Solid Linger into Week End

Perhaps a false sense of security, this market Is hanging on as we approach the closing bell.  It has been one of those Octobers where the scary clown came out of his van, poked and grinned, and now sits behind the bushes in your backyard staring in the windows.  Yet here we are, ‘normalizing’ and getting back to business.

The open was inside yesterday’s value, we tested higher and found responsive sellers, tested lower and found responsive buyers.  This is the type of chop we expected about 3 minutes after the opening bell.  We discuss open types and how they behave and what we can glean from them.  Today was all about waiting for the market to tip its hand via a major rotation.

Buyers showed up, made the rotation, and it made more sense, intraday at least, to be hunting the long side.  But don’t get me wrong, the big picture is spooky clownish ghoul and uncertain.  Should we fear uncertainty?  Should it elicit emotion?  No, death is just as natural a change as birth.

I am playing my book so slowly right now it takes about 2 meals per decision.  I reentered the GOGO today, hehe.  This latest ebola spook didn’t last very long.  It’s losing its potency or we are building up a tolerance.  Like any drug, fear needs to be ratcheted up as the use increases.  I joined Le Fly in CLR today, willing to build into another leg lower as long as I see buyers plying a bit of defense along the way.

Perhaps I will eat these words come Monday, but the overall scent of relief rally has emboldened my spirits.  As have the ritualistic activities part and parcel to a cleansing.

The key to fast markets is not trying to catch every move and not fighting the big waves.  Just take it all in, stay limber, and hit your notes when the Great Conductor waves his baton your way (take your trades).

Ye Olde Check Back

Nasdaq futures have been chopping about on normal volume overnight as we head into Friday’s trade.  The NYC Ebola case was confirmed and the equity index is demonstrating sensitivity to the news.  We have New Home Sales data coming out at 10am and an otherwise quiet economic calendar.  Some news about ECB bank stress tests is hitting the wires are we approach cash trade and it is causing a bit of a stir in the futures.

Shifting attention away from the daily bar chart, let’s look at the monthly volume profile print.  A quick note on the daily bar chart (not pictured) is we have seen signs of responsive selling both Wednesday and yesterday.  Whether they can convert to imitative selling is the question on my mind today.  Back to the monthly volume profile, we can see price testing the uppermost value threshold we printed during September.  My initial expectation is for participants to reject this value area, however if they cannot then a test of the VPOC then the other side become likely.  See below:

10242014_monthly_NQ

Yesterday’s profile print was quite the odd shape.  It had the marquee P-shaped short squeeze look for most of the session, then we popped out of it to the upside.  At this point a well-timed Ebola case hit the wires and we saw a sharp responsive sale.  The result is a thin tailed balance of sorts which we are set to open inside of.  We have left behind 4 NVPOCs and 2 open gaps on this move up, we are seeing signs of responsive sellers, and the week is coming to a close.  My primary expectation is for a choppy session with a downward bias as profit taking into the weekend causes sell flow.  I have highlighted the key levels I will be observing on the following volume profile mash up chart:

10242014_intterm_NQ

Eyeballing These Setups

That’s about all I can muster the strength to do, with these long setups, is give them a good eyeballing.  Stare as I might that is not how babies are made.  I took one shot long today, in the afternoon, via the GOGO, but then Ebola hit the wires and I bounced.  Planes, internet, Hazmat suits, extended pounce by the Nazzy—it is all too much to bear being bullish on airplane wifi.

Stupid Ebola, messing up my longz, lol.

I here crazy stuff like this all the time, cursing external events.  Let me bestow a gem from Marcus Aurelius.  This one applies so tight to trading you would think this guy scalped spooz for a living:

Objective judgment, now at this very moment
Unselfish actions, now at this very moment
Willing Acceptance, now at this very moment, for all external events.  That is all you need.

Cultivating this mentality, this little piece of stoic acumen, might be the change you need to clear a trading plateau.  Make a plan, use your logical mind.  That is what makes us human and superior to other mammals.  But remember that your emotions have the strength of a bucking elephant, and can take you on a wild ride plan or not, unless you strengthen your inner peace consistently.

Still struggling?  Lose a vice for a bit.  Just don’t press to hard or you might end up in the old padded room.  But be honest, are you working hard enough today?  You might not like the real answer.

