I think computer trading making things weird?

All-
Although an 11% correction IS long overdue, what strikes me as strange is the inter-day volatility. I don’t remember seeing anything like the after hours/regular hours price swings of this earnings season before (I’ve been in the market since the early 90’s). I did a Google search on it, and did not come up with anything specific to recent volatility so I am just going off my gut. Still it bothers me that a high frequency trader can carve out his pound of flesh in the seconds before our stock trade goes through, and I guess they are the cause of the recent volatility (yup, I can hear the black helicopters circling my home as I write ;o)

Ever since the 2010 flash crash, I have been concerned that bad things can happen from those guys. Although nothing to my knowledge has happened since then as a result of high frequency trading, I have not seen any reforms to the market to keep it from happening.

That said, I think most of the volatility is for the best. I am gradually adding to quality holdings as the market dips. The magnitude of this dip is nothing unusual historically speaking.

bulwnkl

7 Likes

Curious about just how much drop we have seen, I did a few computations.

Since 8/17/15, i.e., the last three days:
DJIA 6.2%
NASDAQ 7.6%
NYSE 5.8%
S&P 500 6.3%

Going back a little farther to some recent highs:
NASDAQ 7/20 9.8%
S&P 500 7/20 7.4%
DJIA 7/16 9.2%
NYSE 7/16 7.5%

If one goes back to May the NYSE and DJIA have gone down 9.3% and 10.1% respectively.

2 Likes

I double checked against VTI, a proxy for the total market. From May, it was off 8.31%, so I rushed through things and was off. Fair point.

2 Likes