What drives these late session swoons ?

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BernardShakey
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What drives these late session swoons ?

Post by BernardShakey »

All you experts out there -- We've seen this a few times here of late. Market (Dow for example) is pretty steady all day and in the last few minutes it takes a noticeable dump, accelerating in last 1-5 minutes. Anecdotally at least, I haven't seemed to notice the opposite trend but maybe I miss those days. Today was a good example of the "swoon." What's up ?
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Re: What drives these late session swoons ?

Post by TheLaughingCow »

More people selling than buying
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Re: What drives these late session swoons ?

Post by BluesH »

Late breaking news -- Fed move, trade deals, market segment, etc.
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Re: What drives these late session swoons ?

Post by pasadena »

Guessing that profit taking plays a role here.
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Re: What drives these late session swoons ?

Post by BernardShakey »

BluesH wrote: Tue Oct 05, 2021 3:11 pm Late breaking news -- Fed move, trade deals, market segment, etc.
Seems like most of the news comes out earlier in the day. We're talking about last few minutes (maybe 30 minutes). Is there some advantage institutional investors are playing here, waiting until the very end of the session ?
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Re: What drives these late session swoons ?

Post by BernardShakey »

TheLaughingCow wrote: Tue Oct 05, 2021 3:07 pm More people selling than buying
Very observant, but why so sharp in the last few minutes ?
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Re: What drives these late session swoons ?

Post by Da5id »

BernardShakey wrote: Tue Oct 05, 2021 3:05 pm All you experts out there -- We've seen this a few times here of late. Market (Dow for example) is pretty steady all day and in the last few minutes it takes a noticeable dump, accelerating in last 1-5 minutes. Anecdotally at least, I haven't seemed to notice the opposite trend but maybe I miss those days. Today was a good example of the "swoon." What's up ?
There are news stories about "the market fell sharply at the close today on news of XYZ". But honestly those feel like rationalization rather than cast iron cause and effect most of the time. News doesn't move markets much usually, it is unexpected news or new information IMO. But heck, it can also be automated trading responding to some signal that is obscure to those who don't know the algorithms.

The more boglehead approach is probably to ignore the days ups and downs. But I get being curious about it.
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Re: What drives these late session swoons ?

Post by drk »

The days are getting shorter, so all the buyers are ducking out early to get to happy hour.
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Re: What drives these late session swoons ?

Post by Mel Lindauer »

BernardShakey wrote: Tue Oct 05, 2021 3:28 pm
TheLaughingCow wrote: Tue Oct 05, 2021 3:07 pm More people selling than buying
Very observant, but why so sharp in the last few minutes ?
Profit taking.
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Re: What drives these late session swoons ?

Post by ZMonet »

Is it not that day traders like to have nothing on their books at the close so as to not have overnight news risk, thus selling (or buying if they are short) into the close?
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Re: What drives these late session swoons ?

Post by Northern Flicker »

My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
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Re: What drives these late session swoons ?

Post by arcticpineapplecorp. »

TheLaughingCow wrote: Tue Oct 05, 2021 3:07 pm More people selling than buying
For every seller there must be a buyer on the other side. The seller is willing to sell at a lower price than previously exchanged.
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Re: What drives these late session swoons ?

Post by arcticpineapplecorp. »

Northern Flicker wrote: Tue Oct 05, 2021 3:33 pm Here is a good explanation.

https://www.schwab.com/resource-center/ ... near-bells
Yes. What moves prices downward? New information (bad news) comes out and will be reflected in the new lower price. The opposite is true too.
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Re: What drives these late session swoons ?

Post by Californiastate »

Traders don’t want to be locked in a trade overnight. Fridays are similar when the bears are trying to gain the upper hand. The opposite could play out when the bulls are gaining momentum. IMO
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Re: What drives these late session swoons ?

Post by BernardShakey »

Da5id wrote: Tue Oct 05, 2021 3:29 pm
BernardShakey wrote: Tue Oct 05, 2021 3:05 pm All you experts out there -- We've seen this a few times here of late. Market (Dow for example) is pretty steady all day and in the last few minutes it takes a noticeable dump, accelerating in last 1-5 minutes. Anecdotally at least, I haven't seemed to notice the opposite trend but maybe I miss those days. Today was a good example of the "swoon." What's up ?
There are news stories about "the market fell sharply at the close today on news of XYZ". But honestly those feel like rationalization rather than cast iron cause and effect most of the time. News doesn't move markets much usually, it is unexpected news or new information IMO. But heck, it can also be automated trading responding to some signal that is obscure to those who don't know the algorithms.

