The Underground Trader: Shutting It Down for the Day
September 9, 2010The Underground Trader
We wish to introduce a new periodic feature to TSP Flash Alerts: The Underground Trader. These posts are authored by a long-time friend and colleague who specializes in trading futures and options. The Underground Trader is a very close watcher of the indices and is a market junkie who cruises message boards, trading groups, news feeds and opinion sites for any edge he can get. Do not bet the ranch on any of his comments but they are usually interesting and definitely food for thought.
From The Underground Trader:
- SHUTTING IT DOWN FOR THE DAY. Many equity traders are likely unaware that today is "futures rollover day". Although futures on equity indices officially expire the third Friday of the quarter, generally most futures traders begin the "rollover" process on the Thursday eight days before expiration. These days four times a year are notoriously difficult to trade, often a continuous narrow stream of choppiness and then other times highly volatile with a very wide range. Many 'pros' just shut it down for the day and refuse to trade it, with the usual light volume adding to their frustration. Today's volume is a prime example, with about 55 million shares of SPY traded so far halfway into the day versus monthly daily averages generally over 200 million. The discrepancy in the futures contract pricing is also a factor, with the September S&P contract trading at 1108 and the December at 1103 as I write this. Throw in the Rosh Hashanah and Ramadan holidays and the volume is even lighter than usual. We also have a situation where the SPY is wavering back and forth around its 200-day moving average of $111.18, with a low at 111.01 and a high at 111.68, adding to some further market indecision and wariness post the pop higher this morning. It will be interesting to see how the day turns out, but after a small gain earlier I am going to sit the rest of the session out.
SPDR S&P 500 - Last 5 Years
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SPDR S&P 500 - Intraday
SPDR S&P 500 - Last 12 Months
Disclosure - Mr. Moenning owns positions in securities mentioned: None
Note: Observations by the Underground Trader should not be construed as trade recommendations, but rather are reports on marketplace activity and his view on the subject.