Those Darned Program Trading Bots

Fascinating story breaking on Goldman Sachs.  Zerohedge has been reporting this quite closely. Karl Denninger also picked this up at The Market Ticker, sometimes referencing DailyKos, a sketchy over-the-top political site, so caution is advised as I cannot attest to the source and have seen DailyKos manufacture stories in the past.  Bots were almost 50% of the market last week (that is fact), but apparently (this is speculation) GS got kicked out of the NYSE for computerized trading, and a former GS employee got himself arrested for stealing the bot code.  The claim goes further (this is rank speculation since this is very illegal activity) that GS was peeking at the trades before commit, enabling it to skim some vig.  Those 'pennies' can add up big time.  Again, not sure the truth of this story, but watch for developments.  

As Brian commented to the last post, the STU tonight referenced an unusual bot activity at the close in the S&P - huge volume driving the market to close above the head & shoulders neckline. Will this matter? Probably not. Often after a H&S pattern, the market will retest from below the neckline, then fade off it. Attempts to manipulate like this one (if indeed that is what happened) tend to get overwhelmed by larger market forces.  It is too easy to fall into conspiracy thinking. If the PPT were so powerful, how did we fall 50% off the top in 2007 so rapidly?

Head & Shoulders chart courtesy Safehaven.  A great backgrounder on the pattern is here.  

The STU count remains wave [2].  They think this current (X) wave down could retrace 50% of the whole move from Mar6 in a double zigzag, which would be in the range of the expected 'drop below the neckline of the distance above to the head' of an H&S pattern.  They still expect a higher high later this summer.  

Although they haven't commented in a while, I believe their alt count is wave (1) of [3] down, if Jun11 is indeed the top.

One thing to watch is how the USD resolves a potential triangle,  If it goes above DX 81.37 then it should run up towards DX 90.  Given how the USD and the Dow are somewhat inversely related recently, this could mean the Jun11 top is it. Lots of volume in the Forex today.  The DX triangle is a fourth wave, and indicates a final drop first before the USD strengthens.  In my view, we should see the DX drop out of the triangle about the same time the Dow begins the FInal Surge.  My guesstimate is a down market into Jul17 (options expiration), and then the FInal Surge.  As the USD drops into late summer, the Dow will rally, but then a huge reversal of Dow and Dollar will signal the real top.  

Comments

[Rob]

I agree with a potential bottom of July 17th, which coincides with McHugh's phi-mate turn date +/-. There is also a major Bradley model turn date July 14/15th.

I think STU is being over zealous with its downside projections. There will not be enough time to achievet those projections.

[EN]

Good blog. I could care less about the predictions. There is nothing like being in like Flynn with better than break even stops. When all those bulls came out at 950 to proclaim a new bull market I just keep shorting and shorting and shorting. . . with much fear, including vomit.

Good luck to all!

PS - That July 17 date could well mark the bottom of a C wave with a D up to follow. Should be interesting.

[Papillon]

People are already mentally zeroing in on the 825-850 area. The financials report next week from the 14-17th. Good results could send the dow back for the surge to a higher high before Sept/Oct coming knocking...

[anon_aka_TERA BAAP]

I have been AWAY for few days.. SCANNING the different message BOARDS.. it seems MINOR correction has made WHOLE WORLD into BEARS

THOSE who think TERA_BAAP has not done real trading...HAHAHHAHA

i shall POST a FILE..where i SCAN my buying of bulk shares GOLDMAN SACHS in 60's range.. this SMALL correction is LAUGHABLE..

my WAVE COUNT indictaes that HUGE rally is coming...i am VERY LONG...as every GRANDMA and GRANDPA is buying PUTS!!

finding a BULLISH comment is like NEEDLE in HAYSTACK!!!

tomorrow..GAP UP which will NEVER fill...as we go much much HIGHER..BEARS will be DEMOLISHED

MARKETS like to travel LIGHT <=== VERY important lesson

TERA BAAP

[tomorrow..GAP UP which will NEVER fill]

http://www.traders-talk.com/mb2/index.php?showtopic=108213

[So many people were buying puts, the P/C ratio declined all day]

I don't use the P/C ratio because it isn't precise enough for me, but from a peak of 1.25 in the morning to 1.05 by the close. No one was fighting the tape. That's data straight from the CBOE site.

Also, anyone who can pull up a chart of the equity ($cpce) and total ($cpc) put/call ratios on stockcharts.com can see they haven't even spiked above their June 17th highs.

You know, when you have to lie about data to support your market view, you might be on the wrong side of the market.

[vipul garg]

good line anon-aka-tera-baap
"markets like to travel lite"..since it has been falling , who is to say it is not lite in this direction.

head and shoulders dont exist for ellioticians , so for want of wave count , lets not make this a 'planet yelnick edward and magee blog.'

