Those who were closely following the S&P cash in the last seconds before the close, and who were eagerly looking forward to a satanic close of 1,666, were likely disappointed when in the last 5 minutes of trading the cash index ramped from 1,665 and easily crossed in and out of 1,666, with the final print pointing to a mid-1,667 close.
And then something happened: instead of a closing print of 1,667.50, over one point of the cash S&P suddenly was wiped out for no reason, in turn leading to the satisfactory 1,666 closing print or exactly 1,000 points higher than the “generational” lows of 2009. Yet, refreshing the settlement of the S&P500 an hour later, showed that the final closing price was, indeed, 1667.47.
So what happened?
We now know that the reason for the however brief close of the S&P at the demonic level was none other than the flash crash of Anadarko Petroleum, which as we noted in today’s EOD post, lost $45 billion in market cap in 45 milliseconds (a collapse rate of $1 billion per millisecond), flash crashing from $90 all the way to an (allegedly illegal) stub quote of $0.01. It is this collapse in the entire market’s capitalization of $45 billion that resulted in the difference between 1,667.5 and 1,666 for the S&P500 cash. One wonders which is worse: that the market unofficially at 1,666 and officially at 1,667.5, or that such flash crashes continue to be a daily inexplicable occurrence and which nobody has any control over. How long until the same algo that wiped out APC today, decides to shift away from simple stocks and goes for the SPY, or the QQQ, or the E-Mini contract for that matter, and wipes out $20 trillion in market cap in 45 milliseconds?
Once again, here is has APC went from $45 billion in market cap to $0 in 45 milliseconds beginning at 15:59:59:450 (half a second before the close), with forensic detail courtesy of Nanex:
And zoomed in:
So how did this single-stock flash crash impact the overall market? Simple.
The chart below shows the broad S&P move higher starting at 2pm when it ramped by 8 points in straight line, in one of the now traditional closing day vertical shoots higher on low volume and no news. What can be seen in this chart courtesy of Nanex, is precisely the 1.5 displacement in the broader markets as a result of the APC flash implosion in the last half second of trading:
And once again zoomed in:
This summarizes in a nutshell precisely what the “New Normal market” has become: the same “market” that Bernanke and the administration are so desperate to herd every mom, pop, algo and hedge fund into, in order to enforce “trickle down” wealth effect inflation, now that all other monetary transmission channels are terminally and hopelessly broken.
Luckily for all involved, this time the flash crash was contained, and all the offending trades were unwound. What happens when the flash crash is bigger, becomes un-“unwoundable” and more stocks are involved? the entire market?