Quote from rallymode:
Awesome. If my nonsense saved one person from blowing up today, my job is done.
Oh c'mon, I don't at least get to share in the glory a little bit?
SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
Oh c'mon, I don't at least get to share in the glory a little bit?
Very interesting day and pretty hard to put the pieces together to figure out exactly what happened. But I have done a lot of research and as best I can tell we had the perfect storm of at least 3 major screw ups. Based on the trading volume and patterns I am moderately sure that this is not a correction â it looks more like a simple panic-sell that could go either way from here.
Tomorrow Bernanke speaks and hopefully will step in to ease fears and concerns and get people refocused on the positive aspects of the economy and put some of the recent economic contradictions from ex-FED Greenspan to rest.
I think the number one factor was ex-FED chairman Greenspan irresponsibly shooting his mouth off in China a day ago about the possibility of a US recession while the Chinese market was just coming off a long closed holiday. Foreign traders were already nervous about highly leveraged stock positions. IMHO someone needs to put Greenspan in shackles since he directly contravened & undermined the official US economic report that Bernanke and the FOMC meetings just presented to congress. That report indicated the economy was growing at 2.5%-3.0% in 2007 (what side is Greenspan on any way?). Also related, we just had the US Treasury and IMF putting intense pressure on China to reel in their growth and over heated stock markets. And then China officials did exactly that by threatening to restrict margin and impose trading rules etc. That coupled with Greenspans comments panicked the Chinese market out. Chinaâs markets then drop 9% and present a liquidation issue by kicking in the plunge freeze trading rules and people could not get out. That panicked foreigners who needed to cover who then started selling US and non-Asian assets to raise cash and get more liquid.
So much for the theory that the rest of the world no longer feels its economies are highly coupled to the US economy.
Number 2 was some bad economic news here in the US that spooked people and raised anxieties further. Durable Goods plunged 7.8%, and economists were expecting them to be down just 3.0% or 3.1%. But that was partially offset by good news surprises. Existing home sales rose 3.0% to 6.46 million, well above the consensus. Also, the Consumer Confidence Index (CCI) rose to 112.5 for February which is a five-year high. I would have thought the housing was the more important number but the durable goods order numbers makes it look like our manufacturing is in a recession. Scary. That means tomorrows 4th quarter GDP numbers will be revised down and I am hoping that current prices already account for that. That contributed to an already negative sentiment about China markets.
Number 3 was some major exchange trading hiccups on the NYSE at a time of very high volume related to the bad news and China effect. It is looking like someone or a hedge fund may have improperly entered a huge mistaken over-sized sell order at a similar time that a large block of derivative trading was entered that cannibalistic-ally worked against each other and froze up the system. When the exchange reset to the backup computer it instantly purged a large back order of sells in a big down spikes with no upticks that locked out buyers. That in turn kicked in a lot of additional programmed trading, stop losses and other cascade effects. Then some think a large hedge funds started a coordinated bear raid by selling a lot of the SPX and DOW short to further amplify the effect. The sudden volatility attracted derivative speculators and that also pushed it down more. Basically the circuit breakers failed and the hybrid trading system was hamstrung by the humans in the loop who could not fill orders.
A great fictional book could be written to conjecture that this was all instigated by a disgruntled NYSE specialist who wanted revenge for losing his job to the new electronic trading platforms as he was transitioning outâ¦
--
Current VIX levels are pretty scary. Premium levels are through the roof & making the magnitude of the paper losses (and gains) look downright scary for spreaders. Closing out positions here are not as bad as I thought they would be but the magnitude of the dollar values involved at the shorts and long strikes are now hugely increased by orders of magnitude per contract (over 1000%!).
Letâs hope Bernanke says something soothing tomorrow and traders cancel all the backlogged sell orders still in the queue and people refocus on reality and get rational.
Good Luck tomorrow all,
TS
Tomorrow Bernanke speaks and hopefully will step in to ease fears and concerns and get people refocused on the positive aspects of the economy and put some of the recent economic contradictions from ex-FED Greenspan to rest.
I think the number one factor was ex-FED chairman Greenspan irresponsibly shooting his mouth off in China a day ago about the possibility of a US recession while the Chinese market was just coming off a long closed holiday. Foreign traders were already nervous about highly leveraged stock positions. IMHO someone needs to put Greenspan in shackles since he directly contravened & undermined the official US economic report that Bernanke and the FOMC meetings just presented to congress. That report indicated the economy was growing at 2.5%-3.0% in 2007 (what side is Greenspan on any way?). Also related, we just had the US Treasury and IMF putting intense pressure on China to reel in their growth and over heated stock markets. And then China officials did exactly that by threatening to restrict margin and impose trading rules etc. That coupled with Greenspans comments panicked the Chinese market out. Chinaâs markets then drop 9% and present a liquidation issue by kicking in the plunge freeze trading rules and people could not get out. That panicked foreigners who needed to cover who then started selling US and non-Asian assets to raise cash and get more liquid.
