Advertise | Bookmark | Contact Us | E-Mail List |  | Update Page | UraniumSeek.com 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

Gold Seeker Weekly Wrap-Up: Gold and Silver Find Slight Gains on the Week
By: Chris Mullen, Gold Seeker Report

Ira Epstein's Metals Video 5 25 2018
By: Ira Epstein

COT Gold, Silver and US Dollar Index Report - May 25, 2018
By: GoldSeek.com

Gold Juniors’ Q1’18 Fundamentals
By: Adam Hamilton, CPA

Trump "Victories" on Trade are Anything But
By: Peter Schiff

Debt Slaves, Part 1: Million Dollar Student Loans And The Coming Bailout
By: John Rubino

Three Drivers of Gold, Second Look
By: Arkadiusz Sieron

GoldSeek Radio Nugget: Peter Schiff and Chris Waltzek
By: radio.GoldSeek.com

Can We Really “Time” The Market?
By: Avi Gilburt

GLOBAL FINANCIAL BREAKDOWN CONTINUES: Economic Growth Chokes On Massive Debt Increases
By: Steve St. Angelo

 
Search

GoldSeek Web

 
Could the Markets Stage a 1987-Style Crash?


 -- Published: Monday, 7 April 2014 | Print  | Disqus 

By Graham Summers

 

The big story developing in the US markets regards the sudden crackdown by regulators, most notably the SEC and Justice Department, on High Frequency Trading or HFT.

 

For well over five years now, certain trading firms have been using high-speed computers to front-run orders from other investors.

 

In simple terms, the market exchanges, like the NYSE, would let these firms (for a price of course) see when someone put in a market order to buy or sell shares on the market.

 

The trading firm would then use super fast computer programs to buy or sell shares in front of that order, before turning around and selling the shares to the investor at a slightly higher price. The trading program may only make a $0.01 profit by doing this, but because they were doing it millions of times a day, they were making billions of Dollars per year.

 

At one point, this practice accounted for as much as 70% of all market volume. Put another way, 70% of all shares being traded on the market were not from investors actually placing buy and sell orders, but from computers front-running investors and each other.

 

These firms argued that they were providing liquidity to the markets (an outright lie). The reality is that they spent millions of dollars lobbying in Washington DC to make sure that the regulators didn’t crack down on them.

 

However, it would appear that things have finally hit a boiling point with author Michael Lewis publishing a book exposing HFT as the immoral and illegal activity it is.

 

Between this, and a number of high profile media appearances, Lewis has finally raised public awareness on the issue of HFT. And the public is not happy about it As a result both the SEC and Justice Department have opened investigations.

 

As far as stocks are concerned, we’ve seen a sharp drop in the companies that were highly favored by HFT firms.

 

Amazon, an HFT favorite, has imploded from its highs.

 

 

The same goes for Facebook:

 

 

This was always the problem with HFT: that these firms were pushing prices higher, through artificial pressure, not real buying power. Now that they’re moving out of the market, we’re seeing the consequences of this.

 

Indeed, the sharp drop in those companies favored by HFT firms predicted the recent collapse in the NASDAQ index as a whole.

 

 

Today, the NASDAQ is resting on its 100-day moving average. As you can see in the above chart, this line has help during every correction since 2013.

 

IF we see a breakdown here (meaning this line doesn’t hold), then the HFT crackdown could become a very serious issue for the markets. With these programs dominating trading so much, removing them from the market will have serious consequences for prices.

 

The whole situation is very reminiscent of the computer trading, which led to the 1987 Crash.

 

Could the markets crash again? We’ll see. But smart investors should be prepared for whatever may come.

 

This concludes this article, swing by www.gainspainscapital.com for a FREE investment reports Protect Your Portfolio, which outlines how to protect your portfolio from bear market collapses.

 

Best Regards

 

Phoenix Capital Research


| Digg This Article
 -- Published: Monday, 7 April 2014 | E-Mail  | Print  | Source: GoldSeek.com

comments powered by Disqus



 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2017



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer

The views contained here may not represent the views of GoldSeek.com, its affiliates or advertisers. GoldSeek.com makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, is strictly prohibited. In no event shall GoldSeek.com or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.