Machines never sleep
Its Monday morning and the S&P futures are currently up 5. This morning the “reason” is that CIT cut a deal with its bondholders. Last Monday, a very similar S&P futures gap up in the morning but that was due to Meredith Whitney upgrading Goldman. We always have a very neatly packaged “reason” for why the S&P futures are either up or down in the morning. But maybe something else is going on here? When I look at the overnight chart of the S&P futures, I see this middle of the night spike that starts around 3am eastern time. Its very “coincincidental” that over the past few weeks I saw this same pattern over and over again. I spoke recently to a S&P futures trader from the CME and he told me about more than a few times where he would trade in the middle of the night and feel that he was getting pushed around by the machines. He said volumes are extremely light in the middle of the night and the volume was coming from automated market makers. Automated market makers? Could these be the same automated market makers that have control of the equity market during regular trading hours. Could it be that the overnight futures market is giving these computers a “head start” in the morning? Feel free to comment here if you have any thoughts on the subject.