or selling.

 

?At some point the computers will become so efficient that no edge exists anymore and there is no profit to be made. When program trading fails to produce results, its power will diminish, and traders will look for other inefficiencies to exploit. If it's easy to produce consistent profits through program trading, then it will keep attracting more and more money until it is no longer easy. It would be interesting to know what sort of results program trading generates at this point. Are the firms running those programs making big bucks? If they are, then why isn't more and more money flowing into this type of trading? If they aren't, then how long will it continue??

 

This is the key question. Are the Robots making any money? If not, will the poor results eventually show up in the HedgeHog statement prints? And what if all the results from all of the robots turn out to be mediocre? Will there be a run on the funds and HedgeHogs? Will the volatility eventually be the markets ultimate undoing?

 

Alan Newman has pondered the question. How high will the Program Trading percentage get? 50%? 60%? 70%?

 

Who knows?

 

I?m working on a special piece on Derivative Exotica. Hope to have it ready by tomorrow.

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I have a question:

 

If the Elliott waves are meant to align with human behavior, that is to somehow encapsulate the herd mentaility with all its emotions and fears and hopes and doubts, do they get thrown off by inhuman robotic trading?

 

I mean, humans cannot calculate multifactorial risk spreads with micro second execution. Do robots diminish the value of waving?

 

Not looking to stick it to anyone, I'm new to this and it's an honest question.

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"Snow's words at midday - a blunt "Let me reiterate my support for a strong dollar," came

at a currency signing ceremony with Treasurer Rosario Marin. It followed moderate selling

in the Dow and Nasdaq early in the session."

 

http://biz.yahoo.com/cbsm-top/030305/d8352...60b70cb1_1.html

 

The more times they talk about about a "strong dollar" the weaker you know it is.

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As mentioned yesterday and during the trough this morning, robotry proceeding apace. Look for topping out tommorrow around 7850 area, perhaps 7900. Will look short come Friday sometime. Technically the earlier breakdown point is either 7800 or 7850 but usually during hysterical jam sessions, the market falsely exceeds its 'breakpoints' since everyone is reading the same tape. This all ends with Sigma 10 and not before. Al Green doesn't care an iota. He is out this year anyway so printing more money each day is no problem. When one trades short they trade against their own government at all times. What short circuits this nonsense is a sudden jolt or change of scenery in the geopolitical landscape. That time I sense is overdue and coming. Those in power now are so blatantly arrogant they are like the fat bully on the playground begging to be tripped up and gang punched in the mud puddle out back behind the school yard.

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Sphinxter,

 

It's Elliott not Elliot.

 

In answer to your question. I have seen ewaves work so well AT TIMES that I don't think the robots have any effect. JMHO. :grin:

 

By the way Still short and added to Tempest at the closing prices.

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I have a question:

 

If the Elliot waves are meant to align with human behavior, that is to somehow encapsulate the herd mentaility with all its emotions and fears and hopes and doubts, do they get thrown off by inhuman robotic trading?

 

I mean, humans cannot calculate multifactorial risk spreads with micro second execution. Do robots diminish the value of waving?

 

Not looking to stick it to anyone, I'm new to this and it's an honest question.

No, it makes no difference. Robots are designed by humans. Nothing changes. Elliott Waves stick like glue. We might see more sudden, sharp dramatic moves, but they will still be measurable.

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THIS market is jittery enuff that a Sigma 3 might suffice...

 

 

HRFF thinks there won't be a "waterfall", pre-war. He also thinks war will fail to produce a rally. He rather thinks that prices will begin to decline when or right around hostilities, now rumored to be circa Mar 12, then accelerate ass things go haywire FUR the U.S.

 

The war has yet to begin, and, ASS predicted HAYWIRE theory is already in play - Turkey being a prime ex.

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Can't wait till' tomorrow Stoolies. :grin:

 

Bruce Springsteen Off the Born to run album.

 

 

TENTH AVENUE FREEZE-OUT

 

Tear drops on the city

Bad Scooter searching for his groove

Seem like the whole world walking pretty

And you can't find the room to move

Well everybody better move over, that's all

I'm running on the bad side

And I got my back to the wall

Tenth Avenue freeze-out, Tenth Avenue freeze-out

 

I'm stranded in the jungle

Taking all the heat they was giving

The night is dark but the sidewalk's bright

And lined with the light of the living

From a tenement window a transistor blasts

Turn around the corner things got real quiet real fast

She hit me with a Tenth Avenue freeze-out

Tenth Avenue freeze-out

And I'm all alone, I'm all alone

And kid you better get the picture

And I'm on my own, I'm on my own

And I can't go home

 

When the change was made uptown

And the Big Man joined the band

From the coastline to the city

All the little pretties raise their hands

I'm gonna sit back right easy and laugh

When Scooter and the Big Man bust this city in half

With a Tenth Avenue freeze-out, Tenth Avenue freeze-out

Tenth Avenue freeze-out...

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Program bots on Ruke... :grin: :grin:

 

LR: It is my pleasure to welcome three distinguished jammers of the market to my oversized, overstuffed den of insanity.

 

LR: Bots, give our suckers...er viewers your thoughts on today's markets?

 

Bot Numer One?

 

Bot Number Two ?

 

Of course. And, Bot number three. Your thoughts?

 

Yes. And finally our special guest, what say you?

 

DANGER!

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Feed ,

 

Neither line

 

Notice the clean five wave decline from reversal Monday followed by a clean a-b-c "jerk-me" rally just now.

 

Its over. :lol:

 

MASSIVE DECLINE DEAD AHEAD

 

PD = 1/GTN

 

GTN, you still long? Good luck dude, nothing like trading against the trend and trying to pick turning points :lol:

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