Zero Hedge "tired" of seeing computers trade like smart humans

Posted on | Wednesday, February 24, 2010 | No Comments

Long story short: ZH is mad again that an Evil Machine buys low when selling pressure subsides and sells into strength for a profit like a profitable human does! Oh the HORROR!

I don't even trade the market they're talking about but lets be rational for 2 fn seconds:

Now for the juicy stuff...For months now i have been watching a specific
algorithm push our markets around with great ease. It looks like this algo is
giving the SPY a little push through support and resistance levels with massive
size executed in seconds. Sometimes the push is tens of thousands of shares, the
size all depends on the natural volume around the level which the SPY is trading
at the time it may need a "Jump". For instance if the market is oversold on a 1
min time frame and is trying to break higher off lows but just cant get the
party going on its own, the algo will come in and take offers until day traders,
scalpers, swing traders jump in and chase the market higher. Once the price gets
"jumped" the algo just sits and waits till natural buyers and sellers are few
and far between and it either dumps or takes in more. Usually the program will
reset itself after a trade, then will wait till it senses low volume once again.

For some concrete evidence of this action i have done a quick
illustration, which includes Time & Sales which only display prints on the
exchange the algorithm does business on. This exchange is used because of its
very nice rebate structure, and it allows the algo to exploit the SOES, meaning
it cannot trade in blocks larger than 10000 shares per order. So what does it
do, it takes blocks almost 10,000 shares multiple times a second, this price
action causes the market to lift violently. This is not small money, remember
small money follows big money.

The algo in question starts buying at
110.04 with one block of 9999 shares, followed by 60k more shares all bought in
under two minutes. You can see from the chart how the SPY reacted, it violently
moved higher all the way up to 110.55, where the algo dumped just about all of
the shares, you can see the prints in the "dump" prints window, again only
showing the print from the exchange the algo does business on. The algo did its
job, the cash market snapped back, the components again caught a bid and moved
higher through resistance. I.E. they look alive and well... Natural buyers came
in above the 110.55 level chasing the market up another 50 cents or so before
they left and the SPY fell again because the volume was not there to support the
massive run up which took place over 15 minutes. As you can see the algo works
in two capacities, it manipulates the market to the upside along with keeping
S&P500 components trading in a liquid orderly "non flat" fashion.

Theses geniuses even show a chart of how smart the Evil Machine is (click this Gem to make it larger):

1: Green circle around the volume? that's your key into selling pressure subsiding on that move down. That means sellers are done adding supply to the market and declining prices are DONE declining. See how they say "Natural buyers very thin", it's SELLERS that are thin. You know this because the DECLINE IN PRICE HAS STOPPED. It only stops if sellers stop adding supply greater than existing demand OR incoming demand forces price to stop declining because it exceeds the sellers supply.

1A: There is no fucking such thing as a "natural buyer". Algo or Human, all the supply/demand coming in to a mkt still counts kid-o, regardless of who/what initiated it.

2: No shit you buy here, in fact look at everyone else who did in their time and sales. See all the green at offer BEFORE the Evil Machine came in? People buying bc shits cheap and selling has subsided.

3: Remember how you profit when buy low? That's right, you HIT THE BID and sell it back to all the suckers now buying at already marked up prices. And they did, look at the red in the next time and sales besides what they have circled. People and the Evil machine hitting the bid to book profits OH THE HORROR.

View the complete post on how disturbed they are that they don't understand these concepts here

Buy low sell high is far from a new concept. Here is some recommended reading so you don't blame your trading ineptitude on computers. I will not waste your time w BS links and fkd up conjectured theories that have zero relevance to making money to justify my losses.

Disclaimer: I have no affiliation with Dr. B but he's dead on in what he writes about. He'd probably hate my guts if he ever saw this site.
Related Topics:
What I wish I had been taught when I first started trading @ BIDHITTER
Fade What You See
A Framework For Thinking About Short Term Market Behavior
Anatomy of a Market Breakout
Using Market Delta In Trading
Five Guiding Principles for Short Term Trading
Zero Hedge's New Justification for Spewing Falsehoods

Play Keno!


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