Trapped Longs

I believe a lot of traders were playing the Thanksgiving holiday from the long side when they got blindsided by Dubai. Some of those trapped longs might be weighing on the market.

5 comments:

nicasurfer said...

What do you think of the put buying here also the GLD puts?

Pretty extreme bearish readings here

Tsachy Mishal said...

There is a lot of put buying and we will be maximum oversold if we go down today and tomorrow. That is why I don't want to get too negative here.

I think it would be better for Gold if it corrected here. Straight up runs are not healthy. It has stalled in the past few days and that might be signaling a correction.

Tsachy Mishal said...

I don't want to be bullish here either because when we finally do get a correction it will likely not fit into the framework of the past few months.

To go long I want to see the market maximum oversold, which could happen tomorrow and extreme sentiment, which seems unlikely by tomorrow but I don't rule anything out.

Chaos! said...

Not sure about "maximum oversold" approaching.
The recovery high on the S&P was 1113.69 on the 16th. We traded at 111.18 on the 25th (1.5 trading days ago). We likely need more of a % move from that area to consider things oversold. Absent Friday's opening we've been in suspended animation for 3 weeks.
The action in the finanancials leads me to anticipate more selling before any significant bounce/upside.

Tsachy Mishal said...

I use the 10 day moving average of the advance decline line to measure oversold. 6 of the past 8 days have been negative. If we get 2 more negative days we will have 8 out of 10 days negative.