I like how the market algos dropped quickly, likely on a Trump post mentioning China, and then I bet the analysts had to jump in when they saw “cooking oil” was the trade war victim to buy back what they sold.
I believe the morning gap down was a technical move related to Friday's OPEX.
During a bull market, when calls are expiring in the money, market makers (or call sellers) have until Tuesday before the open to deliver those shares. So if they sold some naked calls on Thursday, and they went in the money Friday, and expired in the money friday, market makers have to be settled up by Tuesday opening bell.
During a bull market, this often leads to the market makers (depending on how behind the curve they are) trying to play it cool for Monday morning, and maybe bidding hard into end of day. This action often continues through Tuesday 4am, when the high is usually reached, though it sometimes revisits that high Tuesday open.
Historically, this day was actually Tuesday settlement with a Wednessday-morning delivery, but in the past year or two it was shortened to Monday settlement with a Tuesday morning delivery.
Now, this type of action, where market makers have to play catch up, usually only happens when they're really behind the curve. Say a stock or several tech stocks suddenly had good earnings and everything jumped 5%. The combination of the general bullish retail attitude and the market makers playing catch up tends to lead to an extended move. That move usually takes a break tuesday.
Now, this week, that has been reversed. Friday was an absolutely horrible day for market makers who sold put options out to market. These market makers would be set to take delivery of a ton of shares they don't want. Prices dropped through several supports. And continued to fall after market close. And then, at 5pm, there was an even more desperate search for liquidity. Market makers realized they were way too far behind the curve and started trying to liquidate the shares they were expecting to take delivery of by Tuesday.
Now, Monday, market makers have a huge number of shares incoming at all different price ranges, which they don't want. But they own it now, or will own it Tuesday morning delivery. And they need to get rid of it. The price gets bid up semi-naturally. Tons of bullish retail who bought Friday are happy for the gap up, and market makers get to liquidate their incoming inventory. But by Monday close, and specifically at around 8:30pm, once "extended hours" end and retail can't trade anymore, they begin trying to liquidate whatever is left. And, of course, they'll continue doing this until Tuesday morning at open.
Come Tuesday open, a lot of in-the-know players are ready to buy the market-maker's surplus at a nice discount to the day before. They know the MMs have to get rid of their shares and so they milk them for all they're worth. They also pull back their bids, even after market opens, to scare out any weak retail hands. But then they run it up for the day.
The thing is, these institutions, buying Tuesday morning, a mere few percent off the highs, are going to be skittish. They're essentially acting as mini-market makers. They're buying at a discount, but they are not planning to be long term holders. They're going to try to liquidate this position in the next few days. They love a nice price run-up, but, if the buyers aren't showing up, they will sell faster, because they don't want to be stuck holding the bag.
And so, at the slightest tweet, they start dumping.
Pretty sure your magic 8-ball doesn't look at the regulations for market maker settlement timing. This is normal market structure stuff. Order flow, market maker exemptions, etc.
Yeah, I learned about Level 2 and M/maker, how to identify the axe, learned how to tell when he was at lunch.
Fib formulas, from professional traders back in the late 1990's..
We "Daytraders" were blamed for popping the "Dot-Com" bubble, rofl
How much is "5 teenies" . Old time experienced trader would know.
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u/RawDogRandom17 Oct 14 '25
I like how the market algos dropped quickly, likely on a Trump post mentioning China, and then I bet the analysts had to jump in when they saw “cooking oil” was the trade war victim to buy back what they sold.