Take a look at the spikes in price and volume of SPXU (triple inverse S&P ETF) and VXX (volatility ETF) during the last 5 minutes of trading on Friday after Thanksgiving when no one was looking:
Somebody waited until the last minute to place a sizable bet on lower prices resulting in higher volatility. This bet apparently could not wait until Monday morning. Which implies that the bettor thinks something will happen over the weekend which would make these securities more expensive to acquire come the Monday open.
Pretty brazen given the recent FBI crackdown on insider trading.
Pretty brazen given the recent FBI crackdown on insider trading.
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You are on target and exceptionally vigilant. Do you look for follow through weaknesses on Monday?
ReplyDeleteHi Parker,
ReplyDeleteI've read you blog for a while and enjoy your work. I've noticed that "highplainstrader" has been giving you some abuse, which seems to be his only contribution to the world, so don't let him get to you.
FYI I'm fairly certain that he used to use the disqus profile "TwoJacks" and if so he was famous for his awful, awful preditions of daily collapses based on no real strategy on sites like slope of hope and evil speculator. If so, I guess he took time off and has come back under this new persona and managed to hoodwink some newbies over on Trading to Win (TTW) that he is a professional trader. In any case, he's clearly not the professional that he claims to be.
Read highplains' "guest post" on trading to win from November 1st and you'll see that his accusations of YOU being a grasping third grader are a better description of his own "trading".
Keep up the good work.
Michael
ReplyDeleteClearly, somebody wanted to be short BEFORE the bell on Monday. Like they expect some bad news over the weekend. We'll see if they are correct.
Eyee
Thanks for the background on TwoJacks. I thought his analysis of the HSKAX indicator was weird, and his refusal to answer my questions about his analysis weirder still.
Parker, noticed the MFI has a very low reading after today. A casual inspection (not in depth) shows that these tend to be bottoms at least for the short term, often longer. If it is timing the midpoint of a drop from the most recent high that is also 'curious'. Unless of course it is going to get a lot lower later. Any comments or implications you have are appreciated.
ReplyDeleteOoopsie, answered my own question.
ReplyDeleteIf today was the MFI low, the target low on a midpoint basis from the high close of 11/5 times out to a theoretical 12/16, or right at the proposed Null Echo Low.
Luv
ReplyDeleteToo early to tell if we are making the centerpost of an inverted Money Flow T. And I prefer to use RSI and other indicators for overbought/oversold type analysis.
Here's a couple of Zero Hedge articles on the late day hijinks:
ReplyDeletehttp://www.zerohedge.com/article/last-minute-after-hours-dump-leaves-investors-edge-ahead-dual-pomo-bail-out-monday
http://www.zerohedge.com/article/surge-after-hours-selling-takes-gold-volatility-index-all-time-low
I think the bet on a downturn in the market on monday is a large bet that north korea will act up again over the weekend.
ReplyDeleteParker...I accidentally double posted and also found the url for the chart didn't load for me...trying again as this should work.
ReplyDeleteFirst off, let me state I was a member of the NYBOT for over 25 years and traded 3/4s of my time spent in the pit with my own money exclusively. Scrolling down, I have read your incident with HighPlainsTrader on TTW. All I can add is that having been chosen to do Rich Dennis' business in coffee and sugar, and spending many years talking markets and living them in my sleep, there are some extremely nice people at TTW. But there is a paucity of professional traders there as on most blogs. That's NOT said to give any great credence to a professional trader as some were mere thieves. But I'd say that as a rule, we don't like being spoken to like some rube by someone who is calling up and trading 1 E-Mini contract who has done this part-time for a handful of years, and who says, "get ready....my system might give a signal". It's become comical to many. So don't think everyone takes him seriously as I know many who don't and have scaled back posting due to him.
I have been working with ZigZag on T Theory and have come up with what I don't see as a finding by anyone, although perhaps you are aware of it. The premise is that we don't need to have long-term extremes to build Ts from as they are fractal in nature. The one that hit on Nov 5th (or perhaps the 8th) is, for example, in-between the 1932 low and the 2007 high. They take place often and in different time-frames in a trend. So I have dubbed this a "Middle Zone T", or MZT for short. I have seen it work often enough recently to believe it has merit and I am trying to research past data. As an Elliotician for years who has a good grasp on its rules, it seems to me that an MZT is most likely to work in a correction when wave B and wave C are generally about equal in time. The construction of those is too long a discussion for this space.
When you get a chance please take a look at this chart of you would.
