The Phaserl


When Algos Turn Bearish

from Wolf Street:

Stock market volume is a sadly drooping southward curve, interrupted by violent spikes. Volumes and turnover rates are now back to levels of the late 1990s. If high-frequency trades and ETF-arbitrage are taken out of the equation, turnover might well be back to where it was in the 1980s. So algorithmic trading – for example, an instant burst of computer-generated buy orders based on a headline that hit a fraction of a millisecond earlier – can have a big impact on the market overall.

Art Cashin, in his “Market Commentary” for UBS on yesterday’s market action – “Bulls Turn Tide, Maybe Helped By Artificial Intelligence” – put his finger on the power of those algo trades:

U.S. stocks followed the lead of European markets and moved lower after a mixed opening. A key negative influence was further weakness in crude, which had Chevron and Exxon subtracting over 20 points from the Dow by mid-morning. Also hurting was a continued ratcheting up of interest rates around the globe.

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