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MP Spoos Jan13th


The witches are broiling the pot. Hubble Bubble Toil and Trouble. Will it be higher or lower for the Witching settlement. How about unchanged which is what we have had now for weeks on end as everyone looks for trends when there be none. Not in STocks, not in Currencies, precious few in commodities but Bonds



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Thanks for the comments Alex. As I type this ES is around 1305 so I assume that the break of the 1301.1 switches your strategy to long. So did you short the 1301 area and then Stop And Reverse (SAR) or just stop?
The Day trade stategy only traded on the long side yesterday. The swing trade swung long long and will swing again if we break the Hidden pivot. The day trade strategy today Wednesday will likely trade both sides depends whether we break out or not
Why didn't the day trade strategy try a short at 1301? That's what I understood you were looking for...
because the structure in the day opened lower. If there was going to be an early reject we would have opened higher. plus you could just feel the pressure building for higher.
quote:
Originally posted by alleyb

...you could just feel the pressure building for higher.



This "feeling" is one that you have probably developed from many years of trading. Have you ever tried quantifying that so that a machine can "feel" the market for you?

The obvious advantage of being able to do that would allow you to watch many more markets in that intuitive manner...
the feeling came from the lack of pull back and the push push push grind higher. The problem with Auto trade is several. The electronic markets do not guarantee liquidity like the open outcry did. There in lies the lack of transparency and the liquidity mirage that I refer to frequently. The other problem is that with the lack of entrprenerial short term risk takers everyone therefore is a trend trader and the problem with that is that there are no short term risk takers (I know I repeat myself. boring isn't it) to take the opposite side so it becomes a case of stops tripping stops until either there is no more capital to invest and therefore the move stops or else until everyone becomes so one sided that the move reverses in the eye of a twinkle and the mad rush goes the other way. Auto trades are great in responsive markets that go nowhere and get killed in the trend markets. Something that actually the human does the opposite of right now in this decade. So it becomes a case of knowing when to turn the auto trade on and when to turn it off. PS have you noticed that on reports how everything slows or your broker unexpectedly goes down. Well this is a bandwidth problem both of the brokers and the exchanges as everyone turns the auto trades back on immediately on a release. The Power companies experience the same surge when adverts are placed in the middle of a film or some other big sporting event.
I was just looking at some of your previous comments on the liquidity mirage and particular your comment on 2/11 here Feb 11 Comments
I think that I finally understand what you mean by this mirage: When we hit extreme situations then liquidity disappears in the electronic market but in the pits it does not. Although I understand what you're saying I'm not sure that I agree with it.

In that same topic you state "The day that Bonds traded 5 big figures in the electronic market the pit only traded 3.5 because the pit was actually more efficient and in fact on that day several brokers then locked their clients out of the market by shutting down access on their platforms." Surely by getting locked out of the market the trader has zero liquidity compared to the electronic market where the trader has the option to get out but at very bad prices? I would say that the fact that brokers can lock their clients out of the market creates a liquidity mirage in the pits and not in electronic - i.e. the exact opposite to what you are saying.

In the reply above you state:
quote:
The other problem is that with the lack of entrepreneurial short term risk takers everyone therefore is a trend trader and the problem with that is that there are no short term risk takers...


Several new open interest records were set on Wednesday, March 15: CME E-mini S&P 500 futures 1,778,581 positions. Now I am assuming that this figure is as of end of day because I'm sure that the CME doesn't measure the peak OI during the day (although they might - and that's why I state my assumption here).

Given this fact I agree with your comment fewer short term risk takers. Record OI is, in my opinion, a sign of more longer term traders because more contracts are being held overnight which implies that traders are taking longer term views and holding their positions for longer. However, Wednesday was also a new multi-month high in the market so I'm not sure if the record OI had anything to do with that...
If the broker locks you out of the market then that affects the electronic platform not the open outcry. Then the only place you can trade is open outcry. Consider this from the point of view of a power failure. No power...no computer,,,eventually your cell ophone runs out of battery. Think about it. now you have a position and are totally blind.
Re open interest there are plenty of funds now that using the excuse of multi strategy trades do not close off o/i. ie open interest is reproted falsely in that I can have both a long and a short position open on 2 different strategies - IE open interest shows 2 - Remember its the client who decides whether to close positions not the broker. Now with this clearly the open interest is false as in reality and in its simplest terms o/i is actually zero.
The liquidity mirage will reappear one of these fine days and will drive to the path of least resistance. PS Interestingly enough the mirage appears in stocks to the downside and in bonds to the upside
quote:
Originally posted by alleyb

If the broker locks you out of the market then that affects the electronic platform not the open outcry. Then the only place you can trade is open outcry. Consider this from the point of view of a power failure. No power...no computer,,,eventually your cell ophone runs out of battery. Think about it. now you have a position and are totally blind.

Right - but the only solution to this is to be a floor trader and that isn't an option for 99.9% of the traders out there. So given that, there's no difference between using the pit and electronic. If there is that type of catastrophic failure then just the pit traders will be trading among themselves and no orders will be coming in.

quote:
Re open interest there are plenty of funds now that using the excuse of multi strategy trades do not close off o/i. ie open interest is reproted falsely in that I can have both a long and a short position open on 2 different strategies - IE open interest shows 2 - Remember its the client who decides whether to close positions not the broker. Now with this clearly the open interest is false as in reality and in its simplest terms o/i is actually zero.

I use Ninja Trader as a platform and it allows you to run multiple strategies in either direction so to you the trader it might look like you have 1 strategy long 300 contracts and another strategy short 200 contracts in the same symbol but behind the scenes Ninja has netted out your position and you are in reality long 100 contracts but are still trading those 2 strategies. The effect is the true OI in the market. Are you saying that the Hedge Funds DO NOT do this and in fact have multiple accounts which are both long and short? The hedge funds that I've worked for always netted out their positions.

quote:
The liquidity mirage will reappear one of these fine days and will drive to the path of least resistance. PS Interestingly enough the mirage appears in stocks to the downside and in bonds to the upside

Please keep us updated with an example when this next happens so that we can better understand it. Thanks Alley!
Your concept that you would need to be a floor trader....misunderstands maybe what I was trying to express.When the lights go out and your broker has locked you out of the electronic world then the Pit will still be operating. All you need is a voice broker who is capable of taking your order and executing it into the floor. If you don't have that capability then your account risks meltdown.

Contray to popular myth if you check the volumes from the CME for example then you may be surprised to find that floor volume has stopped going down and in fact this year is growing month by month

Re netting then you should know that compliance these days has become much more involved and not only does it suit some traders to not net off positions but the accounting boys need to see the seperate books and seperate strategies. It is something that originated in fact in Europe out of the Eurex/Deutsche Boerse exchange and has now pervaded globally. Remember transparency is not what you mightr believe especially now that the CME has taken to netting certain types of trades in terms of time and sales and reporting one number as opposed to each and every little lot. Add into that the insertions of trades and volume which come from options and basis trades and EFPs and well I resst my case
You don't need to correlate the Naz against the Russell - you're looking for a proxy to use to cover yourself if your primary traded instrument is unavailable to trade and you have a position that you want covered.

So say that you have a Russell futures position on and the USA loses power and there are no pits to call orders into. What do you do? You cover your position through the LSE by taking a position in a Russell Index Tracker fund/trust which offsets your CME futures position.

quote:
I'll give you the same opportunity as my friend back in 1998. You may set the parameters of the date for the S&P floor demise and I'll take the opposite side. Deal?

So if I make the statement that the pit will terminate on or before 2026 then how does this work?