Posted By: Ilan Levy-Mayer Vice President, Cannon Trading Futures Blog
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WTF Just Happened??
At approximately 11:57 A.M., Pacific Time / 2:57 P.M. Eastern Time, I overheard one of my colleagues yell, “WTF just happened to the mini S&P?”
As I looked at my screen I saw the market taking a fast nose dive –an almost 8-point slide in less than 30 seconds – only to bounce right back to the price where it was originally trading.
So I decided to try and decipher the mystery.
You can see a 10-second chart below showing when the sell-off occurred. Here are my guesses:
1. A very large ALGO trade hit the market when the bid levels were relatively thin. The algo was using hourly charts and the order was entered right before the prior 1-hour bar was completed. My guess is that the trade was 10,000 lots or more. It took the market down 8 full points.
2. Someone entered a FAT FINGER TRADE and may very well have lost their job because they entered a 10,000-lot order instead of a 1,000- or even a 100-lot order.
3. The market is just trading much higher than it used to 2 or 3 years ago and the volume is not what it used to be during volatile times. Instead of seeing 500 orders at the nearby bid and offer, there were only 100 orders bid/offered on each side of the market. As a result, it took the market a few points to absorb large orders. If done by mistake or not, erratic moves like that can happen. It’s possible large investors/institutions were involved.
Click on image below to enlarge
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