Send in the Clowns: Post Mortem

For some reason, the machines decided it more profitable to squeeze the shorts than run the market down 4 more points. So, precisely when and where the bears were waiting with their shorts in hand, the machines interceded and ran the RUT to 920.57. Nice work if you can get it.

The key signature was the volatility in RVX. Immediately or near so after the RUT crossed the neckline, the RVX fell .3%. This made all the puts purchased in anticipation of the down move worth less– despite the down move. When the volatility had fallen enough, the machines kicked in and ran the price up. A double whammy for those playing the short side of the options market with long puts. Again, nice work if you can get it.

“The desire for constant action irrespective of underlying conditions is responsible for many losses on Wall Street, even among the professionals, who feel that they must take home some money every day, as though they were working for regular wages.”

Jesse Livermore


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