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Program Robot Hysteria


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#1 wndysrf

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Posted 05 March 2003 - 02:56 PM

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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#2 Sphinxter

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Posted 05 March 2003 - 05:08 PM

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.

#3

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Posted 05 March 2003 - 05:12 PM

Thanks, Mark. I always enjoy your work.
Apologies to any who have seen this, but...

http://www.foulds200.../economists.htm

Note how they look up and smile when the chart point is at the top of the chart and look down, frown and become agitated when the chart point is near the bottom of the chart.

Need a revised version for stoolies :lol:

#4 PileDriver

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Posted 05 March 2003 - 05:32 PM

Waterfall tomorrow, or Friday at latest.

#5 Yaryman

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Posted 05 March 2003 - 05:33 PM

"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...60b70cb1_1.html

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

#6 bubbadropping

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Posted 05 March 2003 - 05:45 PM

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.

#7 The End

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Posted 05 March 2003 - 05:48 PM

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.
NONE of what I type, should be taken as financial advice.

And when you loose control, you'll reap the harvest that you've sown
And as the fear grows, the bad blood slows and turns to stone
And it's too late to loose the weight you used to need to throw around
So have a good drown, as you go down, alone
Dragged down by the stone.


--Waters

#8 Slothrop

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Posted 05 March 2003 - 05:49 PM

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.

#9 PileDriver

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Posted 05 March 2003 - 05:51 PM

The S&P 500 offers "compelling value"

passed through...
http://ccwf.cc.utexa.../toys/jive.html

yields:

Da S&P 500 offa's compellin' value

:lol:

#10 BAREister

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Posted 05 March 2003 - 05:55 PM

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.
"The sphinx set riddles for people which they could not solve and the sphinx devoured them." Russian poet Ilia Ehrenberg reflecting years later upon the debacle of the Bolshevik Revolution and civil war

"In any case, experience shows people are unlikely to change their ways without a cataclysm of existential proportions" Meinhard Meigel, German economist and demography expert on his prophecy of a Wagnerian abyss of social and economic chaos

"We believe that here is no easy way out of this mess, and that the chance of a benign outcome, while hopefully possible, is quite low." Comstock Partners 3-17-2005

"Not without a shudder may the human hand reach into the mysterious urn of destiny." Junk email promoting the sale of Valium, Viagra, Soma and Cialis. Of course, we AMERICANS need not WORRY about such CLAPTRAP!!!

"The trouble about myths, or lies, is that those who foster them are stuck with them." Edward Crankshaw

"I don't buy the idea that a crash will come without warning. There are always warnings. All crashes have certain common technical preconditions." Doc (snorjt)

"YOU look IMPORTANT. Are you important, or just....WEIRD?"
"Bob I am" at a political gathering, to HRFF, 9-29-04

"Are YOU C.I.A.???"
"No, I'm not "CIA"."
"Well, you sure LOOK LIKE you're C.I.A.!!!"

Lead singer of the rock band KISS to HRFF at a luggage carousel at SeaTac airport circa 1996

"Unlike you, I use words people can understand." Doc

"America at the moment, with its faith-based currency, faith-based economy and faith-based government, might be a heaven for those who love faith, but it's a hell for those of us that respect evidence." The Daily (W?)Reckoning, circa 9-17-04

"What should be clear at this point is that even huge fiscal stimulus and unprecedented financial excess are incapable of fostering a sound and self-sustaining economic expansion. The paramount issue, today and going forward, is the deeply maladjusted U.S. economy and its increasing unresponsiveness to even enormous yet misdirected financial stimulus. Both the Financial Sphere and Economic Sphere are severely maladjusted." Doug Noland's Credit Bubble Bulletin, Aug 24 '04

"U.S. dollar purchasing power relies almost entirely on the difference between interest rates in Japan and the higher rates in the United States." Warren Pollock, Prudent Bear essay circa 9-04

"What about your replacements? the Children. What do we tell them when the whole thing caves in?" HyperTiger

#11 The End

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Posted 05 March 2003 - 06:00 PM

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...
NONE of what I type, should be taken as financial advice.

And when you loose control, you'll reap the harvest that you've sown
And as the fear grows, the bad blood slows and turns to stone
And it's too late to loose the weight you used to need to throw around
So have a good drown, as you go down, alone
Dragged down by the stone.


--Waters

#12 On The Beach

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Posted 05 March 2003 - 06:01 PM

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!

#13 FeedFool

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Posted 05 March 2003 - 06:02 PM

Here is what I see is going on. I bet wreaked him can do better surgery and come with price and time to saw the right arm before it get real painful. :P

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#14 K Wave Rider

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Posted 05 March 2003 - 06:05 PM

This might help some in the Drug sector. Reduced forecast by 25%

Schering-Plough Lowers 2003 Forecast

#15 PileDriver

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Posted 05 March 2003 - 06:07 PM

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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