Rumors of an AAPL Flash Crash/Pair Trade

Who knows who's right, but there's a site that is talking about the AAPL end of day decline vs the ES end of day pop and is insisting this is a long AAPL / Short ES pair trade being unwound at the close.

There's no proof of any such trade en masse existing by their own admission, it's something they think is confirmed by the end of day action. This is 800,000 shares of AAPL sold in the last second, but by  their own evidence the orders are routed through various exchanges which is something that is done when large orders are accumulated or distributed so one large order isn't seen on one exchange, this eliminates the probability of High Frequency Trades. As they also admit, "it looks premeditated" as would a stop run, but to pull this off, they'd have to sell 800k shares in AAPL through various routing centers as well as cover the offsetting amount in ES.

Sometimes we forget that for every sale there's a buyer and vice-versa. lets take a look...

This is what the pair trade looks like-if it was a pair trade, the SPX (as ES went up) goes up as AAPL goes down, AAPL is being sold and ES is being covered according to their pair trade thesis.

 Using the same version of 3C as we use on ES, we look at AAPL, it's actually at a positive divergence at the EOD, which sounds and looks more like stops being hit and accumulated; that certainly seems a lot easier to pull off (bring AAPL below the stop level and they automatically go off) rather than trying to sell AAPL and cover ES all at the same time through multiple exchanges in the last second of trade.

The multiple exchanges would also explain the dump as the stops are a mental condition of traders so they'd all be at the same place-right under intraday support no matter what exchange they are on which is merely a function of who their broker chooses to route orders through.

 If ES is being covered during this then why do we have a distribution signal at that level?

Sure, when they put this chart up it looks like the pair trade they suspect...

However, looking at the same last minute/second of trade, look at these totally uncorrelated assets doing the same thing.

 High Yield Corporate credit being sold as ES is moving up-just like AAPL

Junk credit doing the same.


And these are only 3 of 4 assets I looked at, so unless credit has some implicit correlation with AAPL, I'd like to hear how they explain the same moves made in credit as AAPL, sounds more like plain coincidence and a last minute stop run in AAPL.

Lastly, for such a strong, unabated sell-off of AAPL en masse, the closing candle sure doesn't look like there was nothing but pure supply in AAPL.

That's pretty close to a bullish hammer, if it was all supply like they are leading everyone to believe, the close would almost certainly be at the low.

Truly Lastly... Why not close this trade throughout the day rather than the last second of which the logistics of selling through various routing centers would be a nightmare (unless all of the separate routing was due to individual hedge funds that all did the same trade all together at the last second which would be another logistical nightmare with no upside for any one fund as the overwhelming supply would knock their fill down) , but if it were simple stops hit, it would be exactly as it looks as individual retail traders are routed through numerous centers depending on their broker.

Sometimes people are so smart they need to be pulled out of the rain.