The Market as a Handful of Stocks

Apr 13th, 2010 | By | Category: Gilbert Mendez's (Gman's) Blogs
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The last couple of days I have been baffled by the market being defined by a handful of stocks. If you’re not in them you have no shot in heck of making any money. Honestly, these days I tend to have about 20–30 positions both on the short and long, market stocks, little stocks, and just about a piece on every sector. What I find very funny…not, is to see the market pop on relatively heavy volume and see my weak market stocks get squeezed, my dopey little caps not go up a penny, and my market longs grind higher if that. Similarly on the down ticks you see the market shorts grind down at best, the market longs get killed and the little ones doing their thing. Its just a nonsensical black box festival out there.

Looking at the top volume stocks the last couple of days it cracks me up that 80%+ of the volume in the ENTIRE market place was done in a handful of names. And these are names that as active traders we just don’t trade. Most of the action/money/volume the last couple of days has been in ABK, FNM, FRE, C, BAC, GE, BPOP. And while we’re on the subject, how is it possible for a stock like ABK to trade 600mln+ shares intraday? And the most nonsensical part is to see ABK trade over a billion shares in two days while going up over 300% and still be low on inventory for shorts on the street. I checked with some guys in the industry that have access to the major brokers and none of them had them available for shorts. Our clearing agent had a disgraceful/laughable amount for shorts. So I wonder, who’s long the stock? was it just a handful of boxes trying to make a half penny? Ummm… just some food for thought.

I definitely think the way to go these days is to stick to the most stocks in play and whatever happens to be doing the most ridiculous unusual amount of volume. Trying to time this market is just plain silly. The boxes will not give you a shot at making any descent money without feeling some serious serious pain. This is a market that rewards those who put in the work to find trading ideas and those able to hold onto that stock while the idea is developing. While I am on the subject of stocks in play we will be launching our SMB Radar product soon. It is our proprietary filter software that finds the most in play stocks seconds off the opening bell. I hope many other active day traders will benefit from this awesome product. Stay tuned for details. Gman out!

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  1. Interesting post, but don’t you think that by constantly discussing what you are going to do to avoid HFT programs that you are actually tipping your hand? Don’t think that developers arent reading this blog. Plus, why publicize your setups and educate other traders on the same setups? Don’t you feel like you are degrading your edge by having everyone trying to get into the same play/setup? Not to mention letting the boxes know “how you have changed your style” to avoid them. How about this, let new traders pay their tuition and take their lumps like the old days. Take all that extra money you are making from training course fees, put it in your account and focus on trading more size. If every Joe-Schmoe is made into a successful day-trader then your edge will be diminished that much more. The reason you make a lot of money day-trading is because not that many people can do it. And quit telling the boxe’s how you are planning to avoid them the next trading session.

  2. Interesting post, but don’t you think that by constantly discussing what you are going to do to avoid HFT programs that you are actually tipping your hand? Don’t think that developers arent reading this blog. Plus, why publicize your setups and educate other traders on the same setups? Don’t you feel like you are degrading your edge by having everyone trying to get into the same play/setup? Not to mention letting the boxes know “how you have changed your style” to avoid them. How about this, let new traders pay their tuition and take their lumps like the old days. Take all that extra money you are making from training course fees, put it in your account and focus on trading more size. If every Joe-Schmoe is made into a successful day-trader then your edge will be diminished that much more. The reason you make a lot of money day-trading is because not that many people can do it. And quit telling the boxe’s how you are planning to avoid them the next trading session.

  3. We clear through Goldman Sachs, and they didn’t have any shares of ABK either today, but stocklocate does have shares. Just FYI

  4. We clear through Goldman Sachs, and they didn’t have any shares of ABK either today, but stocklocate does have shares. Just FYI

  5. Hey GMan. Good to see you back blogging! Tough to find the time now that you are a fancy partner huh? 🙂

  6. Nice work GMan…hope you keep sharing your insights. Love to hear about radar product as it develops

  7. Nice work GMan…hope you keep sharing your insights. Love to hear about radar product as it develops

  8. Thanks for the shout out Bella. I know, so busy these days, so much to do, ladies to see, places to be…weird. Guess I needed to get my priorities straight.

    Eric, thanks for your post. I actually thought for this one I didn’t divulge that much information. The funny thing is that there are so many competing algorithms that create so much noise that in the end It does not matter how much i write about these things they will always find a way to outsmart all of us. 🙂 But I appreciate the comment for sure. It is a just a good friendly reminder. Happy trading.

    Derek – Thanks for the comment. The new radar tool is going to be great. Picked up STEC today at $12.20. In the words of Eric Cartman: just awesome-o!

  9. Thanks for the shout out Bella. I know, so busy these days, so much to do, ladies to see, places to be…weird. Guess I needed to get my priorities straight.

    Eric, thanks for your post. I actually thought for this one I didn’t divulge that much information. The funny thing is that there are so many competing algorithms that create so much noise that in the end It does not matter how much i write about these things they will always find a way to outsmart all of us. 🙂 But I appreciate the comment for sure. It is a just a good friendly reminder. Happy trading.

    Derek – Thanks for the comment. The new radar tool is going to be great. Picked up STEC today at $12.20. In the words of Eric Cartman: just awesome-o!

  10. I really appreciate your post and you explain each and every point very well.Thanks for sharing this information.And I’ll love to read your next post too.
    Regards
    Trade4Target