Feb

23

ChairWhat must not be gainsaid is that the rise of 22 points in S&P futures from 3:30pm to 4:00pm on February 22 from 1334 to 1356 was the greatest rise in history. The rise of 24 points from 3:00pm to 4:00pm from 1332 to 1356 was the second greatest in history, failing by only a point to match the Société Générale rally on 01/17. It was beautiful the way the market set up exactly the same way it did the Friday before all the money was made by frontrunning and running stops associated with the $7 billion loss. Also beautiful was the way the move from 1327 to 1357 (low to high) on Friday basically recapitulated in half an hour the entire range of the last two weeks. That's what a classical symphony is supposed to do at the end of the piece, recapitulate all the themes, bring them together and close with a bang. Also of note was the sentinel function of the bonds in the entire mass, staying down nicely even while the market at the two week lows. It was all guaranteed to happen.

J.P. Highland adds:

Natural gas also had a nice day, settling above $9 for the first since February 2006. It's been quite a run since December 2007 when it was trading below $7. Nearby months are selling at discount, but open interest is decreasing.

Jeff Watson noticed:

While the S&P rallied today at the close, there was also great volatility in the wheat market. The nearby months in Minneapolis did a mongoose/cobra dance today, and the mongoose won.  There aren't any shorts in Minneapolis wheat who are making money right now. 

Kim Zussman studies:

In relation to the joyful pop near Friday's close, I was wondering how to design an experiment in which subjects obsess about short-term gratification in a system with long-term utility.

(ES on Friday from open to 1130 PST was -18, and from 1130-cl was +25.25. Over recent 100 days, when op-1130 < -10, 1130-cl average= -1.5, T=-0.7)

During recent 100 days , lucky longs celebrated some or all of the following:

KZ1

Yet during the entire period, the net change was -217.

The mean O-C was a dull -2, but certainly there was much along the way to self-flagellate or congratulate over, depending on the spin of the wheel:KZ2

Lon Evans queries:

In regards to "It was all guaranteed to happen": Why so?

Note that the AmBac information was released towards the end of a Friday's afternoon session, replete with low volume and high volatility. Note, as well, that the news was released as the S&P was tumbling dangerously close to the dreaded 1320 level. Take also into account that no (pesky) details were included in the given information. Finally, acknowledge that the Bush administration is actively involved in the bail-out considerations (which suggest but another timely release of disinformation from a cabal that would rather climb a greased pole to tell the lie, than stand on the ground to tell the truth).

Without the mentioned announcement, was Friday's reversal "guaranteed?"

Let's consider another scenario. Friday closes at 1324, after bouncing off 1320. We awake on Monday to Asia's having sold off heavily in a tidal wave of red. Spitzer, again, rattles his saber in demanding that the rating agencies come clean with timely and honest evaluations of the monolines' status. And a credible evaluation of accelerating inflation hits the wires.

Given the above scenario, would a Monday's close below 1320 have been a reasonable possibility?

Where is the science in your predictive model? It seems to me that all you've done is demand that a arbitrary result validate a biased opinion. Other than betting upon an "inevitable" inevitable, I don't understand that your system of analysis is any more logical than that of a friend who utilizes tarot cards to guide his investment strategy.

No one can argue that Friday was very profitable for the quick-witted daytrader (full disclosure: I was among the less acute, managing to cover my short with only a couple handle loss, and just as my limit was so close I could smell it). But having cut my teeth on a day-trading floor during the dot-com boom/bust, I'm as aware as any what an accumulation of the quick-witted can impel given the intraday scenario, particularly a Friday scenario.

Will the calvary route the savages, succor the wagon train, and unite the dashing captain with the demure beauty? Only the details will tell. Should this boil down to a Federal bail-out, I'll cover my puts and look to go long. Should it be but a bickering viper's nest of plutocrats and the over-privileged, I sit tight. Either way, there is little science involved in my decision. I'm only interested in what target the guy with biggest stick swings at.

Sushil Kedia observes:

On Thursday, the Indian futures index CNX Nifty produced exactly the same pattern. Meandering lower the whole day and going up in a straight line in the last 30 minutes to finish at the high of the day.

Shorts got squeezed for sure as the futures discount of 30 points got compressed to just about 5 points. Chartists gruntled with joy oh a hammer and the Index jumped from the 5080 area to 5200.

However, the next morning the market opens with a large down gap at 5130 explained primarily by the overnight move in the US, stays throughout the day at the downgap as the resistance for the day dipping in between by a percent from the open some 20 times. The market saw the move on Friday as a dead /dyeing man's heart beat really going nowhere.

One wonders if there is a global trading pump that is on microcosmic level driving the same algorithm in every market?

The rare downgap opening after the move such as on Thursday in India could well be explained with the higher significance of the larger market called US the night after. However, if Asia did still trade lower on Monday would that call for the traders in the US to be ready for a lower market on Monday there despite the move of Friday?
 


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