Woodshed Thursday Rub Down

That was some dirty tape – everyone got taken to the woodshed – bears and bulls alike:

I mused to my zero subs today that this was one big rope pulling contest – we wiggled around the zero mark all day on both the Lite and the PZI. Really don’t have much to say about this – it was ugly and everyone got a turn at the ole’ anal probe.

Program Trading Update:

evil.rat/ES: – 8.25 (got a good entry early but then got whipsawed out due to the constant up/down)
evil.rat/NQ: -4.75
resident.evil/ES: -0.25 (best of the bunch today)
resident.evil/NQ: -6.75
geronimo/ES: + 1.75 (two winners – one loser)

BTW, the frequency of those geronimo trades in combination with some very long candles on both sides suggests that there was a program trading battle taking place today. One side is trying to breach the H&S – the other one is trying to whip this thing higher.

Fujisan proposed that the left shoulder of the H&S on the SPX took 16 days to build and that we won’t see this one break until after OPX. That would be my favorite scenario actually and I hope that’s what we’ll get. In the interim I would recommend everyone to trade very small and not get churned to death by those market mofos.

I might chime in a bit later but I’m not sure yet. If not – the scenarios in my previous update all remain valid.

9:05pm EDT: Here’s an insightful take on the tape from ‘Trader Dan’ Norcini:

“Up and down, back and forth, in and out; she loves me, she loves me not – after everyone and their mother ran to the hills yesterday avoiding “risk”, today they decided that they had forgotten their underwear and toothbrush and ran back to go and get them once again. RISK is back (at least for today) and when it is, down goes the Dollar and down goes the Yen, up goes the Euro and the Commodity currencies, up goes crude oil, and of course, up goes Ol’ Yeller, i.e. gold.

I have been wondering how much longer the Japanese monetary authorities were going to sit idly by as they watched the insanely schizophrenic speculators bidding their currency to Timbuktu. They finally issued a statement and that was enough to take some of the wind out of the Yen’s sails as any speculator, that does not respect the Bank of Japan has not been out to their woodshed as has yours truly. They can put some kind of “whoopin” on you. Even at that, the Dollar was so out of favor today that the Yen came well off its worst levels of the session.

With that in mind, crude oil did struggle to move higher even as the algorithms had the hedge funds buying it and I think that were it nor for crude’s inability to move beyond the session high of 61.62, gold would have taken out $620. For now, $620 is serving as near term resistance as it was support prior to yesterday’s sharp price decline in the gold price. Now it is attracting selling by fresh shorts moving in to take advantage of a rally to sell. In addition, short term oriented traders (the one minute bar chart geeks) are selling up near that level and trying to book a few dollars in profits.

After yesterday’s big rush to safety, the bond market promptly puked and gave it all back. This is exactly what I am referring to when I state that today’s markets are broken and that hedge fund lunacy is destroying their integrity. The wild price swings are indicative of ZERO analysis being done by human beings. Rather what we are seeing is the result of a dog walking its master on the leash. Computers are running our markets and that is what scares the hell out of me. How does a bunch of on and off circuits sit down and do a studied analysis of a market from a fundamental basis? Answer – it does not.

Now you can see why Goldman Sachs has its panties all in a bind about their little ol’ computer program… that is what investing has boiled down to these days – who can get their order in front of the next guy and get it to the exchange the fastest… As a long time speculator I used to be proud of my profession but I must say that this new breed of fund managers and their quant boxes disgust me because it feeds into the notion that we are nothing but a bunch of low-life parasites who produce nothing useful. At least we once did a lot of analysis and provided liquidity and served as a conduit for commercials looking to offload risk. We have now been reduced to a bunch of leeches sucking money out of the hands of those who actually still believe that the markets serve as a price discovery mechanism. Trading/Investing has morphed into a hopped up video game on steroids. “