Some call it Midwest work ethic, others immigrant gumption.  I call it look at the alternatives because they suck.  An oppressive corporate structure is not a real life to live.  There was some disturbing stat on twitter this morning (has the be true because its own [sic] the internet) that Americans forgo (and here’s my guess) a few ten thousand hours worth of vacation days each year.  Ah, such commitment, but for what?  Your own worth or the Lord of the Manor?

I will leave this comically long tangent and return to my point—I am stuck in risk aversion.  Here I sit, shotgun in tote, not buying the nuts off this dip.  All this sitting made for an admirable comeback, I did not puke, but not fear profiteering.

I liked SPLK, watched it rip a 10 bag.  I loved SUNE at $14.25—up up and away.  I even fancied ‘the man’ himself, LNKD for a minute, a bastard stepchild of the HR department.

TZA stopped out fairly early.  GNRC is looking good, TWTR is trading like someone knows the earnings are weak, BLOX is still at work, and XON is a hungry looking beast.  But there could be more winship.

My goal into the weekend, pony up and find a chart to buy.  Hopefully it sticks or I will be out said chart in 20-30 minutes.  Perhaps strenuous exercise will quell this aversion spell.  Or smudging some thickets of sage across the mother ship.  Or a vigorous mopping.  I shall do all three.

Enter Pro Gap

Nasdaq futures are up over 25 points ahead of cash open on a session which featured two major up rotations, one near 3:30am when Europe opened and another around 7am when early earnings announcements started coming out.  Some of the buy flow is being attributed to better than expected earnings from CAT, who also saw a sizeable stock buyback occur.  8:30am we had Initial and Continuing Claims stats which came out in line with expectation.  We have house price index at 9am, leading indicators at 10am, and then Natural Gas Inventories at 10:30am.

The Nasdaq is gapping just above the prior day range, and the size of the gap is what some consider ‘pro’ meaning an attempt to fade it is likely a trade only accomplished with very deep, professional pockets.  The risk to such a trade is the volume pocket just above which could act as an accelerator if prices are not rejected away from the vacuum.  The open will be vital to today’s trade.  Do responsive sellers show up and dominate?  Or do we see a dominant buy flow which sweeps us up into this pocket?  See below:

10232014_daily_NQ

The one trait sellers did not present yesterday which had been rather obvious during other down days was the strong volume and big negative cumulative delta.  Instead we compressed yesterday.  I have been keen on this prior balance zone formed to start October.  When it formed to start the month I thought we would leave it to the upside.  Instead we explored lower, found a sharp responsive buyer, and now here we are revisiting this zone.  The MCVPOC held as resistance yesterday but we might explore through the region today to the other side (above).  We also have the ‘LVN Separator’ at 3937.25 below as a key pivot should sellers price reject out of this area.  These very important levels, as well as other vital price levels are noted below on the following volume profile mash up chart:

10232014_intterm_NQ

Sellers Step Up and Connect

The essence of trading is having a plan.  The good thing about a plan is you have a theory about how price will move.  This theory is based upon a story you build.  My story centers around the ongoing 2-way auction in the Nasdaq.  It has guest appearances like a TV show, but the primary cast is the same.

The current guest causing a big splash is Mr. Jack Ma.  He has a character about him—one that brings a touch of drama to the sell flow in BABA.  Other guests currently in play are Oil, Rusty (The Russell), and le VXN.

But the primary plot today was to watch for follow through higher on yesterday’s strength which will find responsive sellers.  This happened, we nearly printed a neutral extreme (this settlement period buying is making an earnest attempt to make us neutral only), and that is how we found our seller.  Now the question is whether they carry the same tenacity and flow as their initiate move, or if instead we enter a churn.  No one  can say for certain, however I adjusted my book in the interim.

I sold half of my TWTR long—there I said it.  It was awkward because I have been with this long since about February.  I rode through the entire trough, being supportive and sharing ancient Roman and Eastern philosophies with it to build a strong foundation.  I made sure it had good nutrition and when it still acted up I would just coddle it and tell it everything will be okay.  But one must draw the line and I had to create a bit of separation.  This is good for both of us.  Twitter has a big event coming up (earnings) and I would rather be a side piece just in case it does not turn out as expected. In any case, I can always work my way back into the weighting I once had.

