sell S&P's - 1151bid *NM*

Really, it was based on the "two-way," and on, like, the way it was grinding there, instead of popping. It would get to the top of that little range, and just go to sleep there, nobody was getting squeezed. The difference between two-way and chop is that two-way has the feel of buyers coming in, then sellers coming in, sort of casually interleaved. Chop has the feel of people missing at both ends, and getting squeezed in both directions.


It had the feeling of buyers who were picking their spots, and the market was heavy, dropping down to meet them. That having been said, the buyers that came in at that first 46.5 low were a little more agressive than I would have thought, and one reason why could be that I had failed to consider how the market had gapped up over night, making the uptrend from the open look smaller than it was. This also sucked in more trend traders, and made slightly more of the first selloff trend trades than I woudl have thought, and caused more to get back in as a momentum followthrough of the buyers that came in at 46.5.


But, once it got that deep - meaning given the price where the buyers 1) hoped to buy, and then 2) actually got - I wasn't really afraid of a long uptrend. Buyers don't hide that well for no reason, and there was no news or anything weird going on today to suggest they would all come charging in out of nowhere at some odd time. As it was, both at the close, and after lunch, the sellers were more traders than underlying buyers, as I had initially thought. Because of the gap open, traders kept getting stuck long on a dull day, and they paid at the close.


Oh, plus, it peaked out too early. On a good uptrend day, I like to see it make a new high after 11:00, meaning the uptrend traders have a chance to take profits before lunch. This thing collapsed back on itself before 10:30, and couldn't really sniff out a pop anywhere on the way down. I know that's pretty thin, but sometimes a lot of little things contribute to the character, and then you get lucky enough it goes your way, and you think you were smart.


eLROY

What about the fact that everybody went home for the holiday weekend late in the day leaving just a few locals on the floor? Does that mean there are no real buyers so the market will either drift or go down? I subscribe to a service that reports floor activity so thats how I know. My service also said that 200 point swings were just "air pockets" whatever that means--no liquidity. Thanks.

When discussing real buyers versus traders, I would put locals in the category of traders. Locals aren't much of a force any more, most of the trading I try to separate out from "real buying" takes place on desks. Seems like every time I tune in, they are carrying on about how the pit is three quarters empty.


Air pocket is a term they love in Chicago to refer to when no offsetting orders turn up for another couple points. The opposite would be if there were bids, but sellers overwhelmed them, chewing through more and more every tick along the way. Really, it is all air pockets lately, and instead of leaning on orders in the pit, locals lean on the cash ticker, and come in when the premium gets low enough out of line.


I didn't even look at any volume numbers or anything, but today was moderately interesting. Fridays are always moderately interesting. Course, I like to trade on the Friday after Thanksgiving. I guess the locals figured nothing major was going to happen, so they'd sit it out. Somebody has to sit it out and, since the more mechanical/screen-based traders aren't going to, the locals figure why lose money together?


I think a thin market is easier to read, there aren't so many crosscurrents. Hopefully, everybody else goes home, and I can deduce the pockets pretty clearly.


eLROY

"Air pocket is a term they love in Chicago to refer to when no offsetting orders turn up for another couple points. The opposite would be if there were bids, but sellers overwhelmed them, chewing through more and more every tick along the way. Really, it is all air pockets lately, and instead of leaning on orders in the pit, locals lean on the cash ticker, and come in when the premium gets low enough out of line."


I'm confused by what you say. Please correct me If I'm wrong. Someone bids, but there are no takers except for two hundred points higher?


Also, you say "instead of leaning on orders in the pit, locals lean on the cash ticker."


I don't understand what you mean by "leaning" and by the "cash ticker."


Thanks, for any explanation.


TomT

Normally, if some orders show up one one side, locals can try to front-run them by picking off orders on the other side. If there is nobody on the opposite side to pick off, that's an air pocket.


Lean is when you use some known orders as like a backstop, and then try to gamble ahead of them. You know that if the market starts to go against you, you can dump into those orders. So if I am an NYSE specialists, and I have an order to buy 200,000 on my book at 10 1/8, I can lean on that order by bidding at 10 1/4, and trying to sell out at 10 1/2.


By lean on the cash ticker, I basically meant that if "fair" premium is 3.00, and the cash is at 1143.00, the locals will be happy to fill your market sell order in the futures at 1143.00, even if there is no hint of ambient demand in the pit. You could say they are "leaning" on cash-futures arbs, but that would be unnecessarily descriptive. Leaning just means you're not free floating, but are comparing your buy price to something, I guess.


eLROY