Short First; Ask Questions Later
Do you remember that Seinfeld episode
where Kramer burns himself with coffee and hires Jackie Chiles, the dead ringer
look-alike of Johnny Cochran to represent him? If you do, let me take a little
artistic liberty with a quote from that episode as it relates to yesterday’s
“trading.”
“Did you offer the 1000 ‘spoo’ contracts? Who
told you to offer the contracts? I didn’t tell you to offer those
contracts.”
If you were around in the afternoon yesterday, at 3:18 EST to be specific,
you were witness to something that rarely happens. Take a look at the chart
below, most notably where the arrow is pointing and the bars denoted by X’s.
That is some crazy volatility. Unfortunately after the
initial burst down it became volatility that was not tradable. I did
attempt to short the first bar, and luckily I cancelled my order when I did not
get my fill. I shorted for one simple reason: When the E-minis drop that far
that fast and the “big” S&Ps have not caught up, you need to
assume a very negative news item just hit. Short first, ask questions later.
It was not until after the close that the real reason began to emerge, and at
this stage I still do not know the real reason. But according to a colleague of
mine on the floor of the CME
(Chicago Mercantile Exchange), apparently a big offer of roughly
3,000-5,000 contracts showed up in the E-minis, which was then shortly followed
by 1000 “big” contract offered in the actual pit. Needless to say, it
threw the market into a choppy nature that had no edge. I will keep you posted
on any further developments. For those of you not familiar with the day-to-day
activity in the S&P pit, those numbers are highly unusual.
Turning back to yesterday’s action, it was exactly what I had guessed it
would be, a “Gap and Crap.” Luckily there were some decent trades on
the opening, but absent that , HVT was
pretty much done for the day. Those trades were the same ones I had suggested in
yesterday’s
column, “fade the opening” but do not fall in love with the
position. It was still a rip-roarin’ bull rally. Take a look at the one-minute
charts of stocks like
(
IBM |
Quote |
Chart |
News |
PowerRating),
(
AIG |
Quote |
Chart |
News |
PowerRating) and
(
C |
Quote |
Chart |
News |
PowerRating).
Pay close attention to the first five or six bars of the day. Notice
anything? Yep, nice price reversals. Those were the best trades of the day if
you did not hang around the trough. If you did, you got taken to the cleaners.
The afternoon was beginning to shape up as we broke to new highs, but that
little incident mentioned above kept me on the sidelines.
Looking ahead to today’s session, it may be interesting. Intel
(
INTC |
Quote |
Chart |
News |
PowerRating) dropped
a bomb (gee, there is a shocker), so that may take the bloom off the rose…for
now. Sure this market has come a long way really fast, so a pullback is in
order, but I would be surprised if the INTC news does too much damage. If
anything, it will bring some negative “vibes” into this “bullfest,”
and that combination may offer some great intraday volatility. Let’s hope.
I do apologize, but the columns this week have been a bit light. I am in the
process of finishing up my book (tentatively due early December), so my focus
has been meeting this deadline. I suspect by later this week, I will be able to
put a bit more into the column. I do apologize and appreciate your patience.
Key Technical
Numbers (futures):
S&Ps |
Nasdaq |
| 905 | *970-69* |
| 895 | *952* |
| 889 | 937 |
| 879 | 933 |
| *872* | 927.50 |
| 865 | 918.50 |
| 855 | 910.50 |
| 847 | 894 |
| 845 |
*indicates a level that is more significant
As always, feel free to send me your comments and
questions. See you in TradersWire.