Monday, December 29, 2008

Monday Notes - Two ...

5:02pm - Low volume and a putrid pace were major themes early today as the year-end Holiday trading pace continues. Said another way, today felt like stop and go traffic on the Boston expressways where drivers floor the accelerator, slam on the brakes and wait in traffic, and then repeat the sequence over and over as they wear out their brakes.

I actually traded somewhat similarly and incurred some cost of brake pads (multiple early scratches and transaction costs as I provided some market liquidity on the early morning drop) before finally settling into a bit of a midday and afternoon rhythm. The result was essentially a scratch on the day on just over 1,500 contracts traded, but the box score will show a nice comeback and strong reads on shorting the midday trend pullback.

The early climbing VIX kept me from doing too much on the long side and I did take an initial short once the early range broke to the south, yet I was surprised that there were so few retracements as the volume was extremely low which is often the recipe for some tradable chop for the locals. Essentially, I was looking to trade with the short bias, yet provide liquidity by selling pops and covering drops. Instead, the market served up a slow bleed.

So today, the positive speculative pattern-based trades and cost** of liquidity-providing scalps pretty much evened out at this end. And before the mailbox floods with "why would you trade long within a short bias?", it still often pays for locals in a low volume market, provided the market is serving up a half decent ebb and flow rhythm ... which obviously was absent in hindsight this morning. My focus remained on somehow getting short on a sharper pullback, which we finally got midday.

** I say "cost" because that's what I consider "losses" in this business ... a necessary cost of doing business. Cost we can strive to minimize, but never eliminate.

I sat out much of the late afternoon climb, opting to simply let the midday comeback stand and reduce the magic number to two.

I've updated the figures to the left, which barely moved, and will post more thoughts tonight including 2008 statistics by day of week ... which should be interesting as I expect Mondays will look pretty horrible.

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