Spoos Explode Higher On Massive Buy Imbalance To End The Quarter
Heading into today's month and quarter-end, which consensus expected would see a sizable $170BN in forced selling from pension and other institutions according to JPM calculations, we noted that just the opposite was happening, and with a $3BN Market On Close buy imbalance forming, we cautioned readers that the 350pm would be a sight to behold.
Sure enough, that's precisely what happened at 350pm, when E-minis surged almost 20 points in the matter of minutes once traders realized just how sizable the last 10 minute buy rebalance would be.
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Regular readers will recall that the topic of the sudden plunge in liquidity at 3:50 pm prompted none other than Goldman to highlight this curious phenomenon one month ago when the bank said that "concerns remain centered around the final minutes of US equity trading sessions."
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Back in 2018, Goldman found that e-mini top of book depth was considerably stronger at the end of each trading day than earlier. However, in the past two months, ever since institutional investors stepped out of the market and left it to retail daytraders and systemic quants, this phenomenon has eroded considerably, leaving much less "extra" liquidity in the last half hour of trading, even before the corona-crisis. Weakened end-of-day liquidity was likely a potential contributor to the recent end-of-day volatility dislocation, Goldman concluded.
And sure enough, this liquidity vacuum has become a favorite instrument for enterprising traders to take advantage of, as they can whip the market around at will, as they just did today.
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