March 23 2010 Update: UUP currently is trading at

Has the vise started tightening on the UUP shorts? Granted the move today was not huge, the UUP bid most of the day with daily volume being 4,060,000 higher than average of around 1.8 mil. The clear inverse relationship between the UUP and S&P500 is demonstrated by the chart to the left. 



You see as the UUP(blue) traded up, as equities(red) came under pressure. If you take volume into consideration, you can argue UUP moved FIRST then equities moved inversely. I personally did not watch trading close enough to see this anomaly, but one thing is true, if one moves the other moves opposite.

Today price action told the story. We had a trending down day where we broke previous days low in the S&P cash market of (1037.25)with sustained selling on higher than average volume(132,000,000 more on SPY than average of 189,000,000). This action has not been seen in six months.


The old saying goes, "The biggest market moves happen when you least expect it." Today was a great example, the longs were sucked in yesterday and smashed today. One of my old risk managers told me, "The market can remain irrational for longer than you can remain solvent." Best market advice I could ever get.. If you fought the tape up until this point your done, i'll admit I fought the tape in the beginning but i threw in the towel and got long riding the trend. There is a time and point for every trade, the best traders recognize when they are wrong and flip the trade around.

Today the price action (mainly on the bid per NYSE tick) on the S&P500 & Nasdaq indicated a clear inverse correlation between the dollar and equities. Obviously the connection has always been part of the equation, what has not been as obvious is how many traders are watching this trade. As i posted earlier today on twitter, UUP showed large volume spikes today following the rumor of S&P downgrading the banking sector. If you look a bit further out you can see UUP has been in a downtrend finally finding some historical support down here around 22ish. As Roubini mentioned a dollar collapse is a lot less likely than a dollar rally. If this is the case profits from the rally we begin to be taken aggressively out of fear of, this will create great sell side pressure on equities and commodities alike.

Not to sure what to make of these big bullish bets on the front month options in the XHB, but as options traders we use information like this to help foresee the future. 


Based on the call volume in the XHB 16 strike, TOL 20 strike and LEN 15 strike its looks like there maybe some bullish news out on the us housing situations. 


The volume today has exceeded the open interest meaning a new position has be opened. Though we are not reading into this to much, it is something to keep on the radar.

Looks like Goldman beat estimates with non banking revenue, . This is all old news to traders as the ramp up from 145 ish was the classic, "buy the rumor, sell the news" trade. As for Citi group i think they will disappoint, im basing this solely on the price action in the weeks and days leading up to this number. If they beat, it wont be by much.

This morning we have a few pre market movers, CIT is down on some news its basically going to do a . AIG finalizing deal to sell its life insurance arm to Primus. after meeting expectations. STAR halted on news of CSCO takeover ($2.9 bil). Meredith Whitney and her "advisory firm" have downgraded GS from buy to neutral.

Today i saw sustained selling pressure in AIG, to me the chart said it all. The chart on the left has key breakdown points highlighted with red circles. Inside each red circle there is a breakdown candle with volume confirmation. A lot of my trade set ups come from pattern recognition, either on the macro(daily chart) or micro scale (5 min chart).

An issue i have seen pop up quite a few times the past couple weeks has been the urge by myself and other traders around me to chase a trade. The psychology of being left behind is the driver behind the "Chase". Here is the trade setup: