"really bad hour" at about 1:10pm today?

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chipmonk
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"really bad hour" at about 1:10pm today?

Post by chipmonk » Tue Apr 23, 2013 2:39 pm

What the heck happened today? The markets started nose-diving for a few minutes, and then swiftly corrected.

Does anyone know what caused this? Did any of you ETF users take advantage of this blip as a buying opportunity?

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rmelvey
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Re: "really bad hour" at about 1:10pm today?

Post by rmelvey » Tue Apr 23, 2013 2:40 pm

A little bit later TLT had huge spike upwards and then came down.

Algos gone wild!


Tigermoose
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Re: "really bad hour" at about 1:10pm today?

Post by Tigermoose » Tue Apr 23, 2013 2:42 pm

An AP twitter feed was hacked and gave a false report about a white house bombing.

http://finance.yahoo.com/news/markets-p ... 29454.html
Institutions matter

billern
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Re: "really bad hour" at about 1:10pm today?

Post by billern » Tue Apr 23, 2013 2:43 pm

Was this the reaction to the fake news from the hacked AP twitter account?

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Re: "really bad hour" at about 1:10pm today?

Post by Sam I Am » Tue Apr 23, 2013 2:43 pm

Message deleted.
Last edited by Sam I Am on Sun Oct 06, 2013 11:48 am, edited 1 time in total.

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Re: "really bad hour" at about 1:10pm today?

Post by FredPeterson » Tue Apr 23, 2013 2:46 pm


chipmonk
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Re: "really bad hour" at about 1:10pm today?

Post by chipmonk » Tue Apr 23, 2013 2:51 pm

I see... thanks. Google Finance didn't link to anything remotely relevant so I was scratching my head.
rmelvey wrote:A little bit later TLT had huge spike upwards and then came down.

Algos gone wild!
"Algos gone wild" was my first thought too. I wonder if the spike in bonds wasn't in fact a reaction (algorithmic or human?) to the hacked-tweet-panic. What puzzles me is why TLT (long-term treasuries) spiked much more than total bond market. In a panicked flight-to-safety, shouldn't short-term bonds benefit more?

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prudent
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Re: "really bad hour" at about 1:10pm today?

Post by prudent » Tue Apr 23, 2013 2:56 pm

So computers scan twitter and other sites for news, then automatically start trading on such news without any human intervention? I'm pretty sure that's not a good idea.

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Re: "really bad hour" at about 1:10pm today?

Post by MN Finance » Tue Apr 23, 2013 3:00 pm

prudent wrote:So computers scan twitter and other sites for news, then automatically start trading on such news without any human intervention? I'm pretty sure that's not a good idea.
That's where we live. Not new, though. The flash crash of a few yrs ago was the most obvious example.

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Re: "really bad hour" at about 1:10pm today?

Post by jebmke » Tue Apr 23, 2013 3:08 pm

Are you sure it wasn't this tweet from the same hacked account?
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Re: "really bad hour" at about 1:10pm today?

Post by chipmonk » Tue Apr 23, 2013 3:13 pm

prudent wrote:So computers scan twitter and other sites for news, then automatically start trading on such news without any human intervention? I'm pretty sure that's not a good idea.
Was this brief panic entirely driven by computers trading on erroneous news, or did it actually start with humans trading on that news? I'm curious about whether it's truly a case of computers trading on information gleaned from natural language processing of news...

MindBogler
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Re: "really bad hour" at about 1:10pm today?

Post by MindBogler » Tue Apr 23, 2013 3:13 pm

And if you look at the market in a week long series that "flash crash" won't even show up. A crash based on bad information or programmatic trades is just part of the background noise that should be ignored.

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Re: "really bad hour" at about 1:10pm today?

Post by staythecourse » Tue Apr 23, 2013 3:22 pm

MindBogler wrote:And if you look at the market in a week long series that "flash crash" won't even show up. A crash based on bad information or programmatic trades is just part of the background noise that should be ignored.
Absolutely agree. Surprised I have seen this many comments about this. The just proves that the markets are quickly efficient.

No big deal.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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Re: "really bad hour" at about 1:10pm today?

Post by Calm Man » Tue Apr 23, 2013 3:26 pm

I will assume it was started by humans and then corrected when found to be false. But we are being short-sighted and not taking this further. Let us say the rumor was true and the white house was bombed and the president killed. What is confusing to me is WHY this would lead to a market meltdown if the initial reaction truly represents the market's reaction. This has nothing to do with this particular president, but rather any politician anywhere. And if a president of a country that "we don't like" dies, does that mean the stock market should go up?

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Re: "really bad hour" at about 1:10pm today?

Post by Default User BR » Tue Apr 23, 2013 3:35 pm

Where's the guy with the stop-loss theory? It would have been nice to have some deep discount ETF limit orders. Assuming you got to keep the rewards. I don't know if they'll do any rollbacks on this or not.


