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ES and the Great POMO Rally
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ES and the Great POMO Rally

  #211 (permalink)
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For a market that appeared to be extremely vulnerable to headline risk, it is somewhat surprising the market was able to mount another comeback today, and avoid total collapse. With negative news out of Japan and Bahrain, along with technical weakness confirmed by the market backing and partially filling (1/2) the downside gap, it seemed like all systems were go for a total rout of the equities market.

Looking ahead to the rest of the week, we have the FOMC announcement tomorrow, PPI Wednesday, CPI Thursday and quadruple witching options expiration Friday. Both March opex week and FOMC day carry a widely followed bullish seasonality that may explain why the market was able to hold up today. The busy week ahead of us may also explain why we had range day, and should also serve to keep us on our toes for one more surprise pop to the upside this week.

However, it still makes me wonder why the risk markets are not down more. A clue to the answer may lie in the $TRIN and $TRINQ. Both indicies were trading at very negative readings early in the day, subsequently rallying as the market rallied in the afternoon, but still remaining below 1.00. Both the $TRIN and $TRINQ were reflecting unusually heavy volume to the buy side while the market was breaking. In other words there was a systematic attempt to bolster the market through the purchase of high beta stocks and and index ETFs. While short covering may have contributed to the $TRIN and TRINQ readings, traders could have covered every single short position, and still not accounted for the majority of activity these indices reflected.

The fact that the Fed is still chasing volatile tech stocks and index ETFs in order to prop up the market, should come as no surprise to us. But what is interesting is that the last two bull market peaks (March 2000 & May 2007) have been preceded by ultra low TRIN readings, like we saw today. March 2011 may just be the hat trick.

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ES and the Great POMO Rally-tick-1-min-_-add-1-min-_-trin-1-min-_-trinq-1-min-_-es-06-11-1-min-_-tickdj-1-mi.jpg  

Last edited by tigertrader; March 14th, 2011 at 07:40 PM.
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  #212 (permalink)
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Global Meltdown

I just wanted to update where I see things standing. At this point as I type, the ES is down huge in after hours trading (-21). We are seeing massive selling in Asia with the earthquake and tsunami causing major havoc not to mention the nuclear reactor explosions.

The last few days I've been building a core short ES position cycling some gains and selling into any retracements. I'm currently short a fairly sizeable position and will look to build upon that provided we continue to see selling pressure. Obviously, there are a variety of reasons why the market is rolling over but it was a long time coming. It just needed a catalyst to get the ball rolling.

It will be interesting to see what happens in the next few days. I read an interesting article on ZH regarding the US Treasury's current funding situation/short comings. If this hits main stream, we're going to see some serious panicking.

There will be some great opportunities to make money in this volatility but please remember to be careful, don't get greedy and follow your trading plan.

Cheers,
PB

Attached Thumbnails
ES and the Great POMO Rally-es_meltdown.jpg   ES and the Great POMO Rally-nikkei.jpg  

Last edited by Private Banker; March 15th, 2011 at 02:09 AM. Reason: Typo
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  #213 (permalink)
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tigertrader View Post
I think it is necessary that we take a more holistic view of the market with an emphasis on price action. There are two particularly significant factors worth noting. The market is no longer rallying on good news, and tech stocks are leading the way down. This tells me the bulls are no longer in charge, and the stocks that have fueled the recent asset ramping, are no longer going up. In addition, action in long term treasuries and market internals confirm a defensive to bearish posture.

While Friday closed 11.75 higher , the price action was a classic response to a large professional gap down day, trading approximately half way into the gap and selling off. If for some reason, however, the shorts were to allow the gap to be filled, we would have to consider that this sell off was a false breakout, and a bear trap. Barring that from happening the odds are in favor of the market trading much lower.

Well,

I was certainly wrong with my scenario. When it comes to trading, its not the first time.

D

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  #214 (permalink)
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I just wanted to update where I see things standing. At this point as I type, the ES is down huge in after hours trading (-21). We are seeing massive selling in Asia with the earthquake and tsunami causing major havoc not to mention the nuclear reactor explosions.

The last few days I've been building a core short ES position cycling some gains and selling into any retracements. I'm currently short a fairly sizeable position and will look to build upon that provided we continue to see selling pressure. Obviously, there are a variety of reasons why the market is rolling over but it was a long time coming. It just needed a catalyst to get the ball rolling.

It will be interesting to see what happens in the next few days. I read an interesting article on ZH regarding the US Treasury's current funding situation/short comings. If this hits main stream, we're going to see some serious panicking.

There will be some great opportunities to make money in this volatility but please remember to be careful, don't get greedy and follow your trading plan.

Cheers,
PB

Funny how Micahel H. isn't around to "rub it in our face" !

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  #215 (permalink)
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Just got long the NOB @(-25) using a 9:5 ratio ( +45 Notes over -25 Bonds) (6 tick stop) looking for the yield curve to steepen and the spread to come in. The short end of the curve should out perform the long end as the flight to quality is concentrated in the shorter maturities.

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It appears that the market has stabilized for now with a half gap fill completed so far today. Some interesting things to note, it appears that the market has reacted to a 50% retracement from the late November lows. This will be an important level to watch as it's also where the 100 day moving average is located. Meanwhile, the USD is getting annihilated.

Hope you're all making money!

Best,
PB

Attached Thumbnails
ES and the Great POMO Rally-es-3-15.jpg   ES and the Great POMO Rally-es-5min.jpg   ES and the Great POMO Rally-usd.jpg  
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  #217 (permalink)
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Private Banker View Post
It appears that the market has stabilized for now with a half gap fill completed so far today. Some interesting things to note, it appears that the market has reacted to a 50% retracement from the late November lows. This will be an important level to watch as it's also where the 100 day moving average is located. Meanwhile, the USD is getting annihilated.

Hope you're all making money!

Best,
PB

Dollar is green on the day...

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  #218 (permalink)
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Dollar is green on the day...

True, but look at the tail on that thing. Big time rejection. I guess candles can always refill through out the day but wow, does that look bad right now.

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  #219 (permalink)
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True, but look at the tail on that thing. Big time rejection. I guess candles can always refill through out the day but wow, does that look bad right now.

Can't argue with you there. I just don't want to be short the dollar here - when the short covering rally in the equities is over and the the second leg down kicks in, then there is going to be a flight to quality in the dollar - I would much rather be long the dollar right now...IMO

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Funny how Micahel H. isn't around to "rub it in our face" !

Im still here.. don't worry. I just don't understand what your calling a global meltdown when we've pulled back 3% after a 100% rally that you were shorting the entire time. You had 2 down weeks. Thats it. Im not rubbing anything in your faces, i just still don't understand why your shorting. You're even telling me that you don't know the strike price when it comes to trading options. None of the things you say help your case. Market comes down, you call it a meltdown. Market bounces, you blame it on bernake.
I can't upload .tiff extension on big mike, so i uploaded here with a chart.

ImageShack® - Online Photo and Video Hosting

I've said this before and ill say it again, you CANNOT pick tops and bottoms trading this market, no matter how elegant your methodology is, no matter what time frame. The odds are toooo small, even with a big payout for you to be considered profitable. ASK any pro trader, and they will stand by me on this comment. You say you have other positions on, thats fine. But what your doing is something i've seen many times over and over again, and they all blew up their accounts.
Like i said, when volatility/volume increases and markets come down, i will short no matter how rosy the make the economy sound on CNBC.
I don't have time to watch this thread every day, but im here and i check in at least once every 2 weeks. Best of luck in your trading.


Last edited by Michael.H; March 15th, 2011 at 05:42 PM.
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