Yo Pit Crazies,

Traders like to see nice smooth trends.

Yet sometimes there are none to be found.

While we closed some trades recently in The Trading Desk, the path was not, err, smooth.

But we look at trade ideas in The Trading Desk to capitalize on more volatile situations. The last couple of days have been just that.

Look below at the SPDR S&P 500 Trust ETF (Ticker: SPY) 10-day chart. The net ranges over the last two days were around 10% and 6% intra day. Up and down and up and down …

There is nothing healthy about that kind of trade!

SPY 10-day chart with one-minute candles.

I have a name for that and it is …

Very Low Liquidity

Right now, the crazy swings are punctuated by low volumes in stocks.

That translates to more volatile swings in the market. It does not make a lot of sense when Charles Schwab Corp (Ticker: SCHW) is down more $3 and Nvidia Corp (Ticker: NVDA) is up more $7 …

Unless of course traders are running for the hills from anything that could have bad assets, like Treasury Bonds, and running to low-debt-but-crazy-higher multiples like NVDA.

NVDA is half the market cap of Alphabet Inc (Ticker: GOOGL) with 1/10 the revenue.

The moral here is the market is paying for perceived balance sheet quality. I do not know how far the pendulum will swing, but it is not done yet. I am close to taking the long VIX, long SPDR Select Financials ETF (Ticker: XLF) trade – but not quite.  

But I am also a bit of a fraidy cat on the long XLF, short NVDA trade.

I will see how it all sets up, but I am near-positive today will be another surprisingly volatile day. – AG