My current MZT with my highest probability EW labeling:
http://tinyurl.com/25m4w9p
I've been seeing some good results with MZT, but I suspect some are more valid than others and would likely be more probable without a conflict of a slow stochastic, a 13/34 EMA, or an MACD moving against it.
Your thoughts would be appreciated.
The EW labeling would put us in wave 3 (red labeling) of wave 3 (green labeling) should we begin to drop. Others are calling this part of wave 4, which might also be correct. The standard nomenclature on the chart might not be what Prechter uses in his book, and I know what I mean when I do it, as do people I send it to, which is the important thing.
Steve
Hi Steve
ReplyDeleteThanks for your comments. I'm a big believer in fractals, but just an amateur at EW. However, I think your idea has merit.
In a motive 5 wave down, there certainly can be a small "bearish T" (high to low to high) starting at the beginning of the move with a centerpost at V of 1 and the right edge at C of 2.
Further, within the right side of that small bearish T, there can be a "Middle Zone T" starting at the A top, using B as a centerpost and projecting C as the right edge.
I haven't really tried to apply EW (or smaller fractal Ts to EW concepts) before, but it makes perfect sense.
The "Middle Zone T" would confirm the small bearish T's end date, giving you confirmation on when Wave 3 down would start.
Good stuff. Please update us if you develop any rules as to when a Middle Zone T might be valid or invalid.
I was listening to the pit broadcast from tradersaudio and there was no indication of any big sell orders from institutions that drove down SP futures. The only sizable sell order came from Salomon (200 cars) and that could not have accounted for the last 5 min dump we saw. The drop hence must have been driven by massive sell orders in related markets. I tend to believe the related market would have been e-minis as various ETFs should have stopped trading after cash close as well. Volume in the last 15 mins of trading on e-minis is at 237% of previous 9 day average at the same time of the day.
ReplyDeleteThanks CSW.
ReplyDeleteDo you find the pit broadcast to be helpful? I've often wondered if it was worth the expense.
Steve, Thanks for the contribution. I think the effort to make T-Theory more precise and perhaps even work on shorter time-scales is very intriguing. How did you choose the starting points of your Ts? You did not use the price high 1227.08 or 1200.29 even though stoch, price and MACD were all higher for the former and price & stoch for the latter. Is that because of something you found in backtesting? If you use the 1227.08 and 1200.29 highs, your big and little Ts still align but on Thursday 12/2 instead of yesterday (Friday 11/26). I know there is no right or wrong since it's just a theory at this point. Just food for thought. Also, does anything other than price (incl split tops/bottoms) factor into your T center post? Thanks.
ReplyDeleteParker
ReplyDeleteI don't want to sway you into deciding whether pit audio is of any use or not. I know of professional S&P day traders that rely heavily on knowing how the locals are positioned vis-a-viz institutions and others who couldn't care less about the pit. Easy way to find out is to sign up for a free trial and decide for yourself. I personally certain find the pit audio helpful, but never decisive in my trading decisions.
HTH
S2,
ReplyDeleteHaving no preconceived notions about T-Theory, and not reading that much about it yet but only looking at charts for someone using it for over 10 years, I spotted/marked the point at which the price finally decided to make a move. Perhaps I should backup to those spots also and start to look at what might seem to work more precisely. But the EW-er in me says that the move is when that short-term trend decided to finally do something, which also indicates a high probability that a new deck of cards, so to say, was put on the table. It's not at all from backtesting as I've only done some for the last few weeks and gone back only one year. I've had cataracts removed and replaced with prescriptive lenses (inter-occular) over a 3 week period, so I need reading glasses but not good ones yet until my vision settles in and the surgeon said to try to not tire my eyes too much. So I really can't say it was anything but intuitive and seeing what I called a Middle Zone T (MZT) was nothing other than asking why shorter time frame trades can't be taken when everything now falls between the historic high and low anyway. As to other things, I'm trying to look at EVERYTHING as a filter on the shorter time-frame Ts.
*************************************
CSW,
If hearing the pit sound helps you that's a good thing for you. Having been in one for over 20 years, I don't wish to hear what is going on unless I am in there and can see what it really means for myself, which is why seats cost so much. The same "obvious" GS seller can be 1/4 of the size of the buying they are quietly doing through other people. The stops the pit talks about and tries to get on a slow day might not really be there and the larger trade houses might have the stop orders there themselves to stand in front and burn the pit because on a slow day, the pit is the other side of who they will go after. My "gut feeling" is usually what my desires are. I never met a floor trader with a good "feel" for price direction. But when the mkt was open, certain players had patterns that were big clues to movement. I really think all the markets have gotten far too big for the floor trader's personal volume to be of consequence. It used to be 40-50% of total volume, and it did matter. I suspect it's less than 10% now. The only reason, IMO, that some floors still exist is due to years of campaign contributions. The NYBOT didn't make any; hence we are closed.