So much for the theory that the rest of the world no longer feels its economies are highly coupled to the US economy.
Number 2 was some bad economic news here in the US that spooked people and raised anxieties further. Durable Goods plunged 7.8%, and economists were expecting them to be down just 3.0% or 3.1%. But that was partially offset by good news surprises. Existing home sales rose 3.0% to 6.46 million, well above the consensus. Also, the Consumer Confidence Index (CCI) rose to 112.5 for February which is a five-year high. I would have thought the housing was the more important number but the durable goods order numbers makes it look like our manufacturing is in a recession. Scary. That means tomorrows 4th quarter GDP numbers will be revised down and I am hoping that current prices already account for that. That contributed to an already negative sentiment about China markets.
Number 3 was some major exchange trading hiccups on the NYSE at a time of very high volume related to the bad news and China effect. It is looking like someone or a hedge fund may have improperly entered a huge mistaken over-sized sell order at a similar time that a large block of derivative trading was entered that cannibalistic-ally worked against each other and froze up the system. When the exchange reset to the backup computer it instantly purged a large back order of sells in a big down spikes with no upticks that locked out buyers. That in turn kicked in a lot of additional programmed trading, stop losses and other cascade effects. Then some think a large hedge funds started a coordinated bear raid by selling a lot of the SPX and DOW short to further amplify the effect. The sudden volatility attracted derivative speculators and that also pushed it down more. Basically the circuit breakers failed and the hybrid trading system was hamstrung by the humans in the loop who could not fill orders.
A great fictional book could be written to conjecture that this was all instigated by a disgruntled NYSE specialist who wanted revenge for losing his job to the new electronic trading platforms as he was transitioning outâ¦
--
Current VIX levels are pretty scary. Premium levels are through the roof & making the magnitude of the paper losses (and gains) look downright scary for spreaders. Closing out positions here are not as bad as I thought they would be but the magnitude of the dollar values involved at the shorts and long strikes are now hugely increased by orders of magnitude per contract (over 1000%!).
Letâs hope Bernanke says something soothing tomorrow and traders cancel all the backlogged sell orders still in the queue and people refocus on reality and get rational.
Good Luck tomorrow all,
TS
TS,
Do you have any concept of how many words you use... to say so little?
Aside from the occasional brief bantering that takes place on this forum, I believe that most folks really do want to focus on the specific subject of SPX Credit Spreads (or the criticism thereof).
I know that you will probably ignore this, but in the unlikely event that you really do pay attention, would you consider focusing your commentary on actual SPX Credit Trades rather than the rambling diatribes that you seem to mistakenly think are appropriate on this forum?
Since I think I know what the outcome of this post will be, I'll vow to avoid to the maximum extent possible any further commentary on this subject.
Best Regards,
Mech
I've been bearish for a while now, so I cleaned up today. Would've done better if this had happened last month as I was much more aggressively bearish last month. Wait long enough and I'm bound to be right I guess.
Just remember, money in the market is not lost, just transferred. I happened to be on the receiving end today but it took balls of steel to short that market for the last month.
Quote from Cache Landing:
Oh c'mon, I don't at least get to share in the glory a little bit?
Dear Mr. Landing:
In all sincerity, you are one among a small handful of thread participants that I have targeted to read in- depth. Sailing, Maverick, riskarb, to name a few, are several others.
Rally, or, er, ahh, Mr. Mode, had struck a chord with me relative to his, if I may, "channel surfing", approach. His observations seem to have merit.
Thank you for your contributions as well. I most certainly have benefited from them.
Thank you,
Bob
LOL ... I took off from trading for the last couple of months to focus on my Internet project so I have not visited ths thread for a long time (I used to mostly only read but hardly comment), and this is funny because it's like I never took the time off. I see that TS is still a target lol .....
I've have been downside biased too for the last few months so I wish I still have a hand in the pot today but oh well, there is always the next time.
I've heard reports of computer glitches been one of the reason for the dramatic fall. Anyone has any opinions on that?
I've have been downside biased too for the last few months so I wish I still have a hand in the pot today but oh well, there is always the next time.
I've heard reports of computer glitches been one of the reason for the dramatic fall. Anyone has any opinions on that?