Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Brief Flash Crash Wipes Out S&P 500 January Gains, Quant Hedge Fund Goldsky Rises

Summary

A brief flash crash on Monday saw the markets wiping out their entire January gains but one hedge fund made gains.

Australia-based quantmental and behavioral science focused hedge fund that specializes in global equities Goldsky Asset Management rose 0.34% overnight.

As expected, the Japanese Nikkei fell 4.73% on Tuesday’s market close at 21,610.24.

A brief flash crash on Monday saw the markets wiping out their entire January gains but one hedge fund made gains. The Dow Jones industrial average plunged nearly 1,600 while the S&P 500 Index sank 4.1 percent to wipe out its January gains and turned lower on the year. An attributing factor to the flash crash was autonomous computer-driven trading strategies that where geared to the low volatility seen over the recent year.

Trading volume was almost double the 30-day average. As expected, the Japanese Nikkei fell 4.73% on Tuesday’s market close at 21,610.24.

However, Australia-based quantmental and behavioral science focused hedge fund that specializes in global equities Goldsky Asset Management rose 0.34% overnight.

Goldsky founder and President Ken Grace, commented, “The Goldsky strategy once again demonstrated its robustness as volatility returns to global markets, and shows the dangers of computer-driven strategies trading autonomously without human intervention and oversight. Our long positions were protected by our option protection and our short positioned gained significantly as markets fell.”

CNBC's Jim Cramer said in his program Mad Money, "The market got phony again. It's a shame. It can't handle the volume and it can't handle this level of selling. And the market just broke again. We haven't seen it break in a long time."

Grace added that while Goldsky puts its trust in their “computers to assist” them in analyzing data, they do not trust machines to trade on their behalf.

“It is my pleasure to report this positive result to Goldskys investors,” Grace said as the hedge fund maintained its winning streak. Goldsky’s Global alpha  Fund capped 2017 with 24.22% returns, outperforming its benchmarks as the MSCI World Index rose 14.75% in 2017 and the S&P 500 jumped 21.78%.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.