[DG]

vipul,

I just posted the most bizarre NeoWave chart I've ever put together over on the Neely blog. It is really out on a limb, but you will possibly like it because it is based on a running triangle pattern.

[KRG]

TERA BAAP
I remember you mentioning that you like to buy all the way down and buy all the way up..

Pls post your bullish count

VG : fresh impulse down on Nifty (if 4450 doesn't exceed?)?

Cheers

[vipul garg]

DG,
i saw that.its quite bizzare.you have to be looking at a lot of rules to make one like that.
i think any running formation has to be ruled out for now.thats a very weak structure.
i didnt quite like yesterdays market action .so for want to losing whatever can be had, i ve covered shorts yday.
i have had a feeling that as we approcah 860 it will be time to get out .but market looks it will take time to reach there.
looking for shorting at higher levels especially where head and shoulders pattern traders will experience a breakdown and some blog members will be willing to buy ( and not just say they have bought )!!

KRG,
beats me what nifty is doing.my stop loss is 4122 on nifty cash..looks like we need a bounce . if stopped out , need to reassess whats happening.there is too much negativity in the air .
i am very suspicious of any impulse happening any where..nifty, sp500.

[tera baap. Get a dog. Bernanke says your mouth stinks.]

tomorrow..GAP UP which will NEVER fill...as we go much much HIGHER..BEARS will be DEMOLISHED

tera baap. Get a dog. Bernanke says your mouth stinks.

[Gap that never fills]

tera baap,

I'll show up when I'm good and ready, not when you call for me!

[vipul garg]

not good for for short term bears if sp500 cash is to close around or above 890

[da bear]

a RALLY for the next two weeks or so would make more sense.
bears tried to push the DOW below 8,000 or 8,100 and were not successful (so far).
next week is options expiration week and those weeks are usually bullish. a rally for two weeks could take the DOW higher to around 8,700 to 9,200 which would put in a decent wave 5. by the looks of things i can see a steep and strong wave 1 up, a shallow wave 2 dip, a long but not strong wave 3, this current pullback which did not breach DOW 8,000. so a short term pop here would put in a nice top.

speaking of sentiment you can can get DIA 87 calls that expire next friday for 5 cents. if the dow has a nice rally for the next few days then you have a chance to make some money...

i haven't read the STU (don't subscribe to it) but it seems as if they are expecting too many big moves in too short a time. although i don't know what an X wave is. but i can see a potential for a five wave count off the March lows.

da bear

[da bear]

looking at UUP (bullish dollar ETF):

it looks like UUP made its final low at $22 around mid-July last year just before the panic move into the dollar as the stock market melted down.

here is a link to the one year UUP chart: http://bigcharts.marketwatch.com/advchart/frames/frames.asp?symb=uup&time=8&freq=1

from the mid-July low you get the first move up, then a steep pullback in September then a rally (wave 3), a pause (wave 4) then a final advance (wave 5). The big wave down in December could count as an A wave, since the dollar made a slightly lower high in March as the DOW made a lower low then i would count that as a B wave in UUP. this move down since the March secondary high is the final wave C down. in this wave C down there is a clear wave 1, 2, and 3 completed and we are in wave 4 now. UUP is weak today so the minor wave 5 down could begin very very soon. if you take 1.618 times the A wave low then wave C low should put a low for UUP at $21.84 (which is level where the big up move started last year).

here is a two year chart of UUP showing how much support there is at $22 (or so) for UUP. then we get a replay of last fall...

link: http://bigcharts.marketwatch.com/advchart/frames/frames.asp?symb=uup&time=8&freq=1

da bear

[Sven]

NEoWave Institute's Glenn Neely is forecasting the largest vertical drop of the decade for the S&P 500. Neely predicts the stock market will decline 50% in the next 6 months.

Aliso Viejo, CA (PRWEB) June 16, 2009 -- Glenn Neely, founder of NEoWave Institute and prominent Elliott Wave analyst, today announces a startling prediction: The S&P 500 is forming a major top in June, which will be followed by a large decline, eventually pushing the stock market to record lows for the decade.

"Technically speaking, according to NEoWave a correction began at last October's low; the March-June rally is the final leg of that correction," Neely explains. "The March-June rally is now ending, allowing the bear market to resume. During the next six months, the S&P will decline 50% or more, breaking well below 500!" Currently, the S&P is hovering around 917.

[Muras Gupta]

Harry Dent 2009 update

http://www.youtube.com/watch?v=e_JzAEzYLt4

[Vassko]

I don't like the whole manipulation conspiracy as I've always believed it is just a psychological excuse made when people lose, but I do have to admit that the markets have looked extremely inorganic the past few weeks/months, and the direction of that mystery has always been what the US govt. would like to be happening. This is in the stock indices, and US dollar.