The more boglehead approach is probably to ignore the days ups and downs. But I get being curious about it.
The idea "automated trading responding to a signal obscure to the rest of us" seems reasonable.
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Re: What drives these late session swoons ?

Post by BernardShakey »

Mel Lindauer wrote: Tue Oct 05, 2021 3:32 pm
BernardShakey wrote: Tue Oct 05, 2021 3:28 pm
TheLaughingCow wrote: Tue Oct 05, 2021 3:07 pm More people selling than buying
Very observant, but why so sharp in the last few minutes ?
Profit taking.
Yeah, but why not at 2:30 or 3pm Eastern ? Are they just waiting until the last minute to make that profit taking decision ? When I rebalance, I don't wait until 3:55pm and ask "should I or shouldn't I?" I just do it the next day or later that week when I hit the band limit.
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Re: What drives these late session swoons ?

Post by HomerJ »

It doesn't matter.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
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Re: What drives these late session swoons ?

Post by BernardShakey »

Northern Flicker wrote: Tue Oct 05, 2021 3:33 pm Here is a good explanation.

https://www.schwab.com/resource-center/ ... near-bells
Thanks for the post. This makes sense to me:

"This (consensus build in last hour) is largely because end-of-day trading tends to be dominated by institutional investors. Index-fund managers generally trade near the close in order to match the returns of their benchmark. And mutual funds typically wait to execute trades so they know how much cash they need to raise to cover the day’s redemptions or, conversely, how much cash from new inflows they have to invest.
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Re: What drives these late session swoons ?

Post by BernardShakey »

HomerJ wrote: Tue Oct 05, 2021 4:45 pm It doesn't matter.
I didn't say it mattered. I find it curious, that's all.
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Re: What drives these late session swoons ?

Post by HomerJ »

BernardShakey wrote: Tue Oct 05, 2021 4:47 pm
HomerJ wrote: Tue Oct 05, 2021 4:45 pm It doesn't matter.
I didn't say it mattered. I find it curious, that's all.
Prepare to be disappointed. :)
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Re: What drives these late session swoons ?

Post by BernardShakey »

HomerJ wrote: Tue Oct 05, 2021 4:48 pm
BernardShakey wrote: Tue Oct 05, 2021 4:47 pm
HomerJ wrote: Tue Oct 05, 2021 4:45 pm It doesn't matter.
I didn't say it mattered. I find it curious, that's all.
Prepare to be disappointed. :)
Link posted by Northern Flicker is interesting. "This (consensus build in last hour) is largely because end-of-day trading tends to be dominated by institutional investors. Index-fund managers generally trade near the close in order to match the returns of their benchmark. And mutual funds typically wait to execute trades so they know how much cash they need to raise to cover the day’s redemptions or, conversely, how much cash from new inflows they have to invest." Works for me.
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Re: What drives these late session swoons ?

Post by Brianmcg321 »

Complete random chance.
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Re: What drives these late session swoons ?

Post by HomerJ »

BernardShakey wrote: Tue Oct 05, 2021 5:26 pm
HomerJ wrote: Tue Oct 05, 2021 4:48 pm
BernardShakey wrote: Tue Oct 05, 2021 4:47 pm
HomerJ wrote: Tue Oct 05, 2021 4:45 pm It doesn't matter.
I didn't say it mattered. I find it curious, that's all.
Prepare to be disappointed. :)
Link posted by Northern Flicker is interesting. "This (consensus build in last hour) is largely because end-of-day trading tends to be dominated by institutional investors. Index-fund managers generally trade near the close in order to match the returns of their benchmark. And mutual funds typically wait to execute trades so they know how much cash they need to raise to cover the day’s redemptions or, conversely, how much cash from new inflows they have to invest." Works for me.
Not very smart institutional investors if they don't front-run "late session swoons", if those are indeed known to be a real thing.

There's not going to be an easy answer.
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Re: What drives these late session swoons ?

Post by tomsense76 »

Idk why do people delay doing anything? Why do people react irrationally when stressed?
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Re: What drives these late session swoons ?

