2011-10-04T16:33:00.001-07:00

This is what a broken market looks like on a daily view. It's not obvious, is it. Actually, what it looks like is that sometime between 300 and 330EDT, some sort of tremendously fabulous news hit the market and everyone said "Oh Happy Day!" and all the buyers got out their big green "BUY!" buttons and all the sellers ran for the hills because The World Has Been Saved!

And I'll admit that it does look like that. But that's not what it is.

What happened is that Dexia, the Belgian bank that passed the European Stress Test twice in the last 18 months and is now essentially insolvent will probably, possibly, surely, maybe, likely, but-we're-working-out-the-details be saved from shitting itself by the "EU officials" and thus...

Oh forget it. It's just more bullshit.

Naturally, if you got long a zillion ES contracts at 3:00 and entered a Market on Close order, you picked up for a dandy 29 point gain with only 5 points of risk. Woulda made a pile today on sheer bullshit.

And don't think Goldman didn't know this was coming.

Freaky Friday?

2011-01-28T13:56:00.002-07:00

The big drop in all equity markets today - DOW & NASDAQ - is going to be blamed on the "unrest" in Egypt. (What a stupid euphemism for "mad as hell and not taking it anymore.") To a certain extent, Egypt is the superficial cause, but the reality is that the equity markets are grossly overbought on both technical and fundamental factors. (Not that fundamentals mean diddly in the equity markets anymore.) The more likely cause of the sell-off is that the big money - which is what actually drives the markets - has been looking for an opportunity to cash out, and today's unrest gave them the excuse they were looking for.

Something weird happened today, I mean something weirder than Egypt turning into France - the E7 and the DX were BOTH down today. That almost never happens. But it happened today. This is what "A Race To The Bottom" looks like. On to the juicy stuff:

ESH11: Daily -Volume Profile Start Date 8 May 2008

The ES closed in the low-volume region between a pair of high-volume nodes at 1270.50 and 1277.25. Friday's range was 28.5 points, which is pretty unusual for lately, but not that unusual overall; since Jan 1, 2007, we've actually had 187 trading days with a range of 28 points or greater. In other words, there may be a little bit of not-entirely-abnormal volatility coming back into the market.

We tested the bottom of the current micro-composite range today, and it held. The question is: did it hold because that 1270ish number is providing actual support, or because we'd put in a big enough range for one day. The most likely answer, judging from the charts, is that 1270ish is in fact long-term support.

The view from the cheap seats for Monday looks like this, (standard disclaimers apply):

Look for 1270 to be tested early. If it holds, expect to see a rise back into the meat of the year's range in the 1280s. The VPOC for the current microcomposite is 1281.75-1282. That should be within "normal" range for the day. (We've been running an awful lot of 10-12 point days lately.) If 1270 fails to hold Monday morning, then we should see the previous value area between 1257.50 and 1270 tested. The VPOC of that area looks to be 1263.50.

Keep an eye out for 1254.25 below as we have a pronounced volume spike at that price. I consider that less likely though, as we will need to auction the 1257-1270 area before moving on down.

Stay classy, Traders.

Professional Grade Bullshit

Freaky Friday?