Thursday, August 16, 2012

Did the ZN mode just shift?? Stocks are screaming...

After watching stocks scream higher since the open (ES up 10 S&P points, almost to the march 2012 highs), I suppose this is not a surprise.  Today's 10pt rally in stocks would normally be good for an 8-10bp selloff in 10yr notes, but today 10yr notes have only sold off 3bps.  Our earlier blog entry describing the mode seeking nature of the market still applies, and so our Market Profile model will continue to watch the market and wait for additional activity to confirm which mode is the true center of value.  So, from our recently revised trading rules, we note that the mode has, tentatively shifted from 132-16+ to 132-11.

Both of these intraday modes are almost equally weighted from Market Profile's perspective, so we can't know for sure which one is controlling market activity...we will have to wait for more horizontal price discovery to confirm.  Its times like these that we as prop traders are paid to wait and do nothing.

For those who bought ZN when it dipped below 132-10 (while not the highest probability trade...still allowed by the model)...the model would dictate getting flat now for a small profit with ZN currently trading 132-12.  Until we get more clarity on the market's center of value, being long potentially above the center of value is not a good risk/reward.

govttrader out....

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