The Fed & Co against the Machines

Posted: January 22, 2016 in crash, Uncategorized

This week will be a decision maker.

We just had Draghi speaking and China intervening. Now next week we wait for Yellen and the all important FOMC.

The issue is SP500: 1,870 and the algorithm trading.

If the Reserve Banks cannot stir the market decisively above  1,870 the machines can see two targets 1,785 in the near terms and 1,500 between here and October.

What is worst, as 2008, a lot of asset classes looks like linked…so not much protection there.

Scary picture, I know. very few places to hide.

Algorithm trading is really diffused in the US – not a fantasy or a conspiracy theory (there are several pieces of information even from the SEC – Security Exchange Commission -US). Last year they seem to have a momentum trading style (so pushed over and over the FANG – Facebook, Apple, Netflix, Google) – this year they seem to have changed style in a price/volatility.

Evercore data signals that on 101 momentum stock, only 5 have risen since start of 2016. Now Robotic buy/sell by quantitative machines has turned to price trend/volatility.

There are a few strategy to fight back – but overall, for the market, only the the Gang of Reserve Banks (US, China, Japan, Europe and England) can save it.

Definitely, if you are not aware of this, you have a problem.

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