Tuesday, September 4, 2012

After the undersupply condition is alleviated - what next?

Recall when we talked about the monthly bond cycle...the 2nd half of the month is dedicated to playing from the long side as the market rallies into month-end.  Well, now we are in the 1st half of the month, and that means playing from the short side in preparation for the bond auction.  The Fed POMO buyback schedule complicates this dynamic a bit, but on the margin, the concentration of the auction should overcome the spread out nature of the Fed purchases.  Combine that with the knowledge that a large position was sold into the market today (long liquidation of sorts).  This should make selling pops the trade du jour.  So, first we wait for the center of value to pronounce itself...then we figure out the market volatility, and then we sell the top of the bell curve.

This completes the first course in Market Profile and Bell Curve trading.  If enough people convince me, maybe i'll write a book or do a lecture series.

Later dudes...

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