[mttoolkit]

what does an organic market look like

[george]

based on the work of zoran gayer and
glen neely shouldn't there have been
an increase in speed in the downward
price movement by now? shouldn't
volume have picked up by now?

[george]

based on what i have heard on
cnbc in the past head and
shoulder patterns are only
slightly better than 50%
accurate. it seems like
if this market was going
to drop it would accelerate
and increase the downward
angle if it is a massive
downwave and volume would
pick up.

[CNBC]

they are sales guys. they do not promote bad news.

[Eventhorizon]

Does anyone care to explain how GS makes money front-running its own bot?

[Muras Gupta]

>based on the work of zoran gayer and
>glen neely shouldn't there have been
>an increase in speed in the downward
>price movement by now? shouldn't
>volume have picked up by now?

speed and volume should likely pick up as we get closer to the lunar/solar eclipses which aren't until august

august could be the epicenter of the decline if July 17-22 lows are just the first wave down.

[Papillon]

Put it this way, if you believe in astrological factors (some traders do)...PPI, Wholesales, CPI, etc come out exactly on the Bradley turn dates 14-15th of July. Could this start the move down to complete Prechter's X wave(~789 in S&P), I don't know, but it would be convenient. Then Prechter can get his rally to near to or above Jun 11 high (maybe after "good" GDP at the end of the month). Then after the honeymoon, we start the most severe decline near the end of August into mid September. It would seem too perfect if it played out like this, but something that I try to do to see what events coincide with waves. Any buyers of this theory?

[drama obama]

rally to near to or above Jun 11 high (maybe after "good" GDP at the end of the month). Then after the honeymoon, we start the most severe decline near the end of August into mid September.

sounds like a drama. unless true earnings are better than last quarter.

[ino]

Friday's close might be interesting.

If SPX breaks down below 870 last support, no amount of bullish talk will stop it to fall to 820 or 770, first thing next week.
And the bears, simply going with Neely's prediction, could smile fat in October.

If SPX can manage to close above 890 today, all bearish and bullish EW interpretations remain open.
If we get a 15 SPY point rally before close, then the B wave correction since 11June is completed. And a new C wave takes us to new high above 950.

So, can you imagine the PPT to come into town after 3.00 pm and do the lifting job? Lately the Friday's close attacts buyers.

Anyway, a SellStop at 870 and a BuyStop at 890 looks like a lowrisk shortterm trade.
Just my thoughts.

[Does anyone care to explain how GS makes money front-running its own bot?]

Does anyone care to explain how GS makes money front-running its own bot?

Anyone?
sounds like GS did not take positions (at least long term), but killed stops back and forth.

[vipul garg]

Lately the Friday's close attacts buyers.
Posted by: ino | Friday, July 10, 2009 at 10:45 AM

this friday and other fridays look different to me .
may be its time to be contrarian to what a friday normally does.

[Vassko]

"what does an organic market look like"

This is when the market is working in relation to its natural harmonics on a consistent basis.

[Muras Gupta]

"rally back to June highs"

not according to Neely....Neely says STRAIGHT DOWN

Link:
http://www.traders-talk.com/mb2/index.php?act=attach&type=post&id=11041

[GS]

how much do people anticipate GS's profits this quarter? GS release earnings coming tuesday.

[Yves]

for those interested see the guest piece on blackswan currency of friday
http://www.blackswantrading.com/files/articles/6c5b0af195d4aa1c304c33070f6ea1f8bsccc071009.pdf

Yves

[Hank Wernicki]

Ok, Neely Nailed it ! I'm impressed ..

Prechter will be a little late but correct .....

NDX 5/6/94 @352.36 ( daily 20 year chart ) is the Child Fractal TOP

Go to the weekly charts ( 3 year ) for the NDX and you will see the Parent Fractal TOP

( identical and exact )

July 11th high will stand as the Top

Use rallies to short ..... rally party is over !

EOM

[kld]

Interesting Read - http://sites.google.com/site/disclosuredelta/

[henry4]

Henry Paulson-the worst secretary of treasury in the history. as Gingrich said.

he made it all possible.

[henry4]

I will believe in America if they all go to jail.

[[email protected]]

I am starting a Neely River Theory trading blog. I want to allow others to post besides myself, but of course respecting Neely, only previous students will be allowed to read/post

Email me at [email protected] to answer some quiz questions if you want to follow this blog

[anon_aka_TERA BAAP]

BEARS does this feel FAMLILIAR??

http://www.breitbart.com/image.php?id=iafpCNG.6dccf892a575a132362bf4c9690907a5.631p0&show_article=1&article_id=CNG.6dccf892a575a132362bf4c9690907a5.631

A man is gored by a Miura bull during the San Fermin festival in Pamplona, northern Spain. The festival is a symbol of Spanish culture, despite heavy condemnation from animal rights groups, and attracts thousands of tourists to watch the bull runs or take part.

HAHHAHAHAHAHAH