May 212010

WOW! An almost 30 handle move since the low test just before the open. This is why you MUST use discretion and you MUST keep your eyes open and piece together the puzzle in order to survive conditions like these. Aren’t you all glad you weren’t mechanical traders today? Ouch. It took some patience, but there really were few setups until the 77-79 area. There were some good scalps (though I didn’t snap them all) but the first one was a sure loser at the 65 handle. The others at 69-70, 77, & 78-79 were pretty easy though. In hindsight it probably would have been a better move to not scalp today regardless of results on OE day knowing what I knew and was ready to expect. In case anyone is wondering about the rally it is quite simple. This is what happens when you are at expiration and the whole world is already short. The shorts come off because virtually nobody re-rolls because they have no idea what the market is going to do next week. Better to just stand aside and then adjust and re-position next week.  The majority of the rally was covering consistent confirmed by volume. If you notice the majority of that move was on a couple hundred thousand contracts. In other words, it had nothing to do with the ES. Dog wagging the tail. Anyway, we finally got a Biglot set up with good retest and exhaustion at our 78-79 level from the sheet. I was kind of surprised we didn’t test the OH but listening to the big dogs will most always take good care of you. For those hanging around – as always, be careful. But especially today. The market has no idea what it wants to do so expect more wild, reactionary trading.

PS: Of course right after I post thinking that is it for a while another trade comes up. This time a really good setup at 10:30 – a Mousetrap with Biglot confirmation on the restest of the key 69-70 handle from above this time. With the volatility so high it pushed down into the center of the mid-sixties cluster, but still very much valid nonetheless. Some serious profit on this one – 4.25 handles if you traded to the then current VPOC on the day session..

 Posted by at 10:33 am

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