Whatcha think of the bearish doji candle created by today's action, strong uptrend in the morning and giving it all back in the aft...
I'm not concerned at all by that since I was expecting it, for two reasons. Once bonds reached 107 the bottom base formation was completed and from that point on bonds were supposed to start increasing at a much slower rate than what was extrapolated by today's highs. The other reason is more local in nature and has to do with liquidations ahead of Bernanke's testimony tomorrow.
Here is trade that should be told this one is a classic) Trade#1- ZBM6, 3 Min.Chart using Startegy Runner Lite.Using two indicators: CCI(14) and MACD(7,10, 5).Fifty contracts per trade. CCI Indicator Highest Peak reading:+190 at 107-19, second LOWER peak reading:170 at 107-23, third lower peak reading:+140 at 107-25( third divergence) At 107-25, the CCI (14) Reading of +140,Time: 3 am - SOLD 40, Filled at 107-24. Right after third divergence the MACD crosses down and confirms, prices are heading lower.Another observation is made of the highest 3 min bar being a bearish bar. Trade#2- At 107-13, 7:20 am, CCI Reading: -300(lowest), at 107-09 CCI= -160 BULLISH DIVERGENCE: BUY ORDER FILLED at 10710 MACD cross UP comfirming the uptrend move. Trade#3- At 107-15 the CCI Peak at +300, second LOWER Peak at +180 , third LOWER Peak at +130( divergence) Sell Signal MACD at 107-21, 8:45 am(est) crosses down after peak (ignored,waiting for the divergence), turns back up when the market goes up to test the 107-23.MACD Divergence occurs and the third order is place to SELL 40 at the MARKET. After the filled, expecting the prices to bounce at key support: 107-16. Market does as predicted due to the Equities weakness and CRB Index correction. Prices go to test the 10723 high, and make new high of 107-26. Trade #4- CCI at +230 and MACD Divergences in 3 min,5 min, 15 in 30 min, and 60 min charts.SOLD AT THE MARKET. Target for this last trade was a no brainer, just looked at the yield gap and waited for the gap to be filled. End of Story
Hey Lance -- welcome to ET... a couple questions: what if the triple divergence wasn't seen at 140 on CCI? What if it had dropped like a stone after the 170 divergence? Seems like hindsight plays a role in the analysis. Just curious.
Riskarb, Two Goldman prop options plays today: buying 10,000 Sep 103-105 Put spreads vs. 105-22.5 and 23.5 in Sep futures and buying 5,000 June 106 puts (ITM) vs. 105-30 in the futures. What do you think? Obviously the options plays alone are bearish. What do you think the core position is in this case, futures or options? They have been quiet forever, since they sold 30,000 of those June 107-109 combos vs. 107-10 futures about two months ago and were short every single 107 straddle known to man. Thoughts always appreciated. My bro really enjoys your journal on the barrier options, something he is trying to learn more about.
Thanks, nice to hear. GS bought the bear spread in Sep and went long futures? Also, long futures against the 106 puts? I don't know how many futures were traded against the 106p, but 2,500 would effect a long synthetic Sep 106 straddle, 2500x. The vertical is obviously bearish... the synthetic straddle could be looked at as a bull-stop against the vertical, but I tend to doubt that's the rationale due to the relatively small size on the put spread. At face value it's nearly flat deltas, accumulating -deltas as we trade lower[+gamma] and long upside stops [synth straddle]. I may be wrong on the structure since I am not clear on the futs position.
Yes, both bearish positions vs. long futures at delta-neutral levels, covered put spread and covered ITM puts. When they do covered stuff it is always delta-neutral, very rarely have seen the GS guys do 1:1 when covered. The 106 puts are June so expire on Friday. Sounds like they are generally pretty bearish positions. Thanks again.