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Wednesday, July 25, 2012

THE WORLD WE LIVE IN



Back in the good ole days when brokers didn't steal your money and markets moved freely, a big bar used to be a sign of more to come. In this day and age where everything is seemingly controlled by the hedge funds and the PPT, things have changed. If you just look at the above Coffee chart, you can see what I mean. In almost every instance, the big bars were followed by chop or reversals of the big bars moves. I think what we have going on here is that all these fancy algorithms are written to mechanically pile on moves the minute everything starts rolling on one of these days where the ES moves a lot.

It is pretty clear when the ES goes up or down a large amount in a day, most everything else goes in the same direction with it. This has been happening now for long enough that it is now the new normal. You can see in the above chart, the COT data was spot on in telling us to look to the short side. The truth be told, this was a trade on my radar that I did not do, because I am pretty much taking this month off and waiting until the next month. I have found on some days my head is still not completely clear of the wipe out at PFG.

Whatever way you trade, you have to figure out a way to catch some of these big days, it is just that simple. I don't have any secrets as to how to identify when they are coming, I am just making the point that all the money is being made on these days now.

Yesterday was another good example of why filtering the Bond System trades is impossible. I felt that one was not a good one to do, yet another great winning trade happened that was exited at last nights open for 26/32's profit. I am looking forward to getting started on the service, but am also at the same time hesitant because there has to be a loss or two out there waiting to happen with the roll this system has been on.

One story that came out yesterday which will be interesting to follow, is the head of the Mercantile Exchange said all seg funds should be held there. It would be the safest place for them to be. He said he was tired of seeing traders getting screwed. There of course was an immediate rebuttal by brokerage firms, and a cry that fees would have to go up. You really have to ask yourself why they would object and why fees would go up. They should go down. It is my speculation that a lot of firms do make use of Seg money from time to time even though it is illegal, and this would cause them cash flow problems. Does anyone really think this guy was the only guy dicking around with Segregated Funds? The brokers want to have that available to them, so they can break the law and take them when they get into a pinch like MF did. Is there any other reason anyone can think of that would explain why they would object to this? I can think of some other reasons, all equally untoward.

I think politicians will fight this because I think they like these wipe outs, it gives them less control when fewer people don't rely so much on them.

Try to find a way to catch the big bars is today's main message.

4 comments:

Rigous said...

Too much of the big bar moves happens when I am sleeping. The only expectation I have is to catch a piece of the move or counter move during regular hours in an intraday basis.

Michael Tredr said...

speaking to various account reps in different brokerages and hearing the way they pontificate about the mkts. - i'm almost positive seg funds are all but seg.

Dell Cove Spice said...

Chris -- I'm trying to reach you for a story I'm working on. Would you be willing chat? (pj.huffstutter@thomsonreuters.com)

Best,

PJ

Chris Johnston said...

yes pj I will email you