Wednesday, August 01, 2007

Crazy Trading Day - NASDAQ 100

Even though I drove over 100 miles today to drop my kids of at their grandparents' house, made a Walmart run, and happen to be in the middle of moving (all by myself) to a new house, I did manage to make 25 trades today.

Every uptick was a sale and every downtick was a scoop. These are the days traders relish. Click the graphs to enlarge them. I have included a chart of the futures and of the ETF - since I wasn't sure which was more illustrative.

I got back to my PC around 3:15pm and saw that the market was rolling over. For a second I thought about getting long but ruled it out because I will be moving the next two days and will have considerable difficulty trading with 1) no internet connection and 2) my computer in a box. All I had to do was merely think about buying AND REFRAIN and the market levitated in my face. As you can see, the N100 Futures jumped from 1925 to 1960 in the last half hour of trading.

Some old trader I knew philosophized thusly,

The market always moves in the direction that generates the most pain...

That essentially means that a stock will rise until most of the shorts have covered and a stock will fall until many of the diehard longs have had enough and bailed.

Now consider today's late market spike. You just know that thousands of intra-day traders were getting lamped down at 1925 and likely taking their losing medicine. THEN, all of the mutual fund market-on-close buyers got jammed on the spike to 1960.

See how the market managed to sodomize hose everyone?

One day when I was working down on the PHLX the market was getting absolutely clobbered. Like this past week, it was getting smacked every day for quite some time. On that particular day, the market was down a few hundred points and there was real pain everywhere. (We used to refer to it as "getting hurt" for individual traders. "Blowing out" meant going bankrupt for either an individual or a trading firm. And whenever the market moved violently, those expressions dotted the pit scuttlebutt.)

BUT, similar to today, the market made a spectacular rally in the last hour or so and finished up nicely. Some guy in my trading pit started bragging to me,

PitIdiot - I called my broker and dumped a ton of money into my mutuals today.

I waited a few seconds and let him bask in his ignorance; he was sticking his chest out and feeling like a genius....for the moment.

CaptiousNut - You (expletive) MORON, YOU BOUGHT THE CLOSE. It doesn't matter that the market was down 400 when you called your broker.

That was just the type of Captious service that I provided for my fellow traders back then on a daily basis.

Lastly, since I have to get back to packing...

Though I got walloped in July shorting the market - losing 40% of my trading capital - I managed to make back three quarters of that money in the last few days. That's as big, and as rapid, of a bounce-back I've probably every had. Usually when I get "hurt", it takes a long time to get the money back because I naturally scale down my size in those situations. I am pretty flat today outside of a massive, for me, short position in the 30-year bond.

Oh, I almost forgot - I shorted a little Nazzy on the close at 1964. Perhaps I was selling some delta (long exposure) to my old buddy from the floor?

UPDATE - I just covered the short at 1958 (11:30pm). As much I want to trade up a storm tomorrow, I can't risk the distraction from my moving chores - at least that was the directive from my wife.

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