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Re: "really bad hour" at about 1:10pm today?

Post by MindBogler » Tue Apr 23, 2013 3:40 pm

Default User BR wrote:Where's the guy with the stop-loss theory? It would have been nice to have some deep discount ETF limit orders. Assuming you got to keep the rewards. I don't know if they'll do any rollbacks on this or not.


Brian
By that logic, a deeper discount could have been found last week. Whether these situations are today's windfall or yesterday's missed opportunity depends entirely on one's frame of reference.

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BlueEars
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Re: "really bad hour" at about 1:10pm today?

Post by BlueEars » Tue Apr 23, 2013 3:41 pm

Interesting plots on this site, thanks for the link. I'm always fascinated by how much tech has been developed to do trading even though I do not participate.

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Re: "really bad hour" at about 1:10pm today?

Post by BlueEars » Tue Apr 23, 2013 3:49 pm

I don't think we should too freely waive away this stuff as just noise. Since this was fake it was truly noise but it does say something about how the system is currently developing to handle information flows.

When real geopolitical events happen there is no way to know exactly where they will go. A plot of the SP500 futures on 9/11 shows a drop of about 1% by the market as the 1st plane hit crashed, then a recovery almost. Then about 13 minutes later the market was down about 3% as the 2nd plane hit the World Trade Center. The markets seemed to recover, but then we had a few wars that had large economic implications and definitely affected markets.

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Re: "really bad hour" at about 1:10pm today?

Post by LadyGeek » Tue Apr 23, 2013 6:55 pm

Tigermoose wrote:An AP twitter feed was hacked and gave a false report about a white house bombing.

http://finance.yahoo.com/news/markets-p ... 29454.html
There's a similar thread here: yet another mini flash crash Tue Apr 23 2013
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Re: "really bad hour" at about 1:10pm today?

Post by Artsdoctor » Tue Apr 23, 2013 7:16 pm

There are some things you cannot control. But here, I think it's a terrific reminder that if you're placing an order to buy an ETF, you'd probably be better served by placing a limit order and avoiding "market price" altogether.

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Re: "really bad hour" at about 1:10pm today?

Post by LadyGeek » Tue Apr 23, 2013 7:41 pm

^^^ Good point, here's the wiki background: Orders
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Re: "really bad hour" at about 1:10pm today?

Post by jasonv » Tue Apr 23, 2013 7:46 pm

Artsdoctor wrote:There are some things you cannot control. But here, I think it's a terrific reminder that if you're placing an order to buy an ETF, you'd probably be better served by placing a limit order and avoiding "market price" altogether.

Artsdoctor
Indeed, these types of events make me no more fearful of using ETFs, though they do make me thankful that I'm past my pre-boglehead days when I used to think that leaving a trailing stop order open might be a good idea. Nowadays I'm tempted to think I could benefit from leaving an open buy limit order at some wildly low price with the slim chance of catching a deal on some market glitch.

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Re: "really bad hour" at about 1:10pm today?

Post by steeplechase » Tue Apr 23, 2013 8:40 pm

This event is kind of a warning about how fragile the stock market is today. Mechanisms are in place to trigger automatic selling based on computer analysis of time. It’s like the power failure we occasionally experience where I live – if they are blips, my digital appliances handle the short time of the failures and do not require resetting of their clocks.

This article at Bloomberg mentions “Exxon Mobil Corp., Apple Inc., Johnson & Johnson and Microsoft Corp. briefly lost about 1 percent in two minutes before rebounding. The plunge didn’t trigger circuit breakers for individual stocks. Shares for most companies pause for five minutes if they lose 10 percent in five minutes.”

http://www.bloomberg.com/news/2013-04-2 ... ility.html

I still remember the Northeast blackout of 1965.

“The safety relay, which was to trip if the current exceeded the capacity of the transmission line, was set too low.”

So “the power that was flowing on the tripped line transferred to the other lines, causing them to become overloaded. Their protective relays, which are designed to protect the line from overload, tripped” and the design kept performing perfectly “affecting parts of Ontario in Canada and Connecticut, Massachusetts, New Hampshire, Rhode Island, Vermont, New York, and New Jersey in the United States. Over 30 million people and 80,000 square miles (207,000 km2) were left without electricity for up to 12 hours.”

(Quotes are from http://en.wikipedia.org/wiki/Northeast_blackout_of_1965)

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Re: "really bad hour" at about 1:10pm today?

Post by FredPeterson » Tue Apr 23, 2013 8:59 pm

jasonv wrote:
Artsdoctor wrote:There are some things you cannot control. But here, I think it's a terrific reminder that if you're placing an order to buy an ETF, you'd probably be better served by placing a limit order and avoiding "market price" altogether.

