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Beat Them at Their Own Game

Wealth Daily's Weekend Edition

Written by Christian DeHaemer
Posted October 8, 2011

"The NYSE has been reduced to a server farm and a bell..."  — Bloomberg

On Tuesday afternoon, Brian Hicks, founder of Angel Publishing, sent me an email asking how I could account for the jump in the Russell 2000 (NASDAQ: ^RUT).

rut oct 6
lick chart to enlarge

Small Caps Bounce

I told him that there was no reason for it — no, news, no technicals, nothing. I had to say I had no idea.

It turns out I wasn't alone...

According to Reuters:

In less than one hour on Tuesday, the U.S. stock market surged by 4 percent for no apparent reason.

The last hour of trading was the most volatile final hour in two months and it occurred at a speed that frightens many, from experienced hedge-fund managers to mom-and-pop investors. 

Some would think the boom from nowhere pushing the S&P 500 Index out of bear-market territory would be good news. But it's not.

When something kooky goes on in the market, it just adds to the uncertainty. Traders can take their loses, but if they can't explain why they lost, they get nervous.

This sudden movement without explanation is evocative of the “flash crash” of May 6, 2010. Back then, the Standard & Poor’s 500 Index the benchmark measure of U.S. stocks plummeted 6.2 percent in 20 minutes.

The NYSE was the only exchange that didn’t have to cancel transactions after the flash crash. But the plunge created the perception that markets weren't safe due to high-frequency traders who buy and sell in milliseconds, are beyond the reach of regulators, and enjoy trading advantages on exchanges.

There is a two-tier market. Sixty percent of the trades are done by automated computers. Quants and other geeks set up systems that work in 99% of the markets.

The problem is they all turn direction at once and at the speed of light.

Vampire Squids

On Monday, I wrote about the protests on Wall Street and how they should be in New Jersey throwing dead squids at the Goldman Sacks building.

Perhaps I was wrong.

The culprit is a server farm in Mahwah, New Jersey, about 33 miles from Wall Street.

The real Wall Street is in New Jersey.

Besides, the NYSE was just bought out by the German company Deutsch Boerse AG.

Wall Street Doesn't Matter

Wall Street as a geographic place doesn't matter anymore. The NYSE’s domination of U.S. stock trading is over.

Once, it moved 82 percent of the share volume involving companies it listed, with most of those deals done by brokers in colored smocks shouting orders and waving fingers on the exchange floor...

Now the NYSE trades just 35 percent of volume and they are all executed in milliseconds by computer servers stacked in a brick building in suburban Mahwah.

The only thing left on Wall Street is a TV stage where business executives and celebrities such as Elmo and Snooki ring open and close trading sessions.


Beat Them at Their Own Game

There are ways to profit in this game.

As a matter of fact, several of our analysts have been extremely profitable in this highly volatile time...

Ian Cooper has been making triple-digit winners betting volatility will go up.

Adam Lass saw big money shorting the banks, and Steve Christ has been pulling in steady gains from long-term trends.

I've ditched the big board in search of profits from undiscovered frontier markets.

Right now, Andrew Mickey is in Spain digging through the corpses of European companies and finding the diamonds in the rough.

Below you will find the best of Wealth Daily and our sister publication Energy and Capital for the week.

Yours Truly,

chris sig

Christian DeHaemer
Editor, Wealth Daily

Gold Fever: How to Double Your Golden Gains
Editor Greg McCoach reveals a little-known loophole to profit from the rising price of gold: It pays twice as much as other investments.

The Eagle Ford Shale Formation: Staring Down the Peak Oil Curve
Energy and Capital's Keith Kohl explains why shale fever is growing over the Eagle Ford shale, and how investors can prepare for this South Texas oil boom.

Your Endless Source of Profit: The Birth of Sunless Solar
Years ago, we would've been laughed out of the room for even suggesting it... but his tiny company's revolutionary technology has finally broken through solar power's biggest obstacle. This report provides the details you need to know.

Patchouli-Laced Riots: 118% and 108% in a Month
Here at Wealth Daily, we've been waiting for the riots for some time. I've been recommending readers of my Crisis and Opportunity newsletter buy up riot stocks: companies like Sturm, Ruger & Company (RGR) that went from $10 to $35 over the past 18 months in anticipation of chaos. I wouldn't buy here, as it has gotten ahead of itself, but you get the picture...

Natural Gas Profit Opportunities: Here's Another Way to Screw OPEC
Editor Jeff Siegel discusses how the United States can cut its OPEC reliance by 42 percent.

Alberta Black Shale: A Helicopter Ride to Virgin Wealth
Over 120,000 acres of Northern Alberta is currently undergoing surface mining. It's precisely this reason that I took five different flights to get to and from this remote part of the world last week.

Protests in America 2011: The One Word that'll Save Your Portfolio
Analyst Ian Cooper takes a look at where today's investors have gone wrong, and interviews one of those arrested at the Brooklyn Bridge.

Cyber Security Expert: "Mass Casualties" Possible 
Editor Steve Christ takes a look at the next generation of warfare and the prospect of a digital dirty bomb.

Agriculture a Safe Investment: The Safest Investment You Can Make Right Now
Editor Jeff Siegel discusses the advantages of farmland investing.

The Government and Bankers Stole America's Wealth: Start Getting Yours Back
Once the government is in debt to the bankers, it is at their mercy.

Guide to the Collapse of China and Europe: What Chinese Bank Runs and Euro Riots Mean for You
There is a disaster bearing down on the American Financials. Here's how to profit.

Junior Gold Stocks Set to Soar: The Sell-off in Junior Resource Stocks is Over
Share prices down, interest down, fundamentals strong and getting stronger... It's time to buy junior resource stocks now.

Special Report: Modern Energy Monthly
Jeff Siegel brings readers up to date on developments in the international solar game, Canadian oil, wind turbines, clean tech, and other energy news in October's edition of Modern Energy Monthly.

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