Today's explosion: $4B emini covering
I've checked the grapevine, and have it on fairly good authority: Today's explosion was caused by a covering (or unwinding of) a 122k emini SPX contracts.
That's a notational value of $4B.
Someone's stop loss got triggered big and ugly . . .
Tuesday, November 14, 2006 | 04:30 PM | Permalink
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is that what a major hedge fund blow-up looks like?
how much longer are we going to feel the ramifications of this?
Posted by: emd | Nov 14, 2006 4:41:31 PM
The mainstream financial media just drives me nuts. Here's how the WSJ reports this rally:
The Dow industrials jumped 86.13 points to 12218.01, a new record closing high, after a report showing wholesale inflation dropped sharply in October eased concerns about interest rates. The S&P 500 and Nasdaq hit a six-year highs. 4:25 p.m.
The market was sideways all morning after this economic data came out yet they still attribute the afternoon rally to inflation data.
Posted by: anon | Nov 14, 2006 4:44:22 PM
Sure this wasn't the PPT?
Posted by: jjr | Nov 14, 2006 4:45:50 PM
Thanks for the info, Barry.
From what I understand, large commercial SPX traders are at an all time high short position.
The last time they shorted this much was in mid-2000 and mid-2004.
I am betting they have a big eye on the inverted yield curve which is even going global, yet no one else seems to care.
Posted by: Michael C. | Nov 14, 2006 4:51:27 PM
try reading schwabs market commentary during the day or yahoos.
I get my feed on my pocket pc during the day.
recently and without fail........
all indexes are up during the day and it is because of this event-(insert anything), ie....gold,oil,bonds,inflation, et al.......
no correlation or meaningful data is ever presented but heck all is good.
total and complete j&%@#$....
Posted by: MarkTX | Nov 14, 2006 5:01:17 PM
Yeah, Thanks for the info, Barry.
Now, since HD was basically flatlined at $36 until 12:30 pm, I'd be real curious to know how many of the 48,000 Nov 37.5 calls and 30,000 Nov puts traded before then. Any info on that?
Posted by: tjofpa | Nov 14, 2006 5:06:20 PM
What contract is shown in the diagram? I pulled up data for December ES (S&P 500 minis). Although I also see sudden massive buying at 13:40 central, I don't think this is so unusual. Today's contract volume is not unusual compared to other days - same as Oct. 16, Oct. 30 for instance (one up day, one down day). I can't see evidence that today is so unusual in the S&P 500 futures.
Posted by: Perpetual Bull | Nov 14, 2006 5:07:33 PM
looks like "V" which is Oct..... if you're gonna squeeze them you squeeze the front month at/near expiration IMO
Posted by: emd | Nov 14, 2006 5:14:49 PM
Interesting Barry, one of the latest bulls in recent times when compared with economic weakness. As the weakness grows and damages the labor market this winter and spring, I wonder if the few firms doing the moving can keep it up and why are they even bothering? The mysteries continue........
Posted by: ac | Nov 14, 2006 5:28:04 PM
I don't get too exercised about this stuff. Then again, as I have been saying for a while, as long as the economic data can plausibly be seen as 'mixed' I am net long. Sure, retail sales are trending down. The market is going to ignore them 'til they're negative. Maybe soon, but I'll wait for the data.
Now the +6% homebuilder move on DHI's earnings -- that's exciting. Give me a another 10+% and I'll short more.
Posted by: wcw | Nov 14, 2006 5:42:22 PM
Barry:
I am sorry- I have to dissagree- The IWM and the SMH were up all day and closed 2%/3% higher- What was that?
Posted by: David | Nov 14, 2006 5:45:46 PM
This market is a disaster. I can't rationalize chasing up here??? And today the DOW goes up 80 points in 15 minutes..... throw all the trades out the window.
This is getting risky and dangerous. Does anyone consider this a mini bubble yet???? Check out EFUT 11-48 in one week.....
This is just frustrating.
Posted by: Andrew | Nov 14, 2006 6:05:32 PM
http://www.ilovewavs.com/Effects/Music/Loser3.wav
Posted by: chardog | Nov 14, 2006 6:08:58 PM
i wish this blog was bullish instead of bearish the last year or so....I d be sittin pretty
~~~
BR
Herbie: Your investment posture is determined by the leanings of a blog? Thats pathetic. Why don't you grow a pair of balls and start thinking for yourself?
Posted by: herbie schlaggmann | Nov 14, 2006 6:33:25 PM
Pfft. Do your own due diligence.
If you invest based on the web ramblings of people who appeal to you, for the love of all that is holy, index, index, index. Then index some more, and spend the time you save reading blogs getting a raise instead.
Most who take this advice would gain effective alpha.
Posted by: wcw | Nov 14, 2006 6:44:41 PM
Why assume this is a closing position on a losing trade? What if a player covered his e-mini shorts versus long futures, SPY calls, or SPY, right at well-advertised resistence and yearly-highs? Kinda like lighting the fuse beneath a rocket.