Artsdoctor
Indeed, these types of events make me no more fearful of using ETFs, though they do make me thankful that I'm past my pre-boglehead days when I used to think that leaving a trailing stop order open might be a good idea. Nowadays I'm tempted to think I could benefit from leaving an open buy limit order at some wildly low price with the slim chance of catching a deal on some market glitch.
Your order would be cancelled. You better then hope you don't immediately turn it around and sell when it rebounds because you can end up with a short position then.

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Re: "really bad hour" at about 1:10pm today?

Post by crowd79 » Tue Apr 23, 2013 9:00 pm

Just an example as to why not to use "stop losses" when you are in it for the long haul.

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Re: "really bad hour" at about 1:10pm today?

Post by otbricki » Tue Apr 23, 2013 9:10 pm

Interactions between these algos is probably changing on a daily basis.

I don't think trying to game them is sane.

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Re: "really bad hour" at about 1:10pm today?

Post by jasonv » Tue Apr 23, 2013 9:15 pm

FredPeterson wrote:
jasonv wrote:
Artsdoctor wrote:There are some things you cannot control. But here, I think it's a terrific reminder that if you're placing an order to buy an ETF, you'd probably be better served by placing a limit order and avoiding "market price" altogether.

Artsdoctor
Indeed, these types of events make me no more fearful of using ETFs, though they do make me thankful that I'm past my pre-boglehead days when I used to think that leaving a trailing stop order open might be a good idea. Nowadays I'm tempted to think I could benefit from leaving an open buy limit order at some wildly low price with the slim chance of catching a deal on some market glitch.
Your order would be cancelled. You better then hope you don't immediately turn it around and sell when it rebounds because you can end up with a short position then.
I'm a committed Boglehead now, so the only day trading I do is the occasional TLH trade.

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Re: "really bad hour" at about 1:10pm today?

Post by Artsdoctor » Wed Apr 24, 2013 9:04 am

ETFs are POTENTIALLY abused because they can be traded throughout the day. However, you can absolutely be a Boglehead with judicious use of ETFs! I have one brokerage 401 account which gives me a horrible choice of mutual funds--but allows stock (and ETF) purchases with a very minimal fee. You can definitely be a "buy-and-hold" investor using ETFs (think VCIT, VSS, VNQI, etc) but you just have to know how to buy them (never put in a buy order when the market's closed, for example).

The wiki is a great reference on how to purchase ETFs intelligently.

Artsdoctor

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Re: "really bad hour" at about 1:10pm today?

Post by tylerherman » Wed Apr 24, 2013 1:03 pm

It is just me or is hacking an incredibly lucrative business to be in.

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Re: "really bad hour" at about 1:10pm today?

Post by FiveSigmas » Wed Apr 24, 2013 9:41 pm

Has there ever been such a thing as a broad-market flash "surge", equal and opposite to the flash crashes we've seen? If such a thing existed, I would think it would be a stronger argument against market orders than a flash crash, since the former could cause one to buy at an artificially inflated price rather than at a bargain price.

While I can see fear and protection-of-wealth motives triggering a flash crash, I'm genuinely curious what could realistically trigger a commensurate flash surge. Surely not a rogue tweet that the president was suddenly supper healthy or that the unemployment rate dropped 4 points?

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Re: "really bad hour" at about 1:10pm today?

Post by SamGamgee » Thu Apr 25, 2013 6:33 am

A hacked tweet saying the fed was going to lower the interest rates?

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Re: "really bad hour" at about 1:10pm today?

Post by Ed 2 » Thu Apr 25, 2013 7:27 am

chipmonk wrote:What the heck happened today? The markets started nose-diving for a few minutes, and then swiftly corrected.

Does anyone know what caused this? Did any of you ETF users take advantage of this blip as a buying opportunity?

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Re: "really bad hour" at about 1:10pm today?

Post by FiveSigmas » Thu Apr 25, 2013 9:50 pm

SamGamgee wrote:A hacked tweet saying the fed was going to lower the interest rates?
Yeah, I was trying to think of something along these lines, but anything that would be tweeted (as opposed to reported directly by the fed while the market was closed) would just be some analyst's predictions, wouldn't it? Would such speculation be enough to dramatically move the entire broader market?

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Re: "really bad hour" at about 1:10pm today?

Post by Phineas J. Whoopee » Fri Apr 26, 2013 1:57 pm

What with the short-term market being a voting machine, the appropriate criterion for a high frequency trader is what everybody else will think a few milliseconds from now.

Actually, because markets are forward-looking, it's what everybody else will think everybody else will think.

Getting the news first (fake news in this case, but it makes no difference) and getting the retraction first has considerable value, especially if one's algo(rithmic) plant is co-located with the exchange to minimize propagation delays (even instant information is constrained by the speed of light in a fiber optic cable).

I counsel waiting patiently for the slower weighing machine to operate. That way high frequency trading makes no important difference.

PJW

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