Thursday, December 31, 2009
Position Squaring
I don't know what will happen from now till 3:50 PM, but from 3:50 PM to the close at 4:15 PM (futures close), I am very confident that we will go down hard. The reason being that position squaring orders for S&P futures will come in at the close, and they will be to the sell side.
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13 comments:
The position squaring came in a bit earlier than I expected. Still expect continued weakness till 4:15 ET.
Excellent call re position squaring....thanks..out of my TZA
What lead you to believe it would be on the sell side? Many thanks.
Just from observing past history. And also, the ES futures market is divided into speculators and hedgers, mostly. And the hedgers aren't making moves in the final minutes of trade. They have to always be hedged. The speculators have to reduce their positions or close them out, and usually that means selling.
OK so you think the specs put em back on next week, along with the mutual fund buying at the beg of week?
Yes. It is the 1st day of the year, the institutions are generally looking to get long, along with some of the speculators. The last 30 minutes was not "real" selling, it was a bit artificial due to it being the last day of the year. It was forced selling by those who had to get out, not those who wanted to. Thus, the closing price is artificially low IMO.
But also, IT there is a case for lower prices after ST up. Just summarizing what I understand to be your considered view.
I thought the CPCI and VIX were speaking towards the IT latter BTW all day today.
Correction: "speaking towards the IT selloff view today"
I agree. I expect further weakness next week after a gap up. I am just gaming the overnight trade for Monday.
You're like an ES fortune teller sometimes. Happy New Year Dawg.
Its already a new decade, time flies. Ol Dawg, Happy New Year!
Market Owl, you mentioned position squaring in the ES market, but do you have any ideas why there is usually a sell-off in the SPY index at 3:50pm every day? Around 0.2% to 0.5%? That's not connected to the ES trading, right? But it also looks similar to position squaring behavior. (And sometimes it is price jump.)
Lately, the 3:50 pm selloff has been because of pension funds rebalancing around the end of April out of stocks and into bonds. Before that, I have noticed that pattern of 3:50 pm selloffs, there have also been many 3:50 pm rallies as well.
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