A membership will cost you $615,000

If you want to stand in the pit it will cost you a membership fee of $615,000. You can lease a seat but you have to put up a big security deposit.

For the privilege, you get to stand with 100 other guys and a few gals and trade the Spoos, (big S & P contacts). When you’re a Newbie you get to wear a special badge that says you can only trade less than 10 contracts and that the other locals cant abuse you. But they do anyway.

Lord help the Newbie that stands in the spot of another member. Spots inside the pit are “owned” by senior members. They stand there everyday, same spot, month after month, year after year. They know exactly where to look when they want to see the Trin or the cash markets on the boards overhead. But more importantly, they know when the phone rings over their left shoulder it’s a certain desk likely coming in with an order. It could be the clerks girl friend calling wondering why she suddenly got a rash but more than likely, especially when we are on the highs or the lows, the old timers know the phone call is a Paper customer calling with an order.

Because of where we are in the days range and what desk the phone rings, locals have a good idea if the order is a buy order or sell order. When we are on the highs and the Merrill phone rings there is a good probability that’s it’s a buy order, a good time to sell. When it’s the Goldman desk and the phone rings on the high its likely a sell order, another good time to sell. This edge is why a seat costs $615,000, it’s probably undervalued.

Paper entered mixed off the bell this morning. Merrill was a seller, JP was a seller. GS and the locals bought. To me things were looking pretty bullish. All markets were trading above their OR and I had a bullish bias from yesterday’s action. Did I say bias….. That’s the worst thing you can have as a day trader, a bias. I was hunting for longs and I should be hunting only for opportunity. This is not a lesson I learned today. This is a lesson I learn every few weeks, and this has been going on for years. Fortunately it doesn’t cost me much anymore but in the early days it cost plenty, mostly emotionally.

The right phone must have rung over some locals shoulder. I didn’t hear it and I am not standing in the pit so he can’t give me a nod along with his buddies. But they suddenly started getting short at 05.50. It wasn’t that a large buyer stepped in that they sold to. They just started getting short, selling the screen. Some buyers, not a lot, started coming in as they should have, we were above the opening range and even our 9:45 program trader kicked in a buy program. I’m scratching my head. I’m thinking they will have a tough time muscling this market through the OR. They sold every scrape of Paper from 05.50 up to 07.50, the high of the day. What did they see? What did they know? I wanted them to stay long so that they can do all the heavy work while I rode their coattails. That’s usually how my day goes and I’m just fine with it.

Soon after, the NQ started breaking. It broke its OR and led the way. (There is an open out cry pit for the Nazdaq which is next to the S&P pit. All these guys are in ear shot and they all hang at the the same bar and gym so there could have been a signal from that group and not a phone call. That would also explain why I didn’t see it coming).

Locals were aggressive on the offer and I started to believe they were going to get their way. They did and they pushed the market down to the low 98.25. The thing about locals pushing higher or in this case lower is that’s it’s a false move. Meaning that it’s a manipulated move. All manipulated moves, once the pressure is off, will return to the markets fair value area. The market did just that but the bounce back stopped at the bottom of the OR. Market forces then took over. Theses forces were bearish and the market traded lower closing below the OR and the Value area low with the Trin settling at 1.75. At least 1000 cars sold on the cash close between Goldman, JP Morgan and Swiss Bank, the 3 most respectable players. This is a bearish setup for tomorrow. The exception is the Russell (which is like a kid with ADD) and the Vix which settled below 17.0 at 16.32.

We have some big reports tomorrow- producer price index and jobless claims at 8:30 and existing homes sales at 10:00 ET uggg, no wonder Goldman sold the close…..


Tim Mack