Keyser the Geyser
Words cannot begin to describe today’s market action.
‘Liars is all I can say.
Outliers and out you liars.
Deeper charts and odds helped us see the momo trade come to an end during IB. The half gap and gap targets were welcome sights for shorts from the pre market 78 resistance. 62 and 58 became believable, and 58 was a presumed deep test. Then it spiked to 55.25 and price was quickly above the rain line once again, with high odds to bounce and test the 68/72 range. We suggested 52 as support.
What couldn’t be known at the time, although it was already in our sights pre market, was filling the 80.5 gap. The ramp above 82 was egregious PPT muscle.
Normal rhythm says that a forty point day does not come along very often; but the market can do anything it wants.
Traders who flippantly claim they trade on emotions clearly won today in that 82+ push, but over time their record will likely be shown to be inferior to those types of traders who find common sense prevails.
High odds trades that repeat often are what it’s all about, in my humble opinion. We cannot build an effective system solely on hunches; we need metrics that need not be right 100% of the time, but that are “often” right.
To proclaim “levels” is one thing; to actually have the discipline to accept stop outs, and avoid damaging our accounts beyond repair during this type of day is essential if we are going to become mature traders.
Avoiding trouble is KING.
I felt the 82’s would get taken out, saw the 88 target, then the 91.88 FF T1. I did not wish to participate long side late day.
That should be the start of the 92/98 zone, so anyone who wanted to short had to take the heat or pass. Once the trade starts to unwind, the fast reversal EOD is what we want. If you took a hard stop at 95 you missed the trade. If you entered acap around the 95, then that was perfect entry with insignificant heat. The 93 demon materialized and the short side was then profitable as the longs found their profits unwinding.
The odds changed dramatically within a few points of last week’s high (98) so that is why we were saying zeeero odds remaining long at that hour.
The 85 target was a no brain-er after 88 test, then the 78/77 targets become available. More than likely, we need more time (after hours) for those targets since most day traders will probably capture by 82.
The 77.25 was the overnight high and those areas will often be retested.
Diminishing volume on the wrecking ball trade led us to believe that the squeeze would end with a strong reversal.
Not an easy day, to be sure. Options Expiration games.
As always, we can choose where, when, and if we are going to play.
I want odds on my side, or would rather be sidelined.
Let me use Hurricane Irene to illustrate a final point. 75+ mile an hour winds and torrential rain are not customary, but the possibility exists that it can happen. 25 years ago we had a similar storm, so we need to understand these possibilities, and be prepared for them with insurance, or at least hunker down and ride out the storm when the winds are howling.
Rebuilding comes after the storm subsides.
Four homes along East Haven’s coastline went into the sea; we had seven feet of snow last year piled up higher than our mailbox.
Outliers and Black Swans can never be ignored. They must be understood as anomalies, dealt with accordingly, and we must never allow one bad storm to take us out of the game.
I hope I have said that well.