Steve
2 comments
ReplyDeleteThe value of watching or listening to what is occurring in the S&P pit is becoming less and less as volume moves away from the bigs to the minis. The old pit had 250 locals trading and any given time. The new pit has 70-100 on the open and close and 30 mid day. If you were a hedge fund and wanted to sell 1,000 cars would you route it through the pit not knowing if you will get filled at your price or what your price might be? Or would you hit the ES 10 times at 500 lots which is easily absorbed and wont move the market more than a few ticks?
Nevertheless there is still paper activity (for now) and there are still a few size traders in the pit who can move the market. Joey B and Mslo can easily take on 500 car positions. They can be highly motivated to move the market to get paid and they work in packs with other locals to force lower or higher prints. If I am short 500 cars I can sell a 1 lot in the pit to get a print a few ticks lower. To get a lower print in the ES I have to sell up to 1,500 minis (equivalent to 300 cars).
I have seen it 1,000 times when paper sells a bearish market on the open and the pit gets long. There is no other paper and the market is quiet. What do you think happens next? Locals bid the market up, the market rallies and the locals get paid. If they can’t find buyers to lay off on, they cover in the mini and the market resumes its intended direction. However if you didn’t know this and you were a weak short you probably puked your position (only to have it work 10 minutes later).
If you are a day trader I would recommend knowing what goes on in the pit by either trading ringside or listening to a squawk. The market is still made in the pit and knowing who is in control of price, paper or locals (or neither) and how well a job they are doing can be the difference between a good day and a bad day. If you are a position trader, what happens in the pit on the close or some point during the day shouldn’t make a difference in managing your trade.
Additionally, the market sold off on Friday but as another poster commented, there wasn’t any unusual activity in the pit. I expected the market to sell off sharply simply because it was thin and who would want to be long going into the weekend with North Korea ready to nuke and PIIGS getting ready to be barbequed? It seems like China pressed the pause button on the microwave and the coals need a little longer to heat up so I don’t see a big sell off coming and expect the market will open around 8600 or better if so I will be hunting longs. Still anything can happen between now and the opening bell…I cant wait.
Good trading,
Tim Mack
It is so stimulating to "over-hear" someone using the language of the Street. The experience is a lot like drinking, or sharing really good recreational drugs.. the adrenaline gets going and I am back in the business, working with the market-makers and the traders.
ReplyDeleteThe argot of the Street can be, I imagine, difficult to understand, but for those of us who have lived with and used the argot, it is a breath of fresh air.
Bill
Tim
ReplyDeleteThanks for the pointer on how you use the pit. I have noticed many times as well that paper fading by locals only work during quiet days. On a strong trend day, Joey or other locals fading papers won't move the market much, if at all. One issue that you brought up was that you needed to know whether locals have covered or not via e-minis, and that is one thing that squawk doesn't necessarily do a good job. There were numerous times that I found out locals have covered (long or short) via other means but squawk still has them in position (long or short). I guess that is where ringside view can be more helpful than squawks. What is your take on this?
CSW
CSW
ReplyDeleteUsing the example above, long locals in a quiet market will bid the market up “hoping” paper comes in a buyer and they can unload their inventory. As long as they don’t meet paper sellers they will hold their position, however if they meet aggressive paper sellers and they don’t believe the market has further upside potential, they will cover in the mini. If you are listening to a squawk the key is to hear if they buy the paper that comes in, absorbing the orders, or they start “running” from sellers. When “paper to paper” trades it is often a telling sign that the locals are full of inventory and they don’t want buy any more. Paper will first hit locals but if locals don’t want them they will trade with other paper. You can bet the locals will then start covering in the mini to lighten up.
I try to keep everything that happens in the pit in context. If Joey did that today he won’t have been run over this morning (but his failed attempt to muscle the market is also very telling). I have some other info on my blog that I discontinued. It turned out to be more time consuming than I expected (salute to Parker) and I was getting some grief about what I was sharing but you might pick up a bit of useful info in past posts. http://tmacktrading.blogspot.com/
Tim Mack