8-27-2010 Again, at 30 min from open, indices made sharp dip to key support level (1040 on SPX). It was clearly a markdown by big money to get cheap from weak hands. The price can be manipulated, but no one can distort the time. I went long NQ at 1060 and took profit at 1083. I may close my sept ES call option at close (due to time decay), but I will look for buying opportunity if ES close above 1055 today.
This makes no sense. The volume on that price dump was massive. It WAS big money moving price like that. It was based on gut reactions to Bernanke's notes/speech and as he continued talking things became clearer, recent support was tested and held up well, and big money bought right back in. I may be totally wrong about this, but to me "big money" marking price down to buy cheap or marking it up to sell high comes on low volume moves that trigger common stop levels to activate market orders (running stops as it's often called), not on the the kind of volume that propelled the market down and right back up this morning.
this is a good point, i think a good short on ES was at 9:55-9:56. However, I would have (well I did) buy back at exactly what you're talking about NoDoji. At 10:08 you saw a tail bottom hi lo range on 1 minute (i'm looking at printer paper) of about 3 points (a lot at this vix level imo), 1040.50-1037.50 . The volume wasn't small nor relatively large compared to previous 10 minute declining volume. This may have supported your argument that this was a low volume move to trigger stops. the fact that this 3 point didn't retrace and held the next few minutes with way lower volume was a signal to me that the selling was exhausted. I covered at 1042.50
News is powerful tool to the real insider (manipulator). The high vol was likely some sort of capitulation. Remember smart money always accumulate at low and distribute at high. If big money is selling at bottom quick, it is markdown to get last cheap share from the panic retailer or dumb money (like many mutual funds who can barely beat indices). The swift panic selling is most often from retailer (though triggered/initiated by manipulator for they know very well where the retailer will give up). The one type of selling that really concerns me is well planned steady selling through a long period of time. He who controls time ultimately controls the trend. After all, these are all speculations for in reality, the price action/market behavior is the sum of many many various human decision/action/reaction.
What you're missing is that retail traders don't move price like that; those were very high volume moves in a short period of time. That's the "big money" moving price. The "insider" news was the pre-release notes from Bernanke's speech - selloff ensues because the big money reacts to the notes based on the interpretation they believe the rest of the big players will derive. In a high stakes game the programs react to certain price action and it creates a cascade effect. Then Bernanke actually began speaking ("Yes it's bad, but not that bad and I promise I have the tools necessary to ensure that it won't get any worse than X..."), and when near term support holds, the programs switch sides just like that. That's the big money that moves price. Retail traders either tag along for the ride or pretend they're David and try to fight Goliath.
I hope that is a hypothetical question. The reason you are asking this question is probably that you don't have enough experience under your belt and you are already trading 50 contracts ? Do you know that 50 contracts controls about $3 million. A 1% move, which can easily happen in less than a couple hours given today's volatility, means a $30,000 swing in your account. And you are doing this from your car with a wireless card and a laptop ? Well, you must be a very wealthy man.
8-31-2010 I close my long NQ at 1774 (for 8 pts loss). Again, there was responsive buying at morning dip. If SPX 1040 holds, this bottom could be a significant one. Today is FOMC day, I expect some volatility later this afternoon. !775-1780 has become temporary resistance. If ES 1037 turns to be a bottom here, 1800/1830 is my short term target for NQ. I will be looking for entry later.
8-31-2010 Long one NQ at 1767 near close. I am seeing a bit more upside (1800) than downside (1750). The behavior of VIX could imply imminent up move in short term. I felt that selling has been getting weak over time. Besides, responsive buying below 1040 on ES has been consistent.