Quants: The Alchemists of Wall Street (Movie)

Week 37 Analysis

Expect more participation and an much easier environment for intraday trading beginning this week.

So far this year we’ve gone nowhere. Now that we are out of the summer slowdown we are anticipating a trending market. If we break the neckline of the inverted head and shoulders then we would result to new highs, if we sell off at the neckline we will look for new lows on the year.

One thing to take note of is the VIX trading at lows. A sustainable rally could only ensue if the VIX breaks 20 and remains there.

Let the Games Resume

The time has finally come for the big guns to resume trading after the summer holiday. Now is the time of year when the big hedge funds and top traders begin ramping up their position size. What does this mean for you and me or any other traders pushing around less than 100 lots on the ES, more participation, a more technical market, and more follow through.

Futures Trader: Tomorrow is rollover meaning the volume for the contract month will shift from the current expiration month September (U) to December (Z). Make sure to update your charts and execution platforms accordingly.

Options Trader: Since tomorrow is rollover this means next week is Options Ex. Any new positions should be taken in the months of October and later unless your strategy involves selling premium.

Stock Trader: More volume equals ease of entry and exit for those smaller less liquid stocks.

Our short term outlook is a move down to 1072 at which point we will either bounce and move higher, or sell off to new swing lows and potentially beyond. It’s time to ramp up the trading into the end of the year, so get ready for a wild ride.

Daily Reflection: 09.01

For what was a very big move up today you may notice it was rather “slow.” This is known as a gap and go day where the market gaps up and then moves sideways the rest of the day. This keeps the majority of market participants out of the market. The only way to catch these moves if you have not positioned yourself in the pre-market or overnight sessions is to be long or short stock, option, or overnight futures positions. Find a balance between intraday and overnight setups that suits you.

Today we saw a close on the Trin of .25 and while this is bullish for the day, tomorrows actions will dictate the likelihood of a sustained rally, or decline. If we fail to sell off to some degree tomorrow and instead rally, then the markets are in for a longer term sustained rally. We have lots of news tomorrow including Jobless Claims, Pending Home Sales, Chain Store Sales, and Bernanke Speaking so expect a wild morning.