Eric Hunsader Explains Why Markets Explode Before Scheduled Economic Events

Eric Hunsader, founder and CEO of Nanex, also known as the one-man market monitor, was a guest in Benzinga’s PreMarket Prep show on Friday. The expert discussed liquidity around the release of the jobs report, and explained why investors see “explosions” around certain, relevant, scheduled news events.

How Hunsader Works

The analyst starts by processing CME debt-to-book and contracts available to buy or sell minutes before major –scheduled- events. When liquidity hits a certain level, algorithms trigger responses for investors to hit the market. However, when there is more than one algorithm doing the same out there, Hunsader explained, “then the first algo will cause all the other ones to immediately trigger.” So, what investors can see are sudden moves in the market, only seconds before the economic news in question is announced; importantly, this does not mean that information was leaked, but that certain estimates are more precise than others, he added, explicating that different algos rely on different firms’ estimates.

However, Hunsader continued, no explosion was seen before last Friday’s jobs report.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.