May 142010

Hopefully you all correctly processed the internal and inverse correlation clues this morning to be able to keep from getting run over at the OL. As I said pre-market it had been tested a lot and the rally in the 10s was concerning me. Then again, the big boys were buying there all morning. But when it started to sell into it hard I looked up and saw the 10s just RIPPING up like we haven’t seen in a long time I knew money was flowing out of the ES risk dumpster on quality appetite and there was no chance the level would hold. Then when I saw it coming hard into 40/41 at that pace I knew standing aside was the only option again. It did look like it was going to base in at my 35ish level I had on the sheet and there was a good tick scalp op there, but nothing set up and by then I had decided to wait for things to calm down. The structure had sort of rebuilt itself and we felt 40/41 was a new sort of resistance above and if institutions confirmed they wanted to sell after a multi test of it from below we would consider that. They did and you will clearly see the Biglot setup there which we snapped in today’s sheet. BTW, hopefully you all saw that a Mousetrap DID set up at 44/45 on the push through and it was looking like a good trade for a bit, but this goes to show you that you MUST incorporate common sense to survive these markets. No set up can hold up an equities market against a bid in fixed income like that. Plus the VIX was screaming AND the Euro was plummeting as well. Fading into stuff like that is what many call ‘catching a falling knife’ and it just isn’t worth it…

 Posted by at 10:54 am

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