Catching the “Silver Crusher” Algorithm in the Act

Thursday, March 22nd, 2012

There was a time when catching the silver “whack-a-mole” algo, or process, or intervention, or manipulation, or whatever one wants to call it, in action was a myth: an urban legend, perpetuated by silver conspiracy theorists. Until today that is. Courtesy of Nanex we now have direct evidence of just what the reflexive market (in which derivative products such as ETFs influence underlying assets) goes to town by taking silver to the woodshed at a whopping 75,000 times per second! From the broken market sleuths at Nanex:  “On March 20, 2012 at 13:22:33, the quote rate in the ETF symbol SLV sustained a rate exceeding 75,000/sec (75/ms) for 25 milliseconds. Nasdaq quotes lagged other exchanges by about 50 milliseconds. Nasdaq quotes even lagged their own trades – a condition we have jokingly referred to as fantaseconds.” Translation: so desperate was the desire to crush silver at precisely 13:22;33, that the Nasdaq order flow directive ended up moving faster than light. Frankly, we don’t know about you, but when someone is willing to bend the laws of relativity, just to get a cheaper price in silver, to perpetuate a failing monetary system or for any other reason, we quietly step aside…

From Nanex:

SLV 1 second interval chart showing trades colored by reporting exchange.

SLV 1 second interval chart showing the NBBO
Shaded black if normal, yellow if locked (bid = ask) or red if crossed (bid > ask).

SLV 1 millisecond interval chart showing trades colored by reporting exchange.
Chart shows about 200 milliseconds of time.

SLV 1 millisecond interval chart showing the NBBO
Shaded black if normal, yellow if locked (bid = ask) or red if crossed (bid > ask). Note the insanely high quote rate in the bottom panel. Chart shows about 200 milliseconds of time.

SLV 1 millisecond interval chart showing the quotes and trades from ARCA (red) and Nasdaq (black).
You can clearly see the delay in Nasdaq quotes, yet their trades aren’t delayed at all. Chart shows about 200 milliseconds of time.

SLV 1 millisecond interval chart showing the quotes and trades from BATS (purple) and Nasdaq (black).
You can clearly see the delay in Nasdaq quotes, yet their trades aren’t delayed at all. Chart shows about 200 milliseconds of time.

SLV 1 millisecond interval chart showing trades colored by reporting exchange.
This chart shows approximately 150 milliseconds of time.

SLV 1 millisecond interval chart showing the NBBO.
This chart shows approximately 150 milliseconds of time.

Tags: Algorithm, Arca, bottom panel, Conspiracy Theorists, Crusher, Derivative Products, Direct Evidence, ETF, ETFs, Faster Than Light, Interval, Laws Of Relativity, Manipulation, Milliseconds, Monetary System, Nasdaq Quotes, Nbbo, Sleuths, Urban Legend, Whack A Mole, Woodshed
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Stock Market – Divergence Alert

Monday, December 20th, 2010

I posted an article on Friday, stating that the stock market still had a bullish bias, but that breadth was deteriorating. Breadth indicators are also useful tools to assess the inner workings of the market’s rallies or corrections, and are used to identify strength or weakness behind market moves such as the nascent rally, i.e. to assess how the bulls and the bears are exerting themselves.

Let’s consider a specific measure of stock market “internals”: The number of S&P 500 stocks trading above their respective 50-day moving averages has declined to 80% from 93% in October (see bottom panel of the chart below). In order to be bullish about the secondary trend, one would expect the majority of stocks to be above the 50-day line.

However, the fact that fewer stocks are now above their 50-day moving averages than in October means that a smaller number of stocks are participating in the rally. In the meantime, the S&P 500 has been scaling new highs for the move. This is known as a so-called bearish divergence – a phenomenon investors should be mindful of, especially given the overbullish sentiment levels.

Source: StockCharts.com

The bulk of the index constituents, 86.4%, are trading comfortably above their 200-day averages. As long as this number holds above 50%, a primary bull market remains intact. However, a short-term reaction to clear some of the froth is likely and should be factored into investors’ decision-making.

John Hussman (Hussman Funds) summarized the situation as follows: “In short, it’s not impossible that specific features of the current market could make investors more tolerant of rich valuations, or more careful to demand conservative ones. Regardless, my impression is that a decade from today, investors will view the present time as a relatively undesirable moment to put investment capital at risk.”

Tags: bottom panel, Current Market, Hussman Funds, index constituents, Inner Workings, Investment Capital, John Hussman, market divergence, Market Internals, Moving Averages, New Highs, Present Time, Stock Market, useful tools
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