A Little OTF

Money has been flowing toward the marquee momentum stocks to start the month.  The Nasdaq is a touch higher after finding a responsive bid.  The Nasdaq has been hesitant all day to play along with the S&P and Russell weakness.  Instead it is flexing its apple bottom and holding the weight.

I have done little aside from observe the markets very methodical movement and buying some GOGO.  I am watching my investments perform well to start the month which are allowing me to hit the ground running.

It has been summer-like trade since lunch.  As you were.

A Fresh Month’s Context Read

Nasdaq futures turned in a relatively normal session overnight after drifting higher a bit during the shortened Labor Day session.  As we approach cash trade in the US the Nasdaq futures are trading up about 7 points.

The only major economic release for today is slated for 10am when ISM Manufacturing and Construction Spending data are released.  Looking out on the week, we have Factory orders and The Fed Beige Book during tomorrow’s regular session.  Thursday we have an ECB rate decision before market open with a Draghi presser and US Jobless Claims.  Thursday we also have ISM Non-Manufacturing composite.  And finally Friday before market open we have Non-Farm Payrolls and Unemployment stats premarket, arguably the only economic data point worth observing aside from The Fed.

On a long timeframe, looking at the monthly volume profile prints, we can see how much progress was made during August.  Much of the thin profile makes sense if you consider how well the prices we auctioned back in July.  However some prices received very little consideration and might welcome a retest at some point in the month.  See below:

09022014_monthlyVP_NQ

Looking at the intermediate term, we can see the market beginning to come into balance although buyers still control this timeframe.  The value migration higher began to slow last week.  Overall the structure just below current prices is well-auctioned and likely to provide support in the short term.  If we push down through it however, it would then be considered an overhang of supply.  I have noted the key intermediate price levels below:

09022014_intterm_NQ

Finally, I have marked up the market profile with short term levels I will be observing today.  One piece of context which gave me confidence to press long through the weekend was the high on Friday.  This was a prime example of a poor high, one vulnerable to be taken out.  I will likely merge the small Monday auction into Friday’s profile, but kept them separate for us to observe the poor high:

09022014_marketprofile_NQ

Envisioning Doom on The Horizon

Somehow my atomic alarm clock with battery backup fails to wake me at my customary time.  The iPhone backup chimes are muffled after falling off the bed and under a pile of blankets.  The air conditioning coil froze into a four inch block overnight and the house is a sultry eighty one degrees.

Forced to forego my methodical morning, I opt for a glass of water and a slice of untoasted bread smothered in ghee and almond butter.  I take said rations via tray to my desk and spill a bit of water on the mouse.  The mouse is fine but all the signs are there, it will be a day determined to challenge.  After taking my first bite of bread I power up all three monitors and accidentally smudge peanut butter on my second screen.

My eyes struggle to focus on the screen because I have slept with my contacts in by mistake effectively caking my eyeballs with thin plastic sheaths.  Nasdaq futures are deep in the red, down over 45 points after printing an abnormal 60 point range.  I cannot adjust my chart to show current prices until I wash the nut butter off my sticky hands.  We are off the lows which are another 10 points lower.  My intermediate term composite tells the story, it looks something like this:

0902HYPO2014_IntTerm_NQ

Rushed, I mark up the market profile levels in haste and struggle to locate all the key price levels from back on 08/22.  I barely have time to write my hypotheses and hit send on the hypos as the opening bell sounds.  Just at that moment, my secondary computer which houses key intelligence including news feeds, The 12631 power group, The PPT, twitter, blogs, and stock charts forces a shutdown.  I overlooked the 15 minute countdown to finish installing the god damned latest Windows 8 update.

Over the next 15 minutes, while the computer slowly reboots, the market open drives lower.  The order flow meter is screeching the whole way down, my portfolio is a sea of red, down well over 4% by now, and the overnight low has been breached, sending us into the land of low volume pockets below—levels leap frogged in the preposterous gap-and-grind higher swing.  I have no time to scan the week’s economic calendar and miss noting the ISM manufacturing number at 10am which turns out to be a reasonable excuse for another wave of selling to push into the marketplace.

Twitter announces they have prices a secondary offering, effectively shaving 8% from the share price overt the weekend.