I also joined the 12631 crew on the TZA trade.  This is good.  I have a hedge in place now verses my other longs.  Speaking of which, GNRC caught a little upgrade this morning.  I like this company into the winter.  Their product runs on cheap natty.  No home is complete without a natty gas generator, IMO.  Especially in Michigan, where the sun seldom shines but a deep enough hole yields pockets of the sweet gas.  If the proverbial excrement hits the fan, you will likely find me digging deep, Kevin Bacon style, for gas to power the mother ship.

We will ride through earnings together, shotgun in tote.

Returning To A Well-Defined Auction

Equity futures are flat overnight after a quiet session of digesting yesterday’s move.  As we approach US trade the CPI stats are out and roughly in line while some traders may have expected a bit softer of a number.  This is lending a bit of strength to the US dollar early on and the initial reaction in Nasdaq futures is muted.  Buyers managed to extend yesterday’s progress a bit during the globex session before finding responsive sellers who neutralized the session.

Below is a daily chart of the Nasdaq futures where we can see just how sharp of a rejection buyers created with their response to the discounted prices.  I noted the midpoint of the down move yesterday which is at 3902.375 and I combined that with the midpoint of the current up move (which is still in development) at 3832 to highlight a broad ‘pivot’ area.  Whoever controls this zone has an opportunity to control the long term timeframe.  There is also a very well defined LVN above current prices as we press into the scene of the breakdown.  My expectation is for the market to find responsive sellers at some point today:

10222014_daily_NQ

If you look at the nearest profile to the left of our current prices, you can see our ‘template day’ or the day we are trading relative to is thin north of 3979 until about 4014.  If this was our only observation we might consider the risk of a fast slide up this zone.  However, there is a larger balance in play up here.  It is the red and green micro composite on the left side of the screen.  It tells the story regarding the last auction we held at these prices.  I have carefully selected the price levels I will be observing as we enter this zone (and beyond) on the following volume profile mash up chart:

10222014_intterm_NQ

Easy Go Easy Come

The market is the final arbiter.  This is something ChessNwine reminds traders of weekly in his strategy session.  If you find yourself becoming frustrated, euphoric, or BABA forbid panicked, then you are likely attempting to impose your will upon the market.  You are entering trades knowing they HAVE to be right because you are so god damned bright.

This is a fool’s game.  Well not quite.  It is a game for the humble sportsman (or sportslady?) who is tickled by the extraordinary.  And there is one thing you must impress upon your method if your method follows the tenants of momentum—your allegiance is to be sworn to the heaviest puncher.

The price action we are currently experiencing in the marketplace is peak abnormal, which, oddly enough, normally happens once in a while.  It is a good thing, a notch in the belt of survivors.  But think quick because you have not survived yet.  This is an ongoing extravaganza.

Equity markets are rallying hard today.  The Nazzy wants a 100 print after pulling the inverse last week.  Remember what I said last week?  About big waves?  You settle your heart by taking slow consistent breaths and allow it to take you as it desires until it throws you loose.  Then you begin to swim.

I am still doing very little, however, given the magnitude of the harmonic down, one was fortunate enough to back off the idea of hedging until a proper revision occurred.  Now it has, we are over the mid, and I am wondering if the bears jumped the shark with this move.

I know, it sounds crazy, perhaps fiduciary  questionable, but sitting and taking that sell flow to the nuts for a few weeks might have been the best course of action for longer term positions.  Again, this is all still TBD.

The rub?  They timed the rout about perfectly to zero out your October leverage.  Mine too, those fucks.  But sharpen your axe, purchase common on discount, and hone your strategy for another gregarious thrust.

You thought I was done thrusting, didn’t you?  You must know, Raul possesses the energy of 10 adhd afflicted teens.

All this to say I made no alterations to my book today.  This melt up was a gift however to my long term positions which are making admirable recoveries.  I still might dial them back.  However, this must be done very slowly, not all at once.

Think fast, move slow.

Strong Premarket Buy Flow Calls Predominant Theory into Question

Four hours of continuous buy flow impulsively ripped through the globex marketplace this morning.  The move is being attributed to an ECB corporate bond buying plan according to a few media outlets.  The ‘why’ of a move is often the focus of media outlets, but we focus on the ‘how’.  We know for certain a dominant buyer overnight rejected us away from yesterday’s prices.  This puts the Nasdaq out of balance as we approach cash open.  Our next job is to assess how RTH participants react to this new development.

There is a general consensus of skepticism surrounding the market bounce currently taking place.  The dip lower that precluded our current market bounce was fast and spanned a wide price range.  This leads many to suspect any bounce will eventually roll over, likely before attaining new highs.

