Institutions know most traders get discombobulated on the Friday before a quarterly option/future expiration and it tends to be a day wrought by heavy moves in price.
If the rally has been strong, a hard flush to blow out the directional call buyers. Conversely a down tape often experiences a rapid squeeze higher.
This is OPEX trickery at its best, and heading into Q4 big players are making a definative move down and away from the value we spent most of August building. Below you can see the value as printed on the NASDAQ:
The market tried twice to break the balance to the upside, to no avail. Now we are exploring lower prices aggressively.
For the last month, several metrics inside the tape have rhymed with November 2015. Panning out and observing the behavior, there are similarities and differences, but if we are embarking on another January 2016-type move, things could get ugly fast. Here’s the analog to work with:
On my end, I blew out several longer-term stock holdings after the first failed auction and I’ve been sitting like an old man, yelling at all the momentum traders. So I don’t have much else to do aside from waiting for my algos to nudge me back in.
In the futures, life is finally coming back, opportunity has reemerged on the tape (it always does, patience was wearing thin though).
This move is very much risk off and cautionary, with an active higher time frame who knows most investors/traders came into the day ill-prepared. Caution.
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thanks for this – provides good market overview and context (even though I don’t necesarily like the context you present…..)
cant hate the game – just have to adjust your positioning
differences: the ATR was way higher back then and it was end-of-year
I’ve had ATR as an indicator on my screens for a while but have never been able to really get what they do/signify.
Sure it’s the average true range, but isn’t it simply a lagging indicator like moving averages & wouldn’t that be inconsequential to auction theory which is price-action based?
Aslo – wouldn’t you expect ATR to blow out wider due to heightened cross-asset correlation?