May 072010

Believe it or not this session may not be so difficult to piece together given the way that we trade. Everything is quite mixed actually so we should see some good rotational opportunities. Unemployment up and nearly 10% yet STRONG jobs growth in nearly every sector. Despite the huge sell off, it was NOT Greece related beyond about the 46 handle or so. And despite the gigantic volume we finished quite mixed with lots of money made to the long side. Overnight though is a little tricky as all deltas are up with institutional order sizes favored, however the participation of large lots is a lower than normal percentage of the total pointing to sidelining large traders until we reach the edges. As far as the “real” reason we auctioned down yesterday – before the nonsense – the strong bid in the 10’s were an early clue. But this morning despite the overnight continuation we don’t see a strong offer or the yields flattening much. The Euro is also basically unchanged after some significant overnight volatility. We may also see some liquidation activity from naked algorithmic options traders who detonated themselves yesterday this morning. Ooops, spoke too soon – As I write they just started pounding the EU HARD! Anyway, you get the picture. Don’t be too quick to bet the oversold angle and expect more volatility. As for what we are looking at it plays out like this. The overnight high could potentially start as low as 34 and extend up as far as 38.25, so we would only look to scalp it if at all. The whole world will be probably favored to the log side if we get any momentum anywhere near there. You are asking to get crushed if you mess with it. If it does break we like trading long maybe from 39ish all the way to 44.75 or even 50.75 on the snap back. I think the market is going to want to return to 46.75 the key swing low that is the fulcrum point right now. Support became resistance. On the short side I would potentially fade the gap fill long at 23 or so but if we probe lower I don’t think I would take a real fade around 19 as if it pokes to there it may want to test the OL and quick. I would just scalp (if at all) 19.25 or 16.25. I do think 13.50 would hold but I doubt we test it. If it gets really whippy we will just stand aside. There really is no upside to thinking you are missing something by not trading. All in all if I had a gun to my head and was forced to call it today I think 22ish will hold as support and somewhere between 46-50 will be the interim resistance. If you start seeing zeros printing on either side just switch off and give it up.

 Posted by at 9:16 am

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