Trends of the black box...

Discussion in 'Strategy Development' started by marketbarometer, Jan 20, 2007.

  1. I want to compile a list of different trends that program trading reacts to...

    For example, a small plane strikes a NYC building and then instantly the markets start pulling back. The software programs had instantly detected the event on Reuters and reacted within milliseconds.

    Another event that the black box trader reacts to is actually Jim Cramer. I have studied the time/sales and noticed that the moment Cramer mentions a stock, there is an instant sale or movement of the bid/asks. Sometimes the timeframe is milliseconds and there is no human being that can react that fast. I do have some experience with runners and timing the exact response time to the sound of a pistol. These trades are reacting to what Cramer is saying faster then an Olympic athlete can react to the sound of a pistol.

    One other popular event is the earnings call. You can see where the stock starts selling or being bought as the CEO starts speaking. A program is wired to the earnings call to buy or sell immediately depending on the words that are being spoken during the call.

    Sometimes the black box does make a mistake. Jim Cramer had issued an informational video about small caps to include JSDA on his website Thursday. The video was more or less a pump video. However, this video triggered a program to instantly buy the stock and trigger a short squeeze. There is no other event that I could attribute the huge volume to. . .an institution or hedge fund would not purposely buy the stock at the current levels in order to establish a position.

    http://publish.vx.roo.com/thestreet/portal/?clipId=1373_10333084&channel=Market+Strategy&puc=yahoo

    So what are the cyclical events that will trigger a program trade. Im imagining that the cold weather in the northeast will trigger program trades to buy stocks in the XLE and OIH. I can also imagine that the earnings calls this week will trigger many selloffs.

    Dr Michael Roberts
    www.marketbarometer.blogspot.com