By 11:15 the market is down 70 points and my book just a touch over six percent.  I am forcing myself to ignore the empty pit that is my stomach, foregoing nourishment and staring like a deer caught in headlights.  I am wearing purple underwear, why the hell am I wearing purple underwear?  Of all the days to wear such royal garments, gluttonous fool.

Famished, I react and throw on some risk, more than intended because panic has set in and all planning is now subject to abandonment.  The plan is shelved for reliance upon old fashioned survival hormones which are coursing through my veins.

Part of me wakes up and I step away for lunch.  I slide cold leftover meat off skewers while swilling down the lukewarm glass of water I never finished from the morning.  Still hungry, I eat a large plate of spaghetti and a piece of chocolate cake.  20 minutes later, I am clinging to conciseness after my spiked glucose crashes through the floor.

I nap, for the love of nourishment.

I wake, now 3:30pm and my book down just a touch over ten percent.  We snap off the lows as the President makes an impromptu announcement from the White House.  The message is obfuscated but mentions ISIS and we rally.  Emboldened and overrun with patriotism, I press more risk into any chart I can find.  I feel pretty good because the market is holding its snap off the lows.  In the final 10 minutes a real liquidation wave of selling swells into the market and takes me with it.  The Nasdaq has lost over 100 points of value and is now trading inside of 08/15’s gnarly neutral print.   I stop out my winning positions in a last second attempt to ‘right’ my ship, ignoring the new risk which has managed to lose forty percent of its value since the morning.

The market closes, I read philosophy books and eat McDonalds on the couch.  Unable to sleep, I make a third attempt to watch The Grand Budapest Hotel and fall asleep sitting up, fast food bag in tote.

For some awful reason you cannot seem to shake this song which is stuck and looping in your mind:

Labor Day Morning Stat Session

During the week long market profile webinar we talked about ‘the story’ and how when we choose to focus on the market activity in the context of an auction we react in planned ways.  As the market moves we can constantly return to reading context by asking ourselves a few questions:

  • What has the market done?
  • What is it trying to do?
  • How good of a job is it doing?

These questions help us answer the final question which determines how we react, if at all—what is the market likely to do from here?

You truly need to see this in action, like seeing a big rotation and running through the questions real time, to see the effect it has on your mental vision.  You return to these questions, you use market profile as a tool for seeing the auction, and the process provides a logical decision making process.

Probabilities can be just as logical a basis for decision making.  They are statistics derived from past market behavior and it is reasonable to include them as part of a decision process.  For example, if the overnight low breaks 89.52 % of the time and you have entered a short position which is working in your favor and is within a few points of the overnight low, then pressing for at least a 1-tick break of the overnight low makes sense, especially if the session has matured a bit, increasing the probability of a break.  These little inches we fight for add up to miles when it comes time to calculate expectancy.

Relying on these foundations (logos, as the Greeks called it) for trading will yield better results and a more objective eye.  Imagine your statistic does not fulfill because that is the simple nature of the markets.  This resistance to the laws of large numbers will speak to the context too.

Enough emphasis on why statistics matter, yes?  Without further adieu, I have performed a study on five years of trade in the Nasdaq futures.  The raw data has been pulled from the IQ Feed servers via their symbol @NQ# which is the continuous contract.  Some key points:

  • Overnight high/low break occurred 89.52% of the time, with 73.28% of breaks occurring before noon
  • The normal volume on an overnight session is between 17-39k contracts
  • The normal range of an overnight session is between 16-46 points

09012014_ON_breakSTATS

09012014_ON_range_histogram

09012014_ON_volume_histogram

Expectancy Shows The Obstacles

The numbers are the truth and the numbers can be your friend if you are on the proper side of the expectancy equation.  After reviewing all trades taken over the last two months, my best strategy per the numbers has been buying out of the money call options.  The ‘when’ question has been a prickly one, because my worst strategy has been the always sexy YOLO.  Coming in second place has been good old stock trading, which is toeing the zero line of expectancy.

My current win rate on normal options trades is 34.5% and 18.9% on YOLOs.  My stock trading win rate is at a frumpy 50% aka coin flip.  Yes, think about that next time you blindly follow me into a trade.

