A Beating for the Bulls With a 93% Downside Day
Monday’s action was not good for longs.
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Our View
When I started on the floor, there were a lot of things to learn: Order flow, program trading and fair value, trailing stops, economic reports, technical levels (which mattered but were much different than they are today) and just the simple act of getting your orders filled!
At the same time, I was getting my off-floor lessons from Marty 'The PitBull' Schwartz.
While we both agree that some of the old stuff we used to make money on doesn’t work anymore, a lot of the trading rules we came up with continue to be part of today’s price action. For instance, even though we haven’t had a true bear market since 2008/09, our bear market trading rules still apply.
Yesterday's rule is something I learned in 2007 when the PitBull told me there was something wrong, that there was “rotten wood floating around in the market leaders, the banks and brokers.” A month later all the subprime news started hitting.
I went out for a few hours yesterday and when I came back the ES was down almost 80 points. I thought it was the bond weakness but the PitBull said “The markets can’t go up when the banks are weak.”
Moral of the story, rules matter.
When I did these two videos, I did them to help preserve some of the unending market knowledge the PitBull has and hoping to do one in the near future.
Our Lean — Danny’s Take
Will the ES go down again today? Only the trading gods know for sure.
What if the ES is just establishing a new trading range? The old one was 3920 to 4000 what about 3950 to 4050? Speaking of rules, the PitBull’s rule about looking for a low the Thursday or Friday before the Dec Quad Witching comes to mind.
Our Lean: