For a while on Monday morning, it began to feel like the Holidays had started early. While stocks had opened down on some new weak data in Europe, the indices recovered relatively quickly. No, make that almost instantaneously, as the opening down draft lasted a total of two minutes. And after the requisite rebound, things got fairly quiet for a couple of hours.

But then it happened. Out of the blue and on absolutely no discernible news, the S&P 500 dove 8 points in 8 minutes. We checked our news wire sources and found nothing. We checked the major financial sites. Nada. We checked our Twitter feed. Zip. Heck, we even turned the sound up on the television for a while. But, yep, you guessed it; there was no explanation for the sudden dive picture below.

In short, the chart shows sell algo’s in action. This is what happens during the day when you are in a meeting, on the phone, or at lunch. Regardless of how quiet things are, there is always a computer-driven trade ready to be dropped.

And on a day when there were already “technical difficulties” in the market, the 6100 eMini’s that were sold in 1 second at 12:20:05 (hat tip to Eric Scott Hundsader of Nanex) were simply too much for the market to handle. This “out of the blue” action is represented by the first red box in the chart below.

S&P 500 – 1-Minute

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The game of Dump the eMini’s continued about an hour later. But this time around there were some “excuses” associated with the selling – namely the ongoing dive in oil and what was turning into a pretty intense smack-down in the social media names.

The second red box shows another 13 S&P points coming off the index as the waves of selling just kept on coming on, oh that’s right… no news.

Read the rest of the report…


David Moenning

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David Moenning is Mr. Moenning is President of Heritage Capital Research, a privately owned, investment research firm. Heritage focuses on active risk management and an “own the best and ignore the rest” equity selection strategy.

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Positions in stocks mentioned: none

The opinions and forecasts expressed are those of David Moenning, President of Heritage Capital Management (HCM) and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security or Heritage Capital program. No part of this material is intended as an investment recommendation. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any of HCM’s programs. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that investment objectives outlined will actually come to pass. Investors should consult an Investment Professional before investing in any investment program. Neither Mr. Moenning or Heritage Capital Management nor any of their employees shall have any liability for any loss sustained by anyone who has relied on the information contained herein. Mr. Moenning and employees of HCM may at times have positions in the securities referred to and may make purchases or sales of these securities while this publication is in circulation. The analysis contained is based on both technical and fundamental research. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.