Tuesday, September 01, 2009

Midday Briefing for September 1st: Huge Volume to the Downside

Well, it was a case of buy on the rumor, sell on the news. Stocks moved up from the open, coming nicely back into Monday's range and then moved yet higher immediately following the release of strong economic numbers at 9 AM CT. We then saw notable strengthening of the dollar, a dip in yields, some selling in commodities, and toppiness in stocks shortly after the release: the confluence of those told us that global macro traders were exiting the risk trade.

The resulting drop took us all the way to new lows and, indeed, to our first weekly downside target. (See here for profit targets for this week). Particularly notable, however, was the volume to the downside: volume during the 10:00 AM CT half hour ran about four times the average value for that time of day or about eight standard deviations above the norm!

That tells us that there was tremendous institutional participation to the downside. Those are the kinds of moves with legs. The fact that the downside move followed from a scenario of continuing technical weakness was also strongly supportive of the bear case. Stocks making fresh 20-day lows continue to expand and continue to outnumber new highs, suggesting that we have, indeed, made an intermediate-term shift away from the bull.


Charles said...

Agreed, this AM i heard talk of a "whisper #" for the econ. data, and it seemed like large, in the know traders were driving price.

So Doc, I wanted to ask you(or anyone else w/ mkt delta), did you see any clues in the number of large transactions? Like say trades over 50/100 contracts. Thanks!


OKL said...

Let me rant a little; I missed the whole darn selloff today...

AM Plan: Not trading until the triage of econ repts is over- did well here and no complaints despite missing a 10pt move.

Attempt #1; Short 1027 w/stop R1 after prices pulled back, target PP... tried and miss

Attempt #2; Short 1025 w/stop earlier highs on pivot point bounce, tgt PP... tried and miss

Attempt #3; Short VWAP w/stop PP on first push < vwap, tgt Open... tried and miss

Attempt #4; Short Open w/2pt stop, tgt Overnight Lows.... tried and miss

Attempt #5; Long Overnight Lows, target open... stopped out witihn 1 min for small loss

Attempt #6; Short 1005 w/2.5pt stop, tgt 1000... tried and missed

I still made some ES trades in between for small 0.5-1.5pt scalps, but still ended up with a small loss.

Sometimes, it just doesnt happen does it? *throws shoe*

It's days like today that leaves me really wondering where could I have done better, other than closing my eyes and going short!

Good thing i managed to hit similar trade ideas in other markets (mini crude and GC), or I'll be flipping!

I'm having an absolutely torrid time with equities these 3 weeks, but I'm sure it'll get better!