Hardly as far fetched as the idea of professionals setting up such a massive, line-in-the-sand stop for short positions. If you've shorted stocks stocks for longer than just a couple years, you know what I mean.
Posted by: BKE | Nov 14, 2006 7:19:08 PM
come on BR, notational value? is this another divergement we should be eksamining?
i think you mean NOTIONAL value, and this looks to me more like someone successfully blowing out a bunch shorts and stop loss orders ~1390 area
Posted by: Mark | Nov 14, 2006 7:47:08 PM
Here comes the spike....
Posted by: Jason M | Nov 14, 2006 7:57:55 PM
A futures trader would would dismiss the move as ordinary. The esz06 was trading sideways, low volatility, low ADX, for more than a day and a half creating what S&P traders call a Box. the longer in the box, the greater the move out of it because of the large accumulation of positions over the day and a half. Additionally there was a low adx on the daily charts. On top of that, expiration week always has a strong buy bias a few days before expiration. The futures started to break to the upside at 1:30 or so and MO traders hoped on the breakout, the shorts started to cover and presto.....big time breakout. as the dailies broke out today, this move can last a week or two to the upside. lok for 800+ on the russel futures and 1400+ on the es futures. these breakout moves on the dailies have a tendacy to continue formultiple days at the minimum.
Posted by: HS | Nov 14, 2006 8:07:28 PM
The S&P has gone up 14% in 4 months. We are over 4 years into this bull market. Economic indicators are slowing or declining. The market is now moving up in a parabolic spike. One has to ask oneself whether the odds favor this being the start of something big or the final blowoff of the largest liquidity induced bear market rally ever. I have no idea how much longer this advance can continue but I suspect the end result will look similar to the gold market in May/June or natural gas in Dec/Mar. of this year.
Posted by: Gary | Nov 14, 2006 8:11:20 PM
I like the Warren Buffet analogy of the 3rd phase of a bull market:
"Once a price history develops, and people hear that their neighbor made a lot of money on something, that impulse takes over, and we're seeing that in commodities and housing...Orgies tend to be wildest toward the end. It's like being Cinderella at the ball. You know that at midnight everything's going to turn back to pumpkins & mice. But you look around and say, 'one more dance,' and so does everyone else. The party does get to be more fun -- and besides, there are no clocks on the wall. And then suddenly the clock strikes 12, and everything turns back to pumpkins and mice."
Posted by: Rich_Lather | Nov 14, 2006 8:21:49 PM
This is kind of entertaining in a way- PPI clearly shows that we are in trouble, but both equities and bonds go up. The bond guys must be laughing their asses off.
But I can afford to be rather sanguine about all of this because of my own stupidity. Just before the elections, I was going to close out my January QQQQ calls at the close but was on the phone with some pest and managed to hit the wrong column in TWS and wound up doubling my position instead. I then planned to close out in the morning, but the damn things went up, so I left them open and have just adjusted my stop since then and am currently up 40%.
My reading is that pretty much regardless of reality, the market is going to be shoved higher thru the end of the year. After that things should get rather ugly rather fast once the Democrats are sworn into Congress to take the blame. Until then, I'll probably add to my calls on pullbacks and ignore the March puts in financials that I have- their turn will come.
Posted by: whipsaw | Nov 14, 2006 8:22:01 PM
It could be a mistyped order... it happens once in a while.
- TSE Dec/2005: firm blows something like Y30B.
- And in 2003(?) a NYSE member sells $4B instead of $4M of a basket of shares. Part of it was undone (by other members) but some damage was left.
Posted by: mhm | Nov 14, 2006 8:28:51 PM
Hey, another satisfied IB client. Say what you will about 'em, they are cheap, and they actually pay attention to their trouble tickets.
Wish I'd followed you. I took my October SPX call profits at expiration and sat on them. Win some, don't win others.
Posted by: wcw | Nov 14, 2006 8:33:50 PM
per wcw:
"Hey, another satisfied IB client. Say what you will about 'em, they are cheap, and they actually pay attention to their trouble tickets.
Wish I'd followed you. I took my October SPX call profits at expiration and sat on them. Win some, don't win others."
Aw, I don't have any gripes with IB so far (just moved options trading there from Scottrade a month ago). It was my own fault and they are far, far cheaper for options trading. The only obvious drawback is that there is a Scottrade office about 5 miles from my home and I can head over there to strangle somebody if I have to, while IB would be more of a problem.
I also like IB's analytics, very cool. Of course, analytics don't help much when you do things like buy a straddle on PLAY only to have somebody acquire the underlying from out of the blue a few days later, but I suppose everybody has some of those episodes over time.
Posted by: whipsaw | Nov 14, 2006 8:59:22 PM