That theory becomes a bit thorny as we enter today’s session.  We are now pushing into a zone where the market is likely to find sellers, however if they instead back off the tape we have a high velocity move underway which could carry us to new highs.

Buyers were impressive yesterday.  The session started with a strong push higher, lingered for the rest of the day, and finally made another thrust up into the bell.  Looking at the daily chart below, we can see prices probing a prior area of support which also features a high volume node.  It appears we will ‘test through’ this zone to the LVN on the other side before determining if this zone will be converted into resistance.  On the whole, this is the first real pullback since this move started.  I have noted the motivated move lower, its midpoint, and a few other observations below:

10212014_daily_NQ

We always observe the midpoint of a major move in the marketplace.  Major is relative as the markets produce similar patterns on multiple scales and timeframes.  This is why you hear the word fractal thrown around in these parts.  Put simply, the mid is a simple number to calculate and observe which makes it easy to run statistical analysis on, build trade ideas on, and build executing algorithms upon.

On the shorter 15-minute timeframe we can see the market is returning to its normal function of balance-discovery in a quest to determine value.  The recent low printed a clean balance volume profile before we began exploring upward.  Now price is probing into the volume profile printed just after we left a 7-day balance and only moments before we printed the fastest leg of the downward move.  This is our template day of volume-at-price to observe for today’s trade.  I have highlighted the key price levels I will be observing on the following chart:

10212014_intterm_NQ

Pause and Assess

The market pace came grinding to a halt this morning after a strong push higher.  We are still operating in an environment which produces larger-than-normal ranges and slightly elevated volume.  However the bulk of today’s move occurred during the initial balance aka the first hour of trade.

It almost seems foreign, the benign intraday action, after enjoying 10-12 sessions of white knuckle racing across the price complex.  There are several charts setting up nicely intraday for longs, however each time I zoom out to an hourly chart or even a 15 minute chart I see slop.  This is what has prompted me to shorten my target distance and trade duration.  Little bounces up into resistance are the singles that I can currently manufacture to bring home some wins.

Into the weekend I gave serious thought to liquidating some of my longer term holdings including TSLA and TWTR.  Before taking any action and remembering how long I have been with said names, I took my person far north, deep into the Michigan bush where internet cannot be obtained.  From my perch atop the autumn trees the thought of giving ‘them’ my shares seemed a bit callous, like manually killing your prey when you can buy it from a farmer.

Now that call premiums have been cleared off the table slow game is back on the forefront.  Value is drifting higher as the market strings together three up days.  Stay nimble as we head into resistance.

Clear Guideposts Emerge

Nasdaq futures have seen a slow in pace as we enter the new week.  Last week (OPEX) featured the highest volumes both in regular session and globex that we have seen in several years.  As  we embark on a new month of risk, activity has slowed.  Since opening for trade Sunday afternoon the price of the Nasdaq front month (December) futures contract has traded inside of Friday’s range suggesting overnight/weekend participants accept Friday’s range as balance.  The session kicked off with a low volume rally which slowly evaporated through the duration of the evening.  The economic calendar was quiet overnight.  We have China GDP numbers out this evening and USA CPI on the docket for Wednesday premarket.  Earnings season is ramping up throughout the week as well.

The market became a bit illiquid last week as participants aggressively sold equities.  Price action ‘broke loose’ which is a phrase we often use to describe the price action following a break from compression.  In these conditions, the quest for value and balance go out of whack and we are offered a rare opportunity to see real human emotion play out in the tape, often fear.  The event leaves a ripple in our environment and is likely to continue affecting the behavior of prices going forward.  Remember, price has memory.  Fortunately, the action managed to form brackets last week—guideposts we can use to assess price and volume going forward to determine if either the buyer or seller is gaining control.  I have noted these brackets on the following daily chart.  Note how prior zones of support and resistance are transformed into their counterparts:

10202014_daily_NQ

Given the progress of sellers over the last 1-2 weeks, the micro composite from Wednesday/Thursday, and especially given the amount of volume which came in on the downward action, my short term bias is medium bearish.  You can see three volume profile print-types: the large composite on the right (months of volume-at-price), the red and green ‘micro composite’ facing the opposite way of all the others, and the daily volume profiles.  Each tells me a different story.  I have noted the price levels I will be observing as opportunities on the following 15-minute volume profile chart.

