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7/8/05
Victor Niederhoffer: Final Consonance

The low in S&P futures yesterday was 1186 in the New York session and 1172 in the overnight session, respectively the lowest prices reached since May 18 and May 17. Such a final consonance, or release of tension, reminds me of Rossini who could not get out of bed until a dominant seventh resolved into a major fourth. It is in keeping with my theory that such releases of tension are quite sanguine. The moves yesterday were also:

All these points must be tested of course.

Martin Skuggig asks:

Speaking of release of tension, yesterday I had much wanted a cane as the index of my choice declined 4% on my leveraged long position, and I desperately hit the buy button to try to scrape up some more contracts at a point which later proved to be quite close to the low of the day. Of course, all such tries were useless and instead there was a much interesting wait for the market to find its feet again. At what now is almost is a full Lobagola the question arises: Lobagola, and then what? What is the most usual outcome of the stampede back to where we were, a la Lobagola? A continuation, or will the balloon burst?

Victor Niederhoffer responds:

The only intelligent thing a former cotton trader and current fund-of-fundist ever said is that once it goes back to where it originally killed you, it goes much further. But this must be tested. And it is unfortunate that you were not able to buy at the lows. The derivatives expert, in the only sensible thing he's ever said to me, once told me that in the depths of despair if I ever tried to put more fuel on the fire, my broker would rise up like a viper from a bottle and strike and suppress.

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