Computer trading to blame for market volatility?

Computer trading to blame for market volatility?


♪♪ KRISTINA: IT HAS BEEN SUCH A WILD WEEK ON WALL STREET. I WANT TO THANK EVERYBODY WATCHING FOX BUSINESS BECAUSE REALLY, THIS WEEK IS LEAVING SOME INVESTORS STUNNED AN CONFUSED BY THESE RECORD MOVES. EVERY SINGLE DAY THERE IS NEW NEWS. CAN WE BLAME THE ROBOTS? THE “WALL STREET JOURNAL” REPORTING THAT IN RECENT WEEKS 85% OF ALL TRADES, 85%, WERE EXECUTED BY COMPUTER WITH NO HUMAN INPUT. COMPARED TO A LONG TERM AVERAGE OF ABOUT 52%. THAT IS A HUGE JUMP UP. WE HAVE TWO WONDERFUL GUESTS WITH US. YOU HAVE GOT PAUL DIETRICH AND TOM LYDEN, WHO ARE JOINING US RIGHT NOW. THANK YOU GUYS FOR REALLY SPEAKING ON THE TOPIC. START WITH, TOM, I WANT TO START WITH SOME TECHNICAL TRADING AND THE FACT YOU WANT TO BLAME ALL OF THE COMPUTERS, THEN YOU ADD PASSIVE INVESTING IN THERE. HOW CAN WE STOP THIS?>>WELL IT HAS BEEN A GREAT MARKET FOR TECHNICAL ANALYSIS, AS WE HAVE HAD TO THE STEP CROSS IN PLACE. WE’VE GONE BELOW THE TRIPLE BOTTOM. NICE TO SEE A LITTLE BIT OF A REBOUND HERE. WE’VE SEEN SOMETHING WHERE THERE IS DIVERGENCE BETWEEN MUTUAL FUND INVESTORS AND ETF INVESTORS. ETF INVESTORS ADDED $50 BILLION, WHERE MUTUAL FUND INVESTORS HAVE TAKEN OUT 120 BILLION. IS THERE A BEHAVIORIAL CHANGE IN THE WORKS? POSSIBLY. THERE IS A LOT OF VOLATILITY. SANTA SURELY PUT A LOT OF DRAMAMINE IN INVESTORS STOCKING AND THEY NEEDED IT ON A DAY LIKE TODAY.>>I LOVE HOW WE ARE STILL BRINGING IN SANTA INTO THE EQUATION. PAUL, TALK ABOUT THE FACT, MANY PEOPLE ARE DEBATING TODAY AND THIS ENTIRE WEEK, WHAT IS THE VOLATILITY IN THE MARKET? WOULD YOU SAY THIS IS CORRECTION AND IS IT A HEALTHY ONE?>>IT’S A CORRECTION AND I CAN’T SAY IT’S A HEALTHY ONE. WHAT ONE IS STRUCK BY THE LAST THREE WEEKS OR SO, THERE HAS BEEN NO VOLUME. THIS HAS BEEN SOME OF THE LOWEST VOLUME OF TRADING ON THE NEW YORK STOCK EXCHANGE WE’VE SEEN IN A LONG TIME AND WHAT HAPPENS IS, WHEN YOU HAVE 15% OF TRADES BEING DONE BY HUMAN BEINGS, MAINLY JUNIOR TRADERS BECAUSE ALL THE BIG PLAYERS ARE DOWN IN FLORIDA FOR THE CHRISTMAS, HANUKKAH HOLIDAYS, AND THEY WILL BE BACK NEXT WEEK, JUNIOR TRADERS DO WHAT THEY NORMALLY DO IN DICE, THEY DO TAX-LOSS SELLING, OFFSETTING GAINS AND LOSSES AND WHEN THEY WERE DOING THAT THE 15%, NORMALLY THAT WOULD BE A BLIP WHEN YOU HAVE 85% OF THE VOLUME BEING DONE BY THESE COMPUTERS THAT HAVE A MOMENTUM COMPONENT TO THEM, WHEN THEY SEE SOME, SOME SELLING THEY RATCHET IT AND ACCELERATE IT DOWN, AND THEY HAVE THIS MASSIVE 15%, TO 85% LEVERAGE. AND THAT IS WHAT IS CAUSING ALL OF THIS VOLUME. THE GOOD NEWS IS, THEY CAN ALSO LEVERAGE UP REALLY QUICKLY, WHEN THEY SEE SOME BUYING. KRISTINA: SPEAKING OF LEVERAGING UP, TOM GO BACK TO YOU, TAKE A LOOK AT SOME OF YOUR PICKS REALLY QUICKLY.>>YEAH, I THINK THERE ARE TWO OPPORTUNITIES HERE. WE’RE SEEING BIG SHIFTS INTO QUALITY STOCKS, QUALITY ETFS. SPECIFICALLY THE I-SHARES QUALITY ETF, QAL. THIS IS OPPORTUNITY TO GET BREAD AND BUTTER STOCKS IN YOUR PORTFOLIO IF YOU’RE WORRIED ABOUT VOLATILITY AND BIG MARGINS. THESE ARE QUALITY STOCKS A LOT OF PEOPLE ARE SHIFTING TO. ON THE OTHER HAND IF YOU WISH YOU TOOK ADVANTAGE OF “FANG” STOCKS 10 YEARS AGO, YOU MIGHT HAVE OPPORTUNITY FOR NEWEST “FANG” STOCKS WHICH MIGHT BE IN AREAS LIKE ROBOTICS, AUTOMATION. AREAS GEE KNOWN SEQUENCING.

13 thoughts to “Computer trading to blame for market volatility?”

  1. How many times are people going to blame HFT? The problem under all of this market is FAKE MONEY! When you pump a market for ten years with fake money, it’s going to deflate. The HFTs just expedite the cycles of trading on trends scalpers would have made.

  2. Blaming computers for stock market loses is s joke no one blames computers when there’s gains. Trumps China tariffs are part of the blame, when’s the last time you’ve seen made in the USA. Trump himself is creating much of the market uncertainty.

  3. Pardon my accent but I'm calling bullshit on blaming the computers. Fed raises rates, stocks goes down. Direct cause and effect. Fed did not raise rates during entire Obamination regime. Then a Republican obtains the office and kick starts a great economy. The Fed Bureaunazis then raise rates and crash the party. The fix is in and the game is rigged.

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