10202014_intterm_NQ

Solid Linger into Week End

Perhaps a false sense of security, this market Is hanging on as we approach the closing bell.  It has been one of those Octobers where the scary clown came out of his van, poked and grinned, and now sits behind the bushes in your backyard staring in the windows.  Yet here we are, ‘normalizing’ and getting back to business.

The open was inside yesterday’s value, we tested higher and found responsive sellers, tested lower and found responsive buyers.  This is the type of chop we expected about 3 minutes after the opening bell.  We discuss open types and how they behave and what we can glean from them.  Today was all about waiting for the market to tip its hand via a major rotation.

Buyers showed up, made the rotation, and it made more sense, intraday at least, to be hunting the long side.  But don’t get me wrong, the big picture is spooky clownish ghoul and uncertain.  Should we fear uncertainty?  Should it elicit emotion?  No, death is just as natural a change as birth.

I am playing my book so slowly right now it takes about 2 meals per decision.  I reentered the GOGO today, hehe.  This latest ebola spook didn’t last very long.  It’s losing its potency or we are building up a tolerance.  Like any drug, fear needs to be ratcheted up as the use increases.  I joined Le Fly in CLR today, willing to build into another leg lower as long as I see buyers plying a bit of defense along the way.

Perhaps I will eat these words come Monday, but the overall scent of relief rally has emboldened my spirits.  As have the ritualistic activities part and parcel to a cleansing.

The key to fast markets is not trying to catch every move and not fighting the big waves.  Just take it all in, stay limber, and hit your notes when the Great Conductor waves his baton your way (take your trades).

Ye Olde Check Back

Nasdaq futures have been chopping about on normal volume overnight as we head into Friday’s trade.  The NYC Ebola case was confirmed and the equity index is demonstrating sensitivity to the news.  We have New Home Sales data coming out at 10am and an otherwise quiet economic calendar.  Some news about ECB bank stress tests is hitting the wires are we approach cash trade and it is causing a bit of a stir in the futures.

Shifting attention away from the daily bar chart, let’s look at the monthly volume profile print.  A quick note on the daily bar chart (not pictured) is we have seen signs of responsive selling both Wednesday and yesterday.  Whether they can convert to imitative selling is the question on my mind today.  Back to the monthly volume profile, we can see price testing the uppermost value threshold we printed during September.  My initial expectation is for participants to reject this value area, however if they cannot then a test of the VPOC then the other side become likely.  See below:

10242014_monthly_NQ

Yesterday’s profile print was quite the odd shape.  It had the marquee P-shaped short squeeze look for most of the session, then we popped out of it to the upside.  At this point a well-timed Ebola case hit the wires and we saw a sharp responsive sale.  The result is a thin tailed balance of sorts which we are set to open inside of.  We have left behind 4 NVPOCs and 2 open gaps on this move up, we are seeing signs of responsive sellers, and the week is coming to a close.  My primary expectation is for a choppy session with a downward bias as profit taking into the weekend causes sell flow.  I have highlighted the key levels I will be observing on the following volume profile mash up chart:

10242014_intterm_NQ

Eyeballing These Setups

That’s about all I can muster the strength to do, with these long setups, is give them a good eyeballing.  Stare as I might that is not how babies are made.  I took one shot long today, in the afternoon, via the GOGO, but then Ebola hit the wires and I bounced.  Planes, internet, Hazmat suits, extended pounce by the Nazzy—it is all too much to bear being bullish on airplane wifi.

Stupid Ebola, messing up my longz, lol.

I here crazy stuff like this all the time, cursing external events.  Let me bestow a gem from Marcus Aurelius.  This one applies so tight to trading you would think this guy scalped spooz for a living:

Objective judgment, now at this very moment
Unselfish actions, now at this very moment
Willing Acceptance, now at this very moment, for all external events.  That is all you need.

Cultivating this mentality, this little piece of stoic acumen, might be the change you need to clear a trading plateau.  Make a plan, use your logical mind.  That is what makes us human and superior to other mammals.  But remember that your emotions have the strength of a bucking elephant, and can take you on a wild ride plan or not, unless you strengthen your inner peace consistently.

Still struggling?  Lose a vice for a bit.  Just don’t press to hard or you might end up in the old padded room.  But be honest, are you working hard enough today?  You might not like the real answer.

Some call it Midwest work ethic, others immigrant gumption.  I call it look at the alternatives because they suck.  An oppressive corporate structure is not a real life to live.  There was some disturbing stat on twitter this morning (has the be true because its own [sic] the internet) that Americans forgo (and here’s my guess) a few ten thousand hours worth of vacation days each year.  Ah, such commitment, but for what?  Your own worth or the Lord of the Manor?

I will leave this comically long tangent and return to my point—I am stuck in risk aversion.  Here I sit, shotgun in tote, not buying the nuts off this dip.  All this sitting made for an admirable comeback, I did not puke, but not fear profiteering.

I liked SPLK, watched it rip a 10 bag.  I loved SUNE at $14.25—up up and away.  I even fancied ‘the man’ himself, LNKD for a minute, a bastard stepchild of the HR department.

TZA stopped out fairly early.  GNRC is looking good, TWTR is trading like someone knows the earnings are weak, BLOX is still at work, and XON is a hungry looking beast.  But there could be more winship.

My goal into the weekend, pony up and find a chart to buy.  Hopefully it sticks or I will be out said chart in 20-30 minutes.  Perhaps strenuous exercise will quell this aversion spell.  Or smudging some thickets of sage across the mother ship.  Or a vigorous mopping.  I shall do all three.

Enter Pro Gap

Nasdaq futures are up over 25 points ahead of cash open on a session which featured two major up rotations, one near 3:30am when Europe opened and another around 7am when early earnings announcements started coming out.  Some of the buy flow is being attributed to better than expected earnings from CAT, who also saw a sizeable stock buyback occur.  8:30am we had Initial and Continuing Claims stats which came out in line with expectation.  We have house price index at 9am, leading indicators at 10am, and then Natural Gas Inventories at 10:30am.

The Nasdaq is gapping just above the prior day range, and the size of the gap is what some consider ‘pro’ meaning an attempt to fade it is likely a trade only accomplished with very deep, professional pockets.  The risk to such a trade is the volume pocket just above which could act as an accelerator if prices are not rejected away from the vacuum.  The open will be vital to today’s trade.  Do responsive sellers show up and dominate?  Or do we see a dominant buy flow which sweeps us up into this pocket?  See below:

10232014_daily_NQ

The one trait sellers did not present yesterday which had been rather obvious during other down days was the strong volume and big negative cumulative delta.  Instead we compressed yesterday.  I have been keen on this prior balance zone formed to start October.  When it formed to start the month I thought we would leave it to the upside.  Instead we explored lower, found a sharp responsive buyer, and now here we are revisiting this zone.  The MCVPOC held as resistance yesterday but we might explore through the region today to the other side (above).  We also have the ‘LVN Separator’ at 3937.25 below as a key pivot should sellers price reject out of this area.  These very important levels, as well as other vital price levels are noted below on the following volume profile mash up chart:

10232014_intterm_NQ

Sellers Step Up and Connect

The essence of trading is having a plan.  The good thing about a plan is you have a theory about how price will move.  This theory is based upon a story you build.  My story centers around the ongoing 2-way auction in the Nasdaq.  It has guest appearances like a TV show, but the primary cast is the same.

The current guest causing a big splash is Mr. Jack Ma.  He has a character about him—one that brings a touch of drama to the sell flow in BABA.  Other guests currently in play are Oil, Rusty (The Russell), and le VXN.

But the primary plot today was to watch for follow through higher on yesterday’s strength which will find responsive sellers.  This happened, we nearly printed a neutral extreme (this settlement period buying is making an earnest attempt to make us neutral only), and that is how we found our seller.  Now the question is whether they carry the same tenacity and flow as their initiate move, or if instead we enter a churn.  No one  can say for certain, however I adjusted my book in the interim.

I sold half of my TWTR long—there I said it.  It was awkward because I have been with this long since about February.  I rode through the entire trough, being supportive and sharing ancient Roman and Eastern philosophies with it to build a strong foundation.  I made sure it had good nutrition and when it still acted up I would just coddle it and tell it everything will be okay.  But one must draw the line and I had to create a bit of separation.  This is good for both of us.  Twitter has a big event coming up (earnings) and I would rather be a side piece just in case it does not turn out as expected. In any case, I can always work my way back into the weighting I once had.

