At around 2:30PM the SPYs were trading down to 113.60 from 117. It seemed like it was a good place to start looking for a bounce. I was keying in on the 113.10 level from March 5th as a potential dream price to get long. I got stopped out below 113 a few minutes later.
At 2:42 I decided to give the bounce one more try. I bought some SPYs at 111.80. By 2:48 I had watched my position drop to 106 and then trade back up to 113. That was more than enough for me. I sat out the rest of the day. A few of our traders were able to take advantage of the wicked price action without taking on too much risk. Good for them.
I honestly can say that I have never seen a move like that in the 14 years I have been trading. I remember the time the NASDAQ was down 400 and I was down 100K before we bounced back to positive. But this time there really wasn’t a bounce. We just went straight up for 3 minutes after going straight down for 3 minutes.
I guarantee you there will be calls from vocal politiicians to have hearings about the current structure of US equity markets. Many will wonder how the market can drop 5% and then rebound 5% in a matter of minutes without significant breaking news. And I’m sure many will put the blame smack dab on the heads of the quant hedge funds. Pehaps they are right. Doug kass wrote an article a couple of days ago predicting just this type of occurrence because of the quant funds who he believes add no value to the marketplace.