Nifty Futures - 5950 key support

5950-5970 is a very key support zone for Nifty Futures. Going below that would imply short term weakness for the market. It would set off a pattern of lower tops and lower bottoms for the short term. Keep a close watch on this zone.

Also yesterday FIIs sold approx 950cr in the cash market. Keep watching FII activity closely.

DAX, SP500 - Bullish

The DAX has broken key resistance of 6390. It is bullish. Most western and Asian Indices are bullish currently. The bulls seem to have taken control for the time being.



The SP500 is also bullish and needs to conquer 1225 which is the next major resistance.

Nifty short term trend is down

Short term trend on the Nifty is down. We have broken the trendline that started from 5352 on 31 Aug 2010 to a high of 6286 on 14 October. 5950-60 on Nifty spot is an important support. Below that we can see a 50% correction of the upmove from 5350 to 6286 which is roughly around 5750

• Globally All western indices are bullish on an uptrend. SP500 has resistance at 1220 and support at 1040. Dow Jones has resistance at 11235 and support at 9950
Russia, Brazil, FTSE, CAC, DAX, Taiwan, Shanghai is bullish

• Dollar index seems to have taken support at 76, its got support below that at 74, needs to cross 83 to confirm it is in an uptrend. Currently it is bearish.

• We continue to remain bullish on the Nifty. The longer term bull market is intact. We are still in a pattern of higher tops and higher bottoms in the long term. If we go below 5350 that would get violated.

May 6 Flash Crash & High Frequency Trading

"At 2:32 p.m., a trader at Waddell & Reed placed a huge order to sell E-mini futures contracts, which mimic movements in the S&P 500-stock index. This kind of trade wasn't unusual for Waddell, which at the time managed some $25 billion, including the popular Ivy Asset Strategy Fund. As part of the fund's strategy, the firm from time-to-time places bets that the broad stock market will fall as a hedge against its individual stock holdings.

Also not unusual was that Waddell placed the trade using a computer program known as a trading "algorithm" designed to stand in for a human trader and parse out buying or selling based on different variables. Generally, traders opt for algorithms that consider trading volume, price changes and the amount of time to complete a trade.

But Waddell's desk opted for an algorithm designed to sell 75,000 E-mini contracts at a pace that would range up to 9% of trading volume—and not take into account other factors. The report details how a similar-size trade earlier in 2010 took five hours to execute, but in this case, the Waddell trade unloaded on the market in just 20 minutes.

As the Waddell trade hit the futures markets, the joint report said, the likely buyers included high-frequency trading firms. A key feature of high-frequency trading firms is that they quickly exit trades and, by 2:41, they were also aggressively selling the E-mini contracts they had bought from Waddell, which was still trying to sell the remainder of its contracts.

Meanwhile, long-term buyers were out of the market in the midst of the selloff.

"HFTs began to quickly buy and then resell contracts to each other—generating a 'hot-potato' volume effect as the same positions were passed rapidly back and forth," the report says. At one point, HFTs traded more than 27,000 contracts in just 14 seconds—a huge amount.

The Waddell algorithm responded to the high volume by picking up the pace of its selling, even though stocks were spiraling lower.

This feedback loop of selling by Waddell, high-frequency traders and others helped drive the E-mini price down 3% in just four minutes."


The entire article can be read here:


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