I also joined the 12631 crew on the TZA trade.  This is good.  I have a hedge in place now verses my other longs.  Speaking of which, GNRC caught a little upgrade this morning.  I like this company into the winter.  Their product runs on cheap natty.  No home is complete without a natty gas generator, IMO.  Especially in Michigan, where the sun seldom shines but a deep enough hole yields pockets of the sweet gas.  If the proverbial excrement hits the fan, you will likely find me digging deep, Kevin Bacon style, for gas to power the mother ship.

We will ride through earnings together, shotgun in tote.

Returning To A Well-Defined Auction

Equity futures are flat overnight after a quiet session of digesting yesterday’s move.  As we approach US trade the CPI stats are out and roughly in line while some traders may have expected a bit softer of a number.  This is lending a bit of strength to the US dollar early on and the initial reaction in Nasdaq futures is muted.  Buyers managed to extend yesterday’s progress a bit during the globex session before finding responsive sellers who neutralized the session.

Below is a daily chart of the Nasdaq futures where we can see just how sharp of a rejection buyers created with their response to the discounted prices.  I noted the midpoint of the down move yesterday which is at 3902.375 and I combined that with the midpoint of the current up move (which is still in development) at 3832 to highlight a broad ‘pivot’ area.  Whoever controls this zone has an opportunity to control the long term timeframe.  There is also a very well defined LVN above current prices as we press into the scene of the breakdown.  My expectation is for the market to find responsive sellers at some point today:

10222014_daily_NQ

If you look at the nearest profile to the left of our current prices, you can see our ‘template day’ or the day we are trading relative to is thin north of 3979 until about 4014.  If this was our only observation we might consider the risk of a fast slide up this zone.  However, there is a larger balance in play up here.  It is the red and green micro composite on the left side of the screen.  It tells the story regarding the last auction we held at these prices.  I have carefully selected the price levels I will be observing as we enter this zone (and beyond) on the following volume profile mash up chart:

10222014_intterm_NQ

Easy Go Easy Come

The market is the final arbiter.  This is something ChessNwine reminds traders of weekly in his strategy session.  If you find yourself becoming frustrated, euphoric, or BABA forbid panicked, then you are likely attempting to impose your will upon the market.  You are entering trades knowing they HAVE to be right because you are so god damned bright.

This is a fool’s game.  Well not quite.  It is a game for the humble sportsman (or sportslady?) who is tickled by the extraordinary.  And there is one thing you must impress upon your method if your method follows the tenants of momentum—your allegiance is to be sworn to the heaviest puncher.

The price action we are currently experiencing in the marketplace is peak abnormal, which, oddly enough, normally happens once in a while.  It is a good thing, a notch in the belt of survivors.  But think quick because you have not survived yet.  This is an ongoing extravaganza.

Equity markets are rallying hard today.  The Nazzy wants a 100 print after pulling the inverse last week.  Remember what I said last week?  About big waves?  You settle your heart by taking slow consistent breaths and allow it to take you as it desires until it throws you loose.  Then you begin to swim.

I am still doing very little, however, given the magnitude of the harmonic down, one was fortunate enough to back off the idea of hedging until a proper revision occurred.  Now it has, we are over the mid, and I am wondering if the bears jumped the shark with this move.

I know, it sounds crazy, perhaps fiduciary  questionable, but sitting and taking that sell flow to the nuts for a few weeks might have been the best course of action for longer term positions.  Again, this is all still TBD.

The rub?  They timed the rout about perfectly to zero out your October leverage.  Mine too, those fucks.  But sharpen your axe, purchase common on discount, and hone your strategy for another gregarious thrust.

You thought I was done thrusting, didn’t you?  You must know, Raul possesses the energy of 10 adhd afflicted teens.

All this to say I made no alterations to my book today.  This melt up was a gift however to my long term positions which are making admirable recoveries.  I still might dial them back.  However, this must be done very slowly, not all at once.

Think fast, move slow.

Strong Premarket Buy Flow Calls Predominant Theory into Question

Four hours of continuous buy flow impulsively ripped through the globex marketplace this morning.  The move is being attributed to an ECB corporate bond buying plan according to a few media outlets.  The ‘why’ of a move is often the focus of media outlets, but we focus on the ‘how’.  We know for certain a dominant buyer overnight rejected us away from yesterday’s prices.  This puts the Nasdaq out of balance as we approach cash open.  Our next job is to assess how RTH participants react to this new development.

There is a general consensus of skepticism surrounding the market bounce currently taking place.  The dip lower that precluded our current market bounce was fast and spanned a wide price range.  This leads many to suspect any bounce will eventually roll over, likely before attaining new highs.

That theory becomes a bit thorny as we enter today’s session.  We are now pushing into a zone where the market is likely to find sellers, however if they instead back off the tape we have a high velocity move underway which could carry us to new highs.

Buyers were impressive yesterday.  The session started with a strong push higher, lingered for the rest of the day, and finally made another thrust up into the bell.  Looking at the daily chart below, we can see prices probing a prior area of support which also features a high volume node.  It appears we will ‘test through’ this zone to the LVN on the other side before determining if this zone will be converted into resistance.  On the whole, this is the first real pullback since this move started.  I have noted the motivated move lower, its midpoint, and a few other observations below:

10212014_daily_NQ

We always observe the midpoint of a major move in the marketplace.  Major is relative as the markets produce similar patterns on multiple scales and timeframes.  This is why you hear the word fractal thrown around in these parts.  Put simply, the mid is a simple number to calculate and observe which makes it easy to run statistical analysis on, build trade ideas on, and build executing algorithms upon.

On the shorter 15-minute timeframe we can see the market is returning to its normal function of balance-discovery in a quest to determine value.  The recent low printed a clean balance volume profile before we began exploring upward.  Now price is probing into the volume profile printed just after we left a 7-day balance and only moments before we printed the fastest leg of the downward move.  This is our template day of volume-at-price to observe for today’s trade.  I have highlighted the key price levels I will be observing on the following chart:

10212014_intterm_NQ

Pause and Assess

The market pace came grinding to a halt this morning after a strong push higher.  We are still operating in an environment which produces larger-than-normal ranges and slightly elevated volume.  However the bulk of today’s move occurred during the initial balance aka the first hour of trade.

It almost seems foreign, the benign intraday action, after enjoying 10-12 sessions of white knuckle racing across the price complex.  There are several charts setting up nicely intraday for longs, however each time I zoom out to an hourly chart or even a 15 minute chart I see slop.  This is what has prompted me to shorten my target distance and trade duration.  Little bounces up into resistance are the singles that I can currently manufacture to bring home some wins.

Into the weekend I gave serious thought to liquidating some of my longer term holdings including TSLA and TWTR.  Before taking any action and remembering how long I have been with said names, I took my person far north, deep into the Michigan bush where internet cannot be obtained.  From my perch atop the autumn trees the thought of giving ‘them’ my shares seemed a bit callous, like manually killing your prey when you can buy it from a farmer.

Now that call premiums have been cleared off the table slow game is back on the forefront.  Value is drifting higher as the market strings together three up days.  Stay nimble as we head into resistance.

Clear Guideposts Emerge

Nasdaq futures have seen a slow in pace as we enter the new week.  Last week (OPEX) featured the highest volumes both in regular session and globex that we have seen in several years.  As  we embark on a new month of risk, activity has slowed.  Since opening for trade Sunday afternoon the price of the Nasdaq front month (December) futures contract has traded inside of Friday’s range suggesting overnight/weekend participants accept Friday’s range as balance.  The session kicked off with a low volume rally which slowly evaporated through the duration of the evening.  The economic calendar was quiet overnight.  We have China GDP numbers out this evening and USA CPI on the docket for Wednesday premarket.  Earnings season is ramping up throughout the week as well.

The market became a bit illiquid last week as participants aggressively sold equities.  Price action ‘broke loose’ which is a phrase we often use to describe the price action following a break from compression.  In these conditions, the quest for value and balance go out of whack and we are offered a rare opportunity to see real human emotion play out in the tape, often fear.  The event leaves a ripple in our environment and is likely to continue affecting the behavior of prices going forward.  Remember, price has memory.  Fortunately, the action managed to form brackets last week—guideposts we can use to assess price and volume going forward to determine if either the buyer or seller is gaining control.  I have noted these brackets on the following daily chart.  Note how prior zones of support and resistance are transformed into their counterparts:

10202014_daily_NQ

Given the progress of sellers over the last 1-2 weeks, the micro composite from Wednesday/Thursday, and especially given the amount of volume which came in on the downward action, my short term bias is medium bearish.  You can see three volume profile print-types: the large composite on the right (months of volume-at-price), the red and green ‘micro composite’ facing the opposite way of all the others, and the daily volume profiles.  Each tells me a different story.  I have noted the price levels I will be observing as opportunities on the following 15-minute volume profile chart.

10202014_intterm_NQ

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