Post by livesoft »

There are a whole bunch of investors and institutions that do not want to hold shares overnight. So they sell before the market closes. It turns out that it doesn't have to be very many of these kinds of investors because their transactions really determine the prices since buy-and-hold investors are not involved at all and are only along for the ride.
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Re: What drives these late session swoons ?

Post by alex_686 »

Because opening and closing prices are wonky. And prices may swoon or they may spike.

During the trinational market day prices are continuous. Prices fluctuate. Supply and demand flow. If prices are dropping because there is a imbalance - more sellers then there are buyers - traders can react. They will pull their sell orders. They will tactically trade and buy.

This does not happen at the close. The exchange needs to close its books. Instead of a continuous flow we are going to operate at a point in time. The exchange will match buyers with sellers and close the books. If there is a imbalance, for example for sellers than buyers, then the exchange will figure out the price to clear the market and it clears its books. There is no chance for the market to respond.

As such there is always a discontinuity between the normal trading day and the closing price.

As somebody who has struck the NAV for a mutual fund I have always thought that the closing price was of poor quality. It always skewed one way or the other. There was little chance of ever actually getting that price. It was easier to manipulate than the intraday price. Of course you really can't use the intraday price when striking the NAV, but there you go.
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Re: What drives these late session swoons ?

Post by bertilak »

Nervous investors cause prices to drop.

Near the end of the day, the thought of being locked in to high-priced shares overnight (or over the weekend) may make people nervous. Uncertainty is a downer.

Just a thought. I cannot back it up with any evidence or rigor.
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Re: What drives these late session swoons ?

Post by arcticpineapplecorp. »

to know for sure you'd have to interview the people who decided to sell their shares at lower prices to find out why they did what they did. that's a lot of people you have to interview, unless you can do a random sample from those who sold.
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Re: What drives these late session swoons ?

Post by alex_686 »

HomerJ wrote: Tue Oct 05, 2021 5:40 pm Not very smart institutional investors if they don't front-run "late session swoons", if those are indeed known to be a real thing.
Often they can't. Many firms have to rehedge their portfolio daily. And they can't know how they should hedge until late in the day.

A example would be the ETF UltraPro S&P 500 (UPRO). It is a 3x leveraged ETF. Its goal is to simulate a 3x return based on the end-of-day price. Not the intraday price. So it can't rehedge during the middle of the day, they need to hedge as close to the end of the day as possible. IIRC, their end of day trading was so heavy that it regularly spiked the market up or down by a few percentage points.
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Re: What drives these late session swoons ?

Post by HomerJ »

alex_686 wrote: Tue Oct 05, 2021 6:15 pm
HomerJ wrote: Tue Oct 05, 2021 5:40 pm Not very smart institutional investors if they don't front-run "late session swoons", if those are indeed known to be a real thing.
Often they can't. Many firms have to rehedge their portfolio daily. And they can't know how they should hedge until late in the day.

A example would be the ETF UltraPro S&P 500 (UPRO). It is a 3x leveraged ETF. Its goal is to simulate a 3x return based on the end-of-day price. Not the intraday price. So it can't rehedge during the middle of the day, they need to hedge as close to the end of the day as possible. IIRC, their end of day trading was so heavy that it regularly spiked the market up or down by a few percentage points.
Oh I was wrong then. There is a simple answer.

So is your firm taking advantage of this? Surely your team of PhDs and programmers have figured out a way to make money off this right?

(The correct answer to that is, "Don't call me Shirley")
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Re: What drives these late session swoons ?

Post by an_asker »

Mel Lindauer wrote: Tue Oct 05, 2021 3:32 pm
BernardShakey wrote: Tue Oct 05, 2021 3:28 pm
TheLaughingCow wrote: Tue Oct 05, 2021 3:07 pm More people selling than buying
Very observant, but why so sharp in the last few minutes ?
Profit taking.
Good for me though. My automatic investment plan with Schwab purchases on 5th and 20th. I have been puzzling why the market always seems to spike on those two dates :oops: so for once I am glad indeed with this "swoon" from +1.5% to 1.0% (approx).
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Re: What drives these late session swoons ?

Post by alex_686 »

HomerJ wrote: Tue Oct 05, 2021 6:20 pm Oh I was wrong then. There is a simple answer.

