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Friday, June 25, 2010

Friday updates

After the close, Interesting pattern on the SPX over the last couple of days, with everything inside that red circle being corrective waves, with a possible inverse head and shoulders pattern (heavy gray line would be the neckline). The market is either very bearish, and this is part of a 2nd wave up corrective where the bulls can not even get enough gusto to retrace 38% (I do not like this option), or we have a completed "B" of the 2nd wave counted as a double zig-zag, a-b-c-x-a-b-c, with a "C" wave starting this morning that will head towards the 1150 area near the 62% retracement level. And lastly, something else is going on that is not far enough along to get a good read on it.
Breadth for the day ended at 2.72:1, advancers, which is not much help in determining the counts.
The trend closed the same as yesterday, 50% bearish, with 6 sell signals, and 2 buy signals.
* Note, the VIX did close the week with the bullish engulfing candle intact!!!!
Click here for a live, and updated chart!!!
7:35, The SPX needs to get moving for this count, otherwise the sell-off can be counted as seven waves down, and that signals a corrective wave, pushing the longer count to wave B, of 2 up, instead of the start of a 3rd wave down. A break above 1085.95 would most likely confirm that the short-term trend has completed.

7:03, Unless they is a monster rally in the equities market, nose-diving the VIX, we are going to end the week with a very bullish engulfing candle on the VIX!!!
Click here for a live, and updated chart!!!
6:46, The SPX is still firmly in the bearish Fib fans.


  1. eye opener:


  2. Just to make sure everyone will go to the link posted in the previous message, here are a couple of paragraphs to highlight what the findings are:

    pay special attention to this:

    "We decided to analyze a handful of these cases in detail and graphed the sequential bid/offers to better understand them. What we discovered was even more bizarre and can only be evidence of either faulty programming, a virus or a manipulative device aimed at overloading the quotation system. You can see our results in Part 4, Quote Stuffing"

    "Quote Stuffing Fingerprints - BATS

    The BATS exchange generates data that is SO unusual and bizarre that we now refer to them as the "Crop Circle" formations and have given the formations unique names. If one did not know better they would almost be inclined to consider this some type of virus in the BATS software. While in not all cases, the majority of the sequence quotes are staggered between valid quotes and stub quotes. Volume of these erroneous quotes can be enormous on any given burst or sequence and can last anywhere from a few hundred milliseconds to a few entire seconds."

    watch those charts!!



    What benefit could there be to whomever is generating these extremely high quote rates? After thoughtful analysis, we can only think of one. Competition between HFT systems today has reached the point where microseconds matter. Any edge one has to process information faster than a competitor makes all the difference in this game. If you could generate a large number of quotes that your competitors have to process, but you can ignore since you generated them, you gain valuable processing time. This is an extremely disturbing development, because as more HFT systems start doing this, it is only a matter of time before quote-stuffing shuts down the entire market from congestion. We think it played an active role in the final drop on 5/6/2010, and urge everyone involved to take a look at what is going on. Our recommendation for a simple 50ms quote expiration rule would eliminate quote-stuffing and level the playing field without impacting legitimate trading.

    Added 06/25/2010: It is important to note that we understand 5,000 quotes in one second on any given issue would pose no problem. However, consider that there are approx. 4,000 stocks listed on the NYSE and 9 reporting exchanges. If each reporting exchange for each stock quoted at 5,000 per second this would work out to 180,000,000 quotes per second. Furthermore 5,000 quotes per second is 5 changes per millisecond.

    At those rates you'd have to abandon the concept of market orders entirely. In fact, at rates exceeding even 50 quotes per second/stock you'd have to abandon market orders entirely.

    Some would also point out that you couldn't change the prices at those rates due to the bid/ask spread being so narrow. However there are plenty of cases where the price remains fixed and the sizes flutter. "

    cheers :)