Best of the Week
Most Popular
1.Gold Price Trend Forecast, Where are the Gold Traders? - Bob_Loukas
2.Stocks Bear Market of 2017 Begins? Shorting the Dow At its Peak! - Nadeem_Walayat
3.Betting on President Trump Leaving Office Early, Presidency End Date - Betfair Market - Nadeem_Walayat
4.Why Stock Market Analysts Will be Wrong About 2017 - Clif_Droke
5.Is This The Best Way For Investors To Play The Electric Car Boom - OilPrice_Com
6.Silver Price 2017 Trend Forecast Update - Video - Nadeem_Walayat
7.Gold Price Set For Very Bullish 2017, Trend Forecast - Austin_Galt
8.10 Things I learned From Meetings With Trump’s Transition Team - - John_Mauldin
9.How Investors Can Profit From Trumps Military Ambitions - OilPrice_Com
10.Channel 4 War on 'Fake News', Forgets Own Alt Reality Propaganda Broadcasting - Nadeem_Walayat
Last 7 days
The Best Reasons to Buy Gold in the Age of Trump - 22nd Feb 17
Silver, The Return of Stagflation - 22nd Feb 17
Why EU BrExit Single Market Access Hard line is European Union Committing Suicide - 22nd Feb 17
Gold: Short End US Rates Matter More Than Long End Real Yields - 22nd Feb 17
CONTINENTAL RESOURCES: Example Of What Is Horribly Wrong With The U.S. Shale Oil Industry - 22nd Feb 17
Here’s Proof Rising Rates Are Good for Gold - 21st Feb 17
Gold and Silver Weekly Update - 21st Feb 17
US Dollar and Gold Battle of the Cycles - 21st Feb 17
NSA and CIA is the Enemy of the People - 21st Feb 17
Big Moves in the World Stock Markets - Big Bases - 21st Feb 17
Stock Market Uptrend Continues - 21st Feb 17
Brent Crude Oil Price Technical Update: Low Volatility Leads to High Volatility - 20th Feb 17
Trump’s Tax System Could Spark The Wave Of Self-Employment - 20th Feb 17
Here’s How to Stay Ahead of Machines and AI - 20th Feb 17
Warning Signs Of Instability In Russia - 20th Feb 17
Warning: This Energy Investment Could Wreak Havoc On Your Portfolio - 20th Feb 17
The Mother of All Financial Bubbles will be Unimaginably Destructive when it Bursts - 19th Feb 17
Gold’s Fundamentals Strengthen - 18th Feb 17
The Flynn Fiascom, the Trump Revolution Ends in a Whimper - 18th Feb 17
Not Nearly Enough Economic Growth To Keep Growing - 18th Feb 17
SPX Stocks Bull Market Continues to make New Highs - 18th Feb 17
China Disaster to Trigger Gold Run, Trump to Appoint 5 of 7 Fed Governors - 18th Feb 17
Gold Stock Volume Divergence - 17th Feb 17
Gold, Silver, US Dollar Cycles - 17th Feb 17
Inflation Spikes in 2017, Supporting Gold Prices Despite Increased Odds of March Rate Hike - 17th Feb 17
Roses Are Red... and So's Been EURUSD's Trend - 17th Feb 17
Gold Trade Note Sighted - 17th Feb 17
Gold Is Undervalued Say Leading Fund Managers - 17th Feb 17
NSA, CIA, FBI, Media Establishment 'Deep State' War Against Emerging 'Trump State' - 16th Feb 17
Silver, Gold Stocks and Remembering the Genius of Hunter S. Thompson - 16th Feb 17
Maps That Show The US’ Strategy In Asia-Pacific - 15th Feb 17
The Trump Stock Market Rally Is Just Getting Started! - 15th Feb 17
Tesco Crisis - Fake Prices, Brexit Inflation Tsunami to Send Food Prices Soaring 10% 2017 - 15th Feb 17
Stock Market Indexes Appear Ready to Roll Over - 15th Feb 17
Gold Bull Market? Or was 2016 Just a Gold Bug Mirage? - 15th Feb 17
Here’s How Germany Buys Time From China - 15th Feb 17
The Stock Trader’s Actionable Guide to Trump - 15th Feb 17
Trump A New Jacksonian Era? The Fourth Turning (2) - 14th Feb 17
Stock Market Yet Another Wall Street 'Witch's Brew' - 14th Feb 17
This Is Why You Don’t Own A Lot Of Stocks - 14th Feb 17
Proposed Tax Reforms Face Enormous Headwinds - 14th Feb 17

Market Oracle FREE Newsletter

State of Global Markets 2017 - Report

Rise of the Quantitative Robots

Stock-Markets / Stock Markets 2016 Mar 18, 2016 - 01:19 PM GMT

By: Gary_Tanashian

Stock-Markets

I read an article at Bloomberg the other day that focused upon a former mathematics professor who now runs his own Mom & Pop ‘quant’ shop (his home) from the desert plains in New Mexico.  The article noted that there are big, powerful quants in New York City and there is a constellation of little guys out there writing their algos and skimming the markets with the precision that mathematical codes instruct.


Meet the DIY Quants Who Ditched Wall St for the Desert

It was a cute story as our little quant gets to step outside and breathe the desert air when he gets stressed.  These little satellites even have their own quant superstore of sorts called Quantopian.  Some guys go to home depot or the local hardware store (to the extent they still exist) for their tools.  These guys go to Quantopian for their tools and software to build out their own unique quant strategies.

This got me thinking about the markets in general and the S&P 500 in particular.  I have called the vast global markets an amalgam of investors, casino patrons, day traders, substance abusers, black boxes and algos because it seems on any given day or week to be a hyper frenetic, emotion-driven mess.

When we projected the bounce in the S&P 500 back when man and machine were still in ‘end of the world’ mode, I noted to NFTRH subscribers that I did not expect the bounce to be as long or as strong as the post-September rally because sentiment had not become quite as bombed out as it did last summer.  Well, it turns out I was wrong in that view and indeed, look at how similar SPX’s Thing 2 looks to Thing 1.  Silly man, trying to out think machine.

What creeps me out if I am a bull is the precision with which Thing 2 has replicated the earlier Thing (and its subsequent price erection).  Have the aggregated quants (big and small) really gained that much control of the markets, so that it follows their combined codes, which after all are based on numbers and algos based on things that have come before?  Also, do the machines see that gap?  Are they coded to even give a damn about a gap or do they laugh at our silly little human data points?

By extension, the bulls could have a problem as well if the post-Thing1 phase replicates.  I have had one nagging issue with the technical bear case and that issue is that every jockey with a chart has seen the topping structure on the S&P 500.  Quants to the rescue for the bears?  Or will they find something in the code (maybe from events that are years ago in the bin of history) that indicates that this time the replication will break?  Maybe Martin Armstrong’s computer is going to get its Phase Transition here and now?

As a dumb human, I only know that in February everybody was bearish and in March most people are getting bullish.  I also know that the market has done what we thought it would do (target: 2000-2030) and more.  What goes on now will surely be interesting.  The preferred plan was per this simple weekly chart of SPY, produced when the market was still bottoming.  We projected the bounce to current levels where an optimal short, amid over bullish sentiment could work out.  Now, will the machines play ball or do they see something else?

Subscribe to NFTRH Premium for your 25-35 page weekly report, interim updates (including Key ETF charts) and NFTRH+ chart and trade ideas or the free eLetter for an introduction to our work. Or simply keep up to date with plenty of public content at NFTRH.com and Biiwii.com.

By Gary Tanashian

http://biiwii.com

© 2016 Copyright  Gary Tanashian - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Gary Tanashian Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife