Friday's Action and Updates on Open Trades

Friday's last five minutes provided a rocket fuel boost to markets going sideways. It was confounding to say the least. If you think those last five or ten minutes smacked of conspiracy theory and a secret cartel trying to prop up the markets, you have a rather large company. The flaw in this theory is that such an action and the immediacy of its effects are too conspicuous and contradict the very definition of how a cartel works. If you want to call the government, the Fed and the treasury as the cartel, then you are right. The actions they are carrying out are really not that clandestine either - whether it is printing money, cutting the rates, tax breaks, triggering spending, launching massive liquidations through treasuries. Which one of this action is truly a secret? None. That is not to say some amount of program trading activity or even government assisted trading activity does not exist. But I feel to attribute all of the weird behaviour of the market to some kind of secret Area-51esque style machinations may be over stretching. Lets wait until more evidence comes through before we declare that everything under the sun is orchestrated and aliens run the US government. In the meantime, you can still find several opportunities to benefit.

Rainsford Yang at MarketTells.com has done an excellent analysis in his latest market commentary on the surges in the final few minutes. He has found that such a surge has actually happened eighteen times in the last nine months so it is not exactly a new phenomenon in recent times. However when you expand your horizon to the last five years, this behavior does appear as new. I asked him if he thought that principal program trading activity was the main culprit behind Friday's activities. His response - "(It is) certainly true that principal program activity (initiated by the likes of GS, etc) has been unusually high recently. But I don't think that's the reason for the last-minute craziness. We saw similarly heavy principal program activity back in 2004 & 2005 - see http://markettells.com/wp-content/chartsO0O/prgtradelt.gif - yet there were never the kind of final-minute moves like we've seen recently."

Updates on Open Positions:

My trades that I post on Twitter are doing well. My current open positions are VIX long, FAF short, CMCSK short, IMAX long. Other than IMAX, the other three trades are short term and I may be looking to get out soon given the continuation of choppiness in the markets.

Let me share my thoughts on IMAX. IMAX is a long term play and I have conviction in their growth story. This is just the beginning of their growth. With the advent of ginormous sized LCD TVs and home theater systems, the incentive to go to a theater can only be provided by something more obscenely ginormous and monstrous. This simple logic has lot of teeth in it and what makes IMAX so lucrative. Sweetening the deal further is the exponential increase in the rate of movies going the IMAX way.

I will be first to admit IMAX is speculative at best. The valuation and debt picture have received bad grades from analysts. But what is not being accounted for is the upside surprise in terms of growth. And that to me has a telling weight that underscores the IMAX story.

Having said all of this if IMAX makes an abnormally large move to the upside, I may not wait and bank some coin.

Good luck