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.


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.