Computerized Trading Creating Oil Price Volatility…(This Why There Are NO “Markets!!)
by Leonard Brecken via OilPrice.com,
ZeroHedge.com
02/09/2016
Recently, I dedicated some time studying in much further depth the explosion in volatility in the broader market as well as in underlying stocks. We have witnessed unprecedented volatility in E&P stocks in recent months. But the commodity crash is spreading to Biotechs and even the broader technology sector with the implosion of Linkedin stock last week.
First, it is important to note what is driving the incremental volume as overall investor participation in day-to-day trading wanes. Every investor has witnessed a huge decline in overall liquidity, in part due to an investor class disenfranchised by 7 to 8 years of central bank easing and resulting asset price distortions. If an investor can’t rationalize valuation then they simply won’t invest. That has exacerbated price movements by those who are left: shorts and algo-trades (i.e., computers). On the former, it’s clear that the unprecedented level of short positions in the E&P space and in futures market illustrate the drivers of this volatility.
The Rest…HERE