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[转贴] What Was THAT? (Friday Market Close)

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发表于 2009-5-30 12:10 AM |显示全部楼层


http://market-ticker.denninger.n ... y-Market-Close.html

Friday, May 29. 2009
Posted by Karl Denninger in Technical Analysis at 23:56

What Was THAT? (Friday Market Close)
Friday's close was "interesting", to put it mildly.

Here's a chart of Friday's price action in the /ES, the S&P 500 "Electronic" Futures:



Notice the huge volume spike (the blue underlay) on the chart at the close.

There were 146,083 contracts traded in that one-minute period between 14:59 and 15:00 (Central); the next minute, when the real dislocation hit, traded 91,774 - after the cash market bell had rung.

The closing bell is usually busy.  But this sort of volume is absolutely unheard of.  To put it in perspective yesterday the same time recorded 26,540 contracts, and 36,642 the minute after.

Volume was light all day, as is somewhat common in the summer on a Friday.  The close started its usual increase, and was up to 23,000 contracts at 14:57 with two minutes remaining.

Then all hell broke loose.

"Paper", or institutional representation, was stalking the close; the pit audio feed so stated.  Directly in front of the bell 1,000 contracts were bought - as near as I could tell at the market.

Those are "Big" contracts, each being 5 of the /ES minis; this was, in effect, a 5,000 contract /ES market order.

The reaction was instantaneous.  The offer side of the market collapsed and the /ES rocketed higher.  In the pit, trades went off as high as 925, but on the E-Mini trades were recorded as high as 927.75.  As quickly as it got there, it collapsed back to 922 - a nearly six-handle (3/4 of one percent) straight-up and down spike.

Now here's the problem:

For me to believe this was "organic", that is, this was an un-forced order, I have to believe that someone wanted to go home net long the equivalent of 5,000 /ES contracts into the weekend at a severely disadvantaged price.  The market had been calm all day; if you wanted to buy 1,000 spoos (equivalent to 5,000 E-Minis) there was plenty of opportunity to do so all day long.  This sort of market order was guaranteed to dislocate the market - so the buyer had to simply not give a damn what sort of price they got.

How bad of a fill was this?  To put this in perspective each /ES point is worth $50 per contract.

Each single point that was disadvantaged to the buyer by this execution cost him a cool quarter-million bucks, and on average, the "disadvantage" was likely around five full handles, meaning that the buyer of these contracts, if this was an "organic" order, willingly ate $1.25 million dollars.

I don't believe for one second that is what happened.

There are only two possibilities that I can come up with, and both demand answers:

"Someone" was forcibly liquidated out of a short position - a fairly big one.  1,000 S&P "big" contracts has a maintenance margin requirement of $22,500,000 - that's not a small position, and each point, as noted, has a $500,000 move associated with it.  Who was it and why?
"Someone" who didn't give a damn if they lost a sizable amount of money intentionally wanted to shove the cash market up through the 200DMA, a critical technical level.  They were 1 minute late; they succeeded in doing so in the futures, but not the cash!
#2 makes for great conspiracy theories, but my money is on scenario #1 - someone got forcibly liquidated into the close, perhaps a big customer, perhaps a hedge fund, but someone.

Whoever it was the coupling between the pit and the Globex futures guaranteed the result.  There are computers and traders looking for differences between the pit and E-minis every day who try to pick up those nickels in front of a steamroller.  When the offer side collapsed the computers took over and stops got run all the way up to 927.75 before quickly collapsing back down to 922.

Here's the cash chart, as of the close this afternoon:



That's a very pretty potential double-top in the oval, and it coincides with the 200MA.

This is not to say that this level will necessarily hold.  We are, in fact, only at the 38.2% retrace from the decline that initiated last fall!  It would not be unusual for a bear market rally to go as far as the 61.8% retrace before its over, which is up around 1060ish, or the 50% retrace around 990.

What does this all mean?  A few things:

The stops up there are gone.  They were potential rocket fuel for next week and the propellant to take us to - and potentially through - the 200DMA on the cash.
A bunch of someones had a lot of contracts that were short taken out on them.  Those nearly 250,000 E-mini contracts did change hands, and odds are a very large percentage of them constituted stop-loss orders on contracts sold short from when we were up toward 933 a few weeks ago.  Those traders are going to be quite pissed off, but that's the risk of the game.
Next week is very likely to be extraordinarily violent, especially Monday.  /ZN (10 year Treasury futures) has seen an insane drop in open interest over the last few weeks.  This little game undoubtedly severely damaged open interest in the E-Mini /ES contract.

Thin markets are dangerous markets.  While the E-Mini still is very liquid, the removal of these stops from the order book leaves the door open for both little resistance if the market decides to move higher early next week, and also provides the potential for irritated shorts to re-establish their positions short, driving the market lower.  Those who wound up long during that little ramp job are likely to be rather nervous as well.

For my part I shorted that spike.  Not large, and I am fully prepared to hedge it Sunday evening if necessary or just take it down, as there is every possibility, this close to the 200MA, that we will at least hit it on the cash, and blowing through it on volume and continuing higher cannot be ruled out.

