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Cover Short on Panic Days Part 2

Cover Short on Panic Days Part 2

by MoleAugust 6, 2011

Well good to know the S&P is only 10.5 years late on the downgrade…. Anyone know when they downgraded LEH?

LOL Exactly. Useless.

We rats dont look into a rear-view mirror and pull out Captain Hindsight and his trustworthy sidekick Mr. Obvious to trade the markets.

How many really predicted the real-estate bubble and * actually* bet on it? 4 and 2 of the 4 were insider banks!

Now how many idiots claim to have seen it coming? Thousands… and thousands…

Listen- let me explain to you how this game works.

(1) 40 Million puts bought in 2 days (record).
(2) Goldman lowers NFP estimate from 150 to 50 as the market goes lower.
(3) This is how someone who is SELLING those puts with a VIX at 40 hedges their bet!

That type of volume is a sign of capitulation. I know two brokerage houses (on Thursday) that said they ran out of stock to let customers short! They had to buy stock just so the sheep could go short.

Now here is the active emini contract:
[amprotect=nonmember] Charts and commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.
[/amprotect] [amprotect=1,13,9,12,5]

Yes we are in free fall. But for every panicky seller there may be a rational buyer. That volume is a sign of capitulation if you ask me.

Also remember channels. I bet on a 2006 broken trendline, and that channel/ capitulation cost me like 40 eminis. Been there, done that- you will have another day to sell this at a better retest of the trend.

**** Remember smart money with large amounts of interest can ONLY get into the market when (1) there is volume and (2) there is panic so they can get a good fill.

Here, look at put volume vs. the VIX.

Ok so you see my point. When the VIX spikes, smart traders cover their long gamma/vega trade, while retail goes long vega!

Finally I leave you with something a little different.

Looks like the “smart” crowd is searching for the stock market…. lol just under Brett Fart. Sheesh that is bullish.

Now I dont know what Monday will do, and volatility may continue to spike. But, as a trader, I am looking to buy on some bad news- Monday may be it.

Wish you all the best luck in trading- dont do anything too stupid here.


About The Author
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at various social media waterholes below.