So is your firm taking advantage of this? Surely, your team of PhDs and programmers have figured out a way to make money off this right?

(The correct answer to that is, "Don't call me Shirley")
My firm? No. Mutual funds tend not to be in the same ecological niche as high-frequency trading (HFT) firms. I know enough about the market structure to know what the general problems are. I am not well versed in the trading micro-structure to know how to exploit this.

I know that UPRO had issues 10 years ago. They are not having them now. I don't know why. I certainly suspect that a HFT firms with a clutch of PhDs and programmers have squeezed all of the easy arbitrage profits out of that trade.

To extend a bit, perhaps you know that there is going to be a spike in the market. You don't know if it is going up or down. You can make money in this area but you have to dig really deep into the data. And these micro-market structures are not stable.
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Re: What drives these late session swoons ?

Post by HomerJ »

alex_686 wrote: Tue Oct 05, 2021 6:30 pm
HomerJ wrote: Tue Oct 05, 2021 6:20 pm Oh I was wrong then. There is a simple answer.

So is your firm taking advantage of this? Surely, your team of PhDs and programmers have figured out a way to make money off this right?

(The correct answer to that is, "Don't call me Shirley")
My firm? No. Mutual funds tend not to be in the same ecological niche as high-frequency trading (HFT) firms. I know enough about the market structure to know what the general problems are. I am not well versed in the trading micro-structure to know how to exploit this.

I know that UPRO had issues 10 years ago. They are not having them now. I don't know why. I certainly suspect that a HFT firms with a clutch of PhDs and programmers have squeezed all of the easy arbitrage profits out of that trade.

To extend a bit, perhaps you know that there is going to be a spike in the market. You don't know if it is going up or down. You can make money in this area but you have to dig really deep into the data. And these micro-market structures are not stable.
HFT firms don't care if the market is going up or down, and they don't have to guess which way it's going. They make money either way by following the trend.

If UPRO and others are forced to spike the market up or down near the close, then wouldn't firms squeezing the arbitrage profits out of it smooth out the spike?

So maybe it's not an easy answer after all.
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Re: What drives these late session swoons ?

Post by GoneOnTilt »

Da5id wrote: Tue Oct 05, 2021 3:29 pm
BernardShakey wrote: Tue Oct 05, 2021 3:05 pm All you experts out there -- We've seen this a few times here of late. Market (Dow for example) is pretty steady all day and in the last few minutes it takes a noticeable dump, accelerating in last 1-5 minutes. Anecdotally at least, I haven't seemed to notice the opposite trend but maybe I miss those days. Today was a good example of the "swoon." What's up ?
There are news stories about "the market fell sharply at the close today on news of XYZ". But honestly those feel like rationalization rather than cast iron cause and effect most of the time. News doesn't move markets much usually, it is unexpected news or new information IMO. But heck, it can also be automated trading responding to some signal that is obscure to those who don't know the algorithms.
Permit me to abbreviate this...expansive...response. It's end-of-the-day profit taking. That's all.
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Re: What drives these late session swoons ?

Post by Booogle »

Is there a cap on the market until the debt ceiling is resolved in December?
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Re: What drives these late session swoons ?

Post by alex_686 »

Booogle wrote: Thu Oct 14, 2021 7:32 am Is there a cap on the market until the debt ceiling is resolved in December?
Define “cap”. But no, nothing special.

There are the normal circuit breakers. But these don’t get tripped by the normal volatile swings if the day. IIRC the last time they got tripped was last year during the COVID meltdown.

Things would have to really melt down politically before these would get tripped.
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Re: What drives these late session swoons ?

Post by sc9182 »

If you are long term net accumulator/investor— on a bad/big-red day — go to your trading desk/computer at 3.50 Eastern, put in a buy limit order for one of those 3x levered funds for 1-2-4% below their already beaten down price — you might be surprised it might get filled. Hey, doesn’t hurt to pick up a few cheap quarters ! Then again, if it’s freight train of red coming up in next few days (which nobody knows!!), you could get trampled ..

When we have a few extra bucks to invest - we sure pick up a few cheap quarters (with below market limit price) along the way — usually at 3.50 pm eastern especially on BIG RED market days ..
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Re: What drives these late session swoons ?

Post by nonemoreyears »

Interesting that it didn’t happen today, on a pretty nice little up day. Who the heck knows …
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