High Frequency Trading Led to Market Freefall: Art Cashin

As reported by CNBC’s Kaitlyn Bigica, Art Cashin, director of floor operations for USB Financial Services, called the market’s steep drop “a classical technical breakdown” and said high frequency trading was contributing to the decline.

Classic "head and shoulder" formation

Classic "head and shoulder" formation

“When the S&P broke through the 1248-1250 (level), it violated what is called a ‘neckline’ on a ‘head and shoulder formation,’ ” he said in an interview with CNBC. “You have a shoulder, which is a rally, and it comes back down, and then a higher rally, and then finally a third rally.” When the market breaks down from those three peaks, it is deemed to be a head and shoulder, Cashin said.

Cashin attributed much of the broad and continuing market decline to high frequency trading. Because high frequency traders use complex algorithms to make buying and selling decisions, once a key technical level is breached “the computers [instead of people] said …we should sell right away, and that’s where you get into freefall,” he said.

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