The Hedge Fund Gunslingers

By Gretchen Marszalk
CMI's Stock Options Trader

       March 21st, was a good example how the hedge fund traders take to the cleaners some unwary intraday public traders and technicians who have very short fuses.
      After the opening the market started out with a slight sell during which the closely watched SPX dropped below the low of the previous three trading sessions at 1303.59, at which point it attracted day-trading technicians to sell short. This came at a time when SPX and the Nasdaq Composite (the playground of many day traders) has moved very close to their previous highs established earlier. Coincidentally some hedge funds decided to run out the shorts and in the process push the short-heavy Nasdaq through its overhead resistance that they hoped would cause the SPX run to new high ground and trigger additional buying and short covering, thus generating bullish-looking chart configurations.
      The first large buying impulse stared with the E-mini contracts in Chicago at about 11:20 AM Est, which was very sharp, but lasted only about 25 minutes during which the Composite broke out above the previous short term highs - but the SPX did not. At 12:42 another attempt was made to push the SPX into new high territory. The SPX broke out above it March 16th intraday high by 0.43 points, remained there less than 2 minutes, during which nothing much happened, and then the market went south. The move was one for the books - as a result of which day traders with very close sell or buy stops were whipsawed twice.
      Editors Note: Gretchen Marszalk is editor of CMI's Stock Options Trader, P.O. Box 5379, Destin, FL 32540, 1 year, 26 issues, $595. www.TheOptionTrader.com.