Tuesday, July 31, 2007

Ugly Tuesday

We got the run up I was looking for, but buying dried up immediately and the sell off continued wih a vengeance into the close. After rising to R1 in thefirst half hour the Qs broke down to and through S1 at 10:45. A hairy bottom pattern in the 5 minute bars suggested a reversal but when the Qs again reversed off S1 (48.08) at 12:30, it was clear that S2 (47.63) was the next target. The Qs have now broken through the 50 DSMA on a high volume, engulfing, wide range, close low bar and although badly oversold, show no indications of reversing to the upside. The selloff in other sectors really was as bad as it looked, with the financials getting especially hammered.
The VIX also shows no signs of reversing, having displayed today a similar pattern of Thursday, with the current difference that, after Monday's run-up, the VIX is not overbought.
I'm finding it difficult to implement my usual options stategy as the market makers are sucking the premium out of both the puts andthe calls at a dazzling rate, perhaps as a tactic to handicap the straddle players. I am therefore moving to the QIDs, long and short, for my intraday trades until this situation improves.

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