I felt like I was watching the Transformers versus the Decepticons yesterday, with us humans being mere collateral damage. The decline was completely emotionless and I have little doubt that quant driven trading was the culprit.
Yesterday was unlike the steep declines seen in October and Novemebr of 2008. Those declines were filled with emotion and fear. Yesterday, most people I spoke to were confused and shocked and the ones that were trading were trying to buy. The speed with which the market collapsed points a finger at the quants as humans simply don't react that fast. Additionally, many of the quant programs have a momentum input and it is undeniable which way the momentum was going yesterday.
We are stuck in a bad sci-fi movie where the computers have taken over. Unfortunately, we do not choose which market we trade in and need to adjust to the environment. This means allowing room for more momentum and being more cautious. In chaos there is opportunity. I will have a column up before the open on the current market outlook.