My average win on a stock trade is just a bit greater than the average loss.  This is a very thin edge at the moment, almost not worth the intense time commitment and effort.  My average win with options is about 3.5x the size of the average loss.  Notable big winners contributing to the large average win size were X, C, CELG, TWTR, and MBLY.  My average win trading YOLOs is only 2x my average loss.  This could be because a solid win has not occurred to skew the data set.

There are a few areas for improvement.  First is becoming more selective with stock trades.  These type of positions need considerable amount of thought and planning and might be better as longer-term trades.  Next is throttling back to YOLOs.  The best strategy for me appears to be sticking with a YOLO for about 3 weeks, willingly purchasing another week of time as best is possible, and cutting bait if the trade never pans out.  Two YOLO positions at a maximum with no more than 1.5% of risk committed.

Overall I have been using about 10% of my risk capital in normal option plays.  After reviewing the statistics it seems reasonable to increase this overall exposure to 15 percent, slowly of course, with a penchant for only the best chart setups.  Remember, this is the tendency with expectancy, to increase activity where expectations are highest.  This in turn can lead to lower quality entries, very much something to watch out for.

The rest of my risk capital must either sit in cash or longer term investments.  Current investments are TWTR, LO, GPRO, TLSA, and XON.

Thus my risk book looks something like this at the present:

Cash – 35%

Investments – 42%

Stock Trades – 14%

Option Trades – 9%

As you can see, I am in the uncomfortable position of having a heavy cash position into the start of a new month.  I will be seeking to correct this as trade ensues next week.

Not Trying To Be Rude But

If you are confined to a desk as others decidedly “slack off” into the holiday weekend, then why not turn on your radio?  Why not beat those assholes by picking the fastest horse for next Tuesday’s event?  Build, build build, an event might rear its head!  Or nothing happens.

Well, something happens.  There will be winners in this pragmatic contest of wit—stocks who prevail amidst a downturn.  It is your job to find them and wrap a proper risk profile upon them.

I have made my bed with a slew of candidates (extra R. Kelly).  I bought the KNDI liquidation or dilution, depending on your perception and added to P.  Other top picks into the holiday include ONVO, GLUU, and the WB.

Of course I am long all of these, and more.  Godspeed

RKelly

Up Gap To Wrap The Week Up

Nasdaq futures pushed higher overnight and achieved a news swing high in the globex hours.  The thrust occurred right around 3:30am and does not align with any economic release, thus it is the result of either a news development or simply more buyers than sellers.  As we approach US cash open, prices are off the highs of the session.

Personal Consumption statistics came out at 8:30am in line with forecasts which initially has brought little activity into the market where we are holding onto the overnight gains.  We have Chicago Purchasing Manager at 9:45am and U of Michigan Confidence numbers at 9:55am.

Yesterday’s auction was effective and methodical.  You will often see the Nasdaq futures operating in this manner.  It will go about the day resolving unsettled items one after another.  The gap higher on Monday did not quite resolve on Monday when prices stopped a tick above the full gap fill.  Yesterday we filled the gap before finding a responsive buyer who returned us back into the upper balance formed this week.  They closed the weekly gap, then they closed the range gap between Wed/Thurs, then they targeted a full overnight gap fill, stopping just one tick shy of this achievement.  It was a very methodical process.

I have highlighted the key LVNs as well as a measured move target which is a point shy of where we printed our overnight high:

08292014_IntTerm_NQ

I have also noted the short term levels I will be observing on the following market profile:

marketprofile_08292014

Time Is On Your Side

If your positions are swelling in value, appreciating amidst this rally to all time highs, you are in a unique position ahead of the final month of the third quarter.  You are leading the pack, out front of the wave of money swelling beneath you, and your job is to catch that wave and ride it.

This market is demonstrating more of a ‘when’ than ‘if’ uncertainty if you are in the right charts.  The key is purchasing enough time if you choose to use options or sticking patiently with the common if this is your choice.  Do not tighten your stops unless you know exactly where you are in the market ebb, otherwise you are likely to be taken out by noise flow.

Deciding when to enter a position is in your control.  Determining how much risk you are willing to commit to an idea is in your control.  How you manage your position is in your control.  Once the position is on, your fate is out of your control.  Being right or wrong is now a matter of the direction of price and to commit much energy to this activity, an external event, is a waste.  There is no point.  Instead exercise willing acceptance, of all eternal events, right now at this very moment.  That is all you need.

