Who’s in charge here… and who’s on first…

Posted on May 02, 2012 by in Letters

Just to remind you who's in charge look at yesterday's action.  19.59 point range in the SPX, with long tails (or "shadows").  These are the fingerprints -- or pawprints -- of the big hedge funds and traders who are implementing very short term trading strategies.  In this methodology an extreme move is met with profit taking and entry into the trade in the opposite direction.  That is why we see the long shadow at the top of yesterday's bar.  Traders, whether they were long or not, sold the market at the extreme.  These are not guys you want to play poker with -- or any other game involving money.  In all likelihood they were taking profits at the lows today.  We watch these things with the fascination of the rat who is about to be eaten by the cobra.

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