The Yo-Yo Shift on Wall Street’s Wild Week: The Diary of an Anonymous Trader

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FRIDAY, AUGUST 5, 2011

8 a.m.: It’s my first day on Martha’s Vineyard, but a money manager is never really on vacation, especially the day after the Dow drops by 500-plus. While my family prepares for the beach, I crack open the laptop. The S&P 500 hasn’t budged over night. It’s hard to imagine it was printing 1290 on Monday. The monthly employment report is due in 30 minutes. Expectations are low, but initial claims data has been surprisingly better recently, so it’s time to get some long exposure: I go long a full lot of SPY, an electronically traded fund that tracks the S&P 500.

8:35 a.m.: Hello! The employment numbers are mediocre, but this market will take mediocre. Time to take the money and run. Sell Sell Sell! In 35 minutes, we’re up $225,000. I’m so giddy even Jim Cramer’s screaming doesn’t bother me.

9:44 a.m.: A “gap up” means the market opens above the previous day’s close. If prices hold and the market trades above the open price, it’s called a “Gap and Go,” and the market rallies all day. Today is the opposite: A “Gap and Crap.” Within twelve minutes, computerized trading robots predict prices won’t hold and start selling the market down hard.

10:30 a.m.: The Gap has officially Crapped. The Dow is down 512 from Wednesday’s close. I think it looks over sold: Time to get long. The system says don’t buy, but this one I’m shooting from the hip.

10:45-11:30 a.m.: It’s bouncing again. The SPY quickly goes to 1205, but we are out at 1197. Argh. $50,000 would have been $150,000 if I’d waited 30 more minutes to sell. But traders don’t think like that. If we did we’d go crazy.

11:45 a.m.: Euro close is ugly. Panic sellers are unwinding their positions, and Italy’s and Spain’s bond yields soar as the prices drop. The S&P 500 is in free fall at 1171 — a new low for the year. Should I buy this dip?

Noon: Goal!!! The European Central Bank is going to fire the bazooka—the media is reporting they'll buy Italian and Spanish bonds. S&P bounces to 1210 in 30 minutes! Why didn’t you buy, you moron? Seriously, I just watched the S&P 500 move 80 handles and stood there like a deer in the headlights.

7:30 p.m.: CNBC suggests S&P will cut U.S.’s AAA credit rating. I am glad I am not long, but is CNBC blowing smoke?

9 p.m.: It happens. Later, at a bar in Oak Bluffs, everyone is talking and laughing and I’m focused on the Sunday night futures open. Oh, the joys of running $30 million.

MONDAY, AUGUST 8, 2011

9:30 a.m.: Nice weekend, but now it’s back to reality: The downgrade is here. The market is in free fall. People are dropping the L word, as in Lehman. Everything is starting to look broken as can be.

2 p.m.: The S&P 500 is around 1150. The Dow is down 344 points. Decide it’s time to get in on this. Normally, I would be more quant-driven, but I’m playing with my gut and not my head. All aboard, we buy 1150, and wow, I am wrong, holy shit, I am wrong. Within minutes of my trying to call the bottom, the Dow drops 300 points. I’m down the price of two college educations in the time it takes to cook a lobster. Feel like a total moron.

3 p.m.: Miraculously, the S&P 500 bounces back up to 1150, and I’m able to recoup 80 percent of my losses and get out. Within half an hour, it falls back to 1120. Saved by luck! I should happy, but I’m too traumatized.

7:30 p.m.: Futures fall hard after hours. Enough is enough. I am going to buy this market.

9:30 p.m.: Bad economic data out of China and South Korea drives S&P futures down to 1080, and I’m down $300,000 again. So I dug myself out of a hole and put myself back in five hours later. Bravo. Tomorrow is payback. It is time to get into a street fight and make these losses back, no mercy, no prisoners.

TUESDAY, AUGUST 9, 2011

6:45 a.m.: Look at that. S&P futures are up and what I thought was going to be a 3 percent loss turned into 1.5 percent gain. Go f–ing figure. That was easy. Now the plan is to get flat before the Fed announcement and to trade as fast as humanly possible after that.

4:15 p.m.: The Fed meeting ends, and the markets go wild. The Dow goes 200 points into the red, then recovers and closes over 400 points up. To me, it looks like a short squeeze, but my Facebook feed fills with messages from high-school classmates working at big financial companies writing things like, “Bull is Back!” I’m not so sure. With their low SAT scores, monogrammed shirts and “emergency conference client sessions,” these guys are maybe smart enough to run the budget surplus of a lemonade stand.

6:45 p.m.: Top Client calls, wanting to know why we're only up about 1 percent. I subtly remind them we avoided a 15 percent market crash going short while they’d wanted to be aggressively long. Honestly, I could create the most successful hedge fund on planet Earth taking the opposite sides of the plays Top Client wants me to put on. My clients are wildly successful, but they didn’t make their millions in the investment business, and Wall Street is set up to ruin people like them.

WEDNESDAY, AUGUST 10, 2011

9:50 a.m.: My vacation is half over, and I’ve missed most of it. I was short U.S. equities overnight, and made a nice $120,000 profit. Now I’m going to enjoy the day.

11 a.m.: On a beach with my wife and her nieces, but still checking the Berry every ten minutes.

1 p.m.: Dow is on the rebound, the sun is shining bright. Grab the clubs for eighteen holes at Farm Neck. What’s the worst that can happen?

5 p.m.: Haven’t looked at my Berry in four hours. Time to check where Mr. Market is. The Dow is down 500. Do I dive in? With the markets this chaotic, decide it’s best to stay close to the harbor. Maybe tomorrow will be calm.

THURSDAY, AUGUST 11, 2011

9:00 a.m.: No position overnight and I am glad, the S&P Futures are manic. They just went from being up 2 percent to down 2 percent to back up to 2 percent.

10:00 a.m.: Market is still choppy but strong. Time to get long, but I am being cautious and trading smaller.

Noon: Dow is up 300 points, now above 1150. I am going to hit it here for a nice profit. This week has been a little smoother and easier for human traders.

3:00 p.m.: Dow is up close to 450 points. The rally is still going. It looks like 1170, last week’s low is going to get taken out and it does as the S&P 500 is now around the 1183 level.

3:30 p.m.: The market is now up huge. I have been out on the sidelines for the last 200 points, but put on a small short positions near highs of the day. The S&P 500 quickly falls eight points and I covered immediately. However, once I cover the S&P 500 drops another ten points and settles for the session at the 1170 level or the prior week’s lows.

6:00 p.m.: A short-selling ban in Europe has the market abuzz. I’m not fan of banning legal short selling, it’s more political than effective. If anything, eliminating short sellers ultimately ends up elevating volatility. But in the short term, it’s bullish. I am going to be long overnight.

FRIDAY, AUGUST 12, 2011

8:30 a.m.: What a week. The market is still down, but trading for much smaller losses than where it closed on Wednesday evening. S&P Futures are up 10 points on the European short-selling ban. I take my profit and I am done. For now.

Sometimes I think I must be a somewhat defective person to subject myself to a job like this. But I’m a stubborn guy who hates to lose, and what’s life if you’re not living on the edge from time to time?

[Ed: The Dow Jones closed up 125 points on Friday at 11,269, and was down just 1.5 percent on the week.]

as told to Jessica Pressler

*All times approximate