The collision of global markets and social mood

Monday, March 11, 2013

Tracking Algos

These are the footprints of an algo bot scooping up VIX April 18 calls. That's a big position.

The last time I saw tracks like these were in SPY 150 calls near the lows of 2/4 around the 1498 area as the market fell into 1495. I made a note of it then as I saw price rip to the upside over the following days.

I'm making a note of it now because it fits this week's max pain thesis. S&P 500 index options open interest suggests the potential of below 1550 and above 1525.

Someone is making a huge bet that we'll see some volatility soon. I'm in these too, only uh, much smaller.

Who knows whether we'll see a flush this week then a rip higher into triple witching, but that's how the game is played by the folks who see all the positions in the market. They're the ones who have written all the options that others have bought. Their goal is to see them go out worthless. They're very successful at it.

If a flush does occur, I will look to buy it as long as 1525.34 holds. Below 1530.94 is even risking it, because it will look like a false breakout. But with the potential for a flush, it is possible that price may get below 1530.94 but does not close below it.

To the upside, I still have 1567 as a multiple Fib extension target.

This month's Elliott Wave European Financial Forecast edited by Brian Whitmer has some interesting nuggets that are going unnoticed by the press.

1) Every large cap European index has failed to confirm the Dow's new all-time high.

2) The spread between the cost of new loans to Italian companies versus German companies widened to an all-time record.

3) The EU just adopted a draft proposal that will cut permissible cash transactions to just €7,500. The proposal would force companies such as banks and law firms to carry out checks on their customers if they carry out cash transactions worth at least 7,500 euros ($9,800), compared with a 15,000 euro threshold under existing EU law.

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