I will note, however, that the last time we saw this sort of dislocation activity start up into the close it it too began with these sorts of "rocket shot" moves higher - and once the shorts were all blown out by having their stops run, the market essentially pancaked.

Look sharp - the sharks are in the water and you taste good.

Disclosure: Mildly short (~5% position) the broad market.

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发表于 2009-5-30 12:13 AM |显示全部楼层
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发表于 2009-5-30 12:18 AM |显示全部楼层
Thanks. I added 8% position short of SPY at last moment. I just felt sth. was not right. Pure for fun play.
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发表于 2009-5-30 12:19 AM |显示全部楼层
也啊,太疯狂啦
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发表于 2009-5-30 12:29 AM |显示全部楼层
本帖最后由 QQQ 于 2009-5-30 01:36 编辑

be careful, next week will possible making a trading history, make sure you are on the right side, or stay at side line if you are not sure.

this mkt has unlimited opportunity, but your account is limited.

when the battle is going on, you do not want get hit by flying bullets from both sides.

Pay attention to the part on above article on "shorts were taken out (between 910 to 930), means future mkt has only thin resistance above.

We have Sunday night China (monday) PMI release, it will sure will drive commodity mkt (future) Sunday night and  create a gap at Monday open.

Here is a link, thinks weak PMI due to seasonality
http://www.forbes.com/feeds/afx/2009/05/27/afx6467777.html

Once more: Be careful, no matter what do you hold.
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发表于 2009-5-30 01:04 AM |显示全部楼层
Really appreciate your reminder!!!!!!!!!!!!
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股神

发表于 2009-5-30 01:54 AM |显示全部楼层
Really appreciate this information!  Thank you, QQQ!
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发表于 2009-5-30 02:11 AM |显示全部楼层
Thank you, QQQ!
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功勋奖章 活跃达人

发表于 2009-5-30 06:39 AM |显示全部楼层
Daily Settlements for E-mini S&P 500 (Dollar) Futures (FINAL),
Trade Date: 05/29/2009

Month: JUN 09
Open: 905
High: 927.75
Low: 902.25
Last: 921.5
Change: +13
Settle: 918
Volume: 2009678
Open Interest: 2599394


注意:
Last trade is 921.5, but the Settlement price is 918.
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发表于 2009-5-30 06:51 AM |显示全部楼层
Thanks, QQQ sister ....
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功勋奖章

发表于 2009-5-30 07:08 AM |显示全部楼层
Pay attention to the part on above article on "shorts were taken out (between 910 to 930), means future mkt has only thin resistance above.
QQQ 发表于 2009-5-30 01:29


从指数SPX上看,最高是920.02啊。而920-927这一段,是收盘之后才有的。

我的broker (IB)设置的股票stop只在盘中交易有效,收盘了这些股票的stop是不会被触发的。

如果只是future markt的stop被打掉了的话,对整个股票市场的影响应该不算很大吧?
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功勋奖章

发表于 2009-5-30 07:14 AM |显示全部楼层
Daily Settlements for E-mini S&P 500 (Dollar) Futures (FINAL),
Trade Date: 05/29/2009

Month: JUN 09
Open: 905
High: 927.75
Low: 902.25
Last: 921.5
Change: +13
Settle: 918
Volume: ...
QQQ? 发表于 2009-5-30 07:39


6月1号开始是不是要future就要变成7月份的了,所以才会有收盘时候的short squeeze?

这个settle价格和最后的交易价格不一样,是什么意思啊?settle价格是根据SPX换算过去的吗?
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发表于 2009-5-30 08:01 AM |显示全部楼层
good analysis, thank you! QQQ sister
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发表于 2009-5-30 08:06 AM |显示全部楼层
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发表于 2009-5-30 08:22 AM |显示全部楼层
be careful, next week will possible making a trading history, make sure you are on the right side, or stay at side line if you are not sure.

this mkt has unlimited opportunity, but your account is  ...
QQQ 发表于 2009-5-30 01:29


Appreciated.
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发表于 2009-5-30 08:36 AM |显示全部楼层
thanks QQQ
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发表于 2009-5-30 08:59 AM |显示全部楼层
be careful, next week will possible making a trading history, make sure you are on the right side, or stay at side line if you are not sure.

this mkt has unlimited opportunity, but your account is  ...
QQQ 发表于 2009-5-30 01:29


If that's the case, can we get into some long term straddle positions to bet on fierce market move now?
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发表于 2009-5-30 08:59 AM |显示全部楼层
Thank you. You are very kind.
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发表于 2009-5-30 09:08 AM |显示全部楼层
be careful, next week will possible making a trading history, make sure you are on the right side, or stay at side line if you are not sure.

this mkt has unlimited opportunity, but your account is  ...
QQQ 发表于 2009-5-30 01:29


Actually I found it's difficult to understand his logic. If the shorts' stop orders were taken out, then it will be difficult to push market higher (Shorts' stop order are buying powers).  Then how come he says that "leaves the door open for both little resistance if the market decides to move higher early next week, and also provides the potential for irritated shorts to re-establish their positions short, driving the market lower"? To me, if what he said is true, the resistance will still be there. But the buyings are reduced (no more short covers). So its easier to go down then go up.
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发表于 2009-5-30 09:09 AM |显示全部楼层
THANKS!
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