Monday, January 28, 2008

Qs wobbles

Upper chart is 5 minute Qs.
Lower is 5 minute MSFT.
The Qs basically did nothing today, failing to hit any of the intradday pivots. This condition has been addressed in previous posts and is actually fairly rare. Expect the pivots to reactivate tomorrow. This was a day of relative indecision, despite the pop in the DOW, this can't be taken too seriously. What was unusual was the disparity between the DJI and the NDX. On a typical day a normal multiplier is 5X, DJI/NDX. Today closed with a 7X. I frequently watch this multiplier during the day as it often provides a leading indicator for a pair-like trade between the DIA and the Qs. Quantifiable Edges had an interesting post on the NAZ/IWM divergence that's also worth a look. I suspect today's divergence is probably just the product of some gaming going on in advance of the State of the Union message, which promises to be loaded with eloquence and inspiration.
The reason I included the MSFT chart is to show off one of my classic dumb trades as I went long the MSFT near calls at Friday's close. . .expecting a bounce back from the great earnings news selloff and hypothetically capitalizing on the higher MSFT delta/premium yielding a better return than those pathetic Qs. NO SUCH LUCK. While the Qs managed o climb the wall of worry to yield a nice gain, MSFT continued the slide past short term support. . .and ended up one of the very few big-cap losers for the day. Fortunately, it was only a small position, but some days you just gotta wonder.
My profound sympathy for High Probability Trader. I hope he's able to hold it together and trade another day. Having sustained substantial losses myself in the past, I can empathize with his attitude and his reaction. The video is painful to watch and I sincerely wish him the best.

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