NEW TRADES ARE UP

I THINK MY POST FRIDAY CLEARED UP KIND OF HOW I FEEL ABOUT THE MARKET.

That being said, there still seem to some long opportunities, I call them "Cats and Dogs" trades, typically they show up and work right at the end of a bull run. Most of the time they can gain double digits in a matter of a few days, and most of the time you are best off taking the gift and running with it. However there are a few that are coming out of some nice bases, they don't construct a 3 month base for a 2-day gain, so if you enter any of those that are notated, you might want to keep in touch with me so we can monitor their progress as possible position trades.

About declines. A rather strange event in bear markets is even during a decline, you will typically find as many if not more up days then down days, even in a downtrend, it's just one of those weird facts about a bear market. The difference is the days that decline are much bigger, the other days are almost irrelevant, but annoying. Just so you know....

HFT's Flash Crash part 2

I have to admit, I know people who work on black box systems and the main concern always seems to be latency. They were always upgrading and adding features to get the fastest executions possible.

I also have to admit that I don't know how long it takes or how many pings are needed to figure out if a an iceberg (a large order that you are only seeing the tip of through 200-300 share transactions) is likely. It may be 3C is picking up on distribution before the stock catches the attention of the HFTs, I just don't know, what I do know is with this exceptionally fast version of 3c, literally order to order, it seems to be identifying distribution before the HFTs cause a flash crash.

Again, AAPL and LQD on 1 minute time frames.

 I wouldn't think that the action in AAPL above qualifies as a flash crash, but it certainly is a pretty decent drop pretty quickly. In both cases, 3C FAST VERSION picked up distribution, both into the gaps higher (see orange arrows)

Above LQD is showing about a day of distribution before the next morning's flash crash. The continued negative stance of 3C, suggests to me (at this very early stage) that there's more downside coming on LQD.

Unfortunately I have only about 2.5 days of data on a 1 second time frame and PGN's flash crash was longer ago, so here's a 10 min chart, again showing a relative negative divergence before the occurrence.

I don't think we can identify flash crash stocks, but once we find the stock, we may be able to identify the course of action that comes afterward to develop an edge in this phenomena of HFT induced flash crashes. So anytime you hear of one, notify me immediately and we'll see how it behaves afterwards on a 1 min chart and see if there's a pattern that develops. To me, uncovering icebergs alone tells us something worthwhile, such as someone has a position in AAPL they want to exit. We may not be able to catch the flash, but we may be able to catch the resulting crash.

High Frequency Trading

I don't know if the SEC has set their sights on HFT firms or not, I just decided to do some digging myself.  HFT firms in essence are the new market makers, trying to incover Icebergs or large orders that a fund may be trying to accumulate or distribute and then jumping in front of the market makers.

They may ping an order to sell AAPL at 300 shares, and another and another until they uncover a pattern, a big order being distributed.

So I created a very fast 3C, probably not fast enough, but decided to take a look. I don't know how long it takes HFT's to uncover an iceberg, but here are two recent HFT flash crashe and it appears this quick 3C may have picked up on them. How this information will be useful is another matter, I'll have to watch the behavior afterwards.

Here's AAPL and LQD