Focus on your process, your plan, your method of entry, your risk exposure, your profit targets, and then review your actions and reassess your plan.  Do this over and over again to cultivate an continued learning experience.  This will save you from damning the ‘they’ and any other force which moves the market.

If you are just barely ahead of the game, use your patience, take pride in your plan, and let time work for you.

I did not buy anything today, but I really like the look of a few of my current positions, notably P.  I also love the negative sentiment surrounding my ONVO, what a dump of a stock :)

Milking Winners

This final week of summertime has been fruitful thus far, and I am harvesting more of the work from last week.  I am happy to report my wins are outstretching my losses nearly 3-to-1 meaning every one win cancels out three losers.  With a bit more patience that number could stretch to 4 or even 6-to-1.  This is a trading style that works well for me.

Also from the fronts, my shares of TWTR, a position dipped and ripped and then submerged under water for months is nearly back to par.  I have said before, when returning to par on my largest position, that I intend to continue holding this position well into fresh all-time highs.  I know a good thing when I see it.  Like Go Pro, another long term investment.

Shots are popping off across the momentum complex.  Today is our first Nasdaq gap down in ELEVEN sessions and it has been the most fruitful day of the entire rally.  So nasty, these conditions are, when you fight the tape.

What RSH is doing to shorts this week is brutal.  That dog of a stock is feeling its oats.  We have one more trading day, a summer Friday, then a holiday Monday, then mutual fund Tuesday.  It is about to get interesting in here.  I already have a roster of stocks I am salivating over.  But instead of buying today I am enjoying the scenery.  Patience, it may leave be in a cloud of dust, but it’s a virtue for a reason.

By the way, I love talking market profile hypothesis with you guys.  Even if you have any general questions or feel intimidated by the material, just ask.  There is no shame in being curious.

Back in The Thick of The Auction

There is only so much analysis one can do when the price of an instrument is climbing to fresh highs.  Mostly I rely on measured move targets to the upside and highlighting support levels.  This is important, but I much prefer the confines of territory we have already auctioned.

I have these expectations sometimes, based upon analysis, where I expect something like lower prices.  Yesterday I was expecting some follow through on the morning weakness in the Nasdaq.  The challenge with expectations, especially those built upon market profile logic, is the timing.  The old axiom says the market can stay irrational longer than you can stay solvent.  The duration of “longer than you can stay solvent” is drastically shortened when you add a big leverage element to your trading.

GPD numbers came in better than expected and jobless claims worse than expected.  The initial reaction to this cocktail of economic numbers is buying across the equity index complex.  Overall however, it appears we will be gapping lower on the open, an event we have not seen in the Nasdaq since 08/12.

I have highlighted the key composite price levels on the following chart.  I will be watching how we behave at these low volume nodes for clues about the ledge of overhead supply and looking for signs of dip buyers creating demand below:

08282014_IntTerm_NQ

I have noted the short term price levels I will be keying off of on the following market profile chart:

marketprofile_08282014

A Little OTF

Money has been flowing toward the marquee momentum stocks to start the month.  The Nasdaq is a touch higher after finding a responsive bid.  The Nasdaq has been hesitant all day to play along with the S&P and Russell weakness.  Instead it is flexing its apple bottom and holding the weight.

I have done little aside from observe the markets very methodical movement and buying some GOGO.  I am watching my investments perform well to start the month which are allowing me to hit the ground running.

It has been summer-like trade since lunch.  As you were.

A Fresh Month’s Context Read

Nasdaq futures turned in a relatively normal session overnight after drifting higher a bit during the shortened Labor Day session.  As we approach cash trade in the US the Nasdaq futures are trading up about 7 points.

The only major economic release for today is slated for 10am when ISM Manufacturing and Construction Spending data are released.  Looking out on the week, we have Factory orders and The Fed Beige Book during tomorrow’s regular session.  Thursday we have an ECB rate decision before market open with a Draghi presser and US Jobless Claims.  Thursday we also have ISM Non-Manufacturing composite.  And finally Friday before market open we have Non-Farm Payrolls and Unemployment stats premarket, arguably the only economic data point worth observing aside from The Fed.

On a long timeframe, looking at the monthly volume profile prints, we can see how much progress was made during August.  Much of the thin profile makes sense if you consider how well the prices we auctioned back in July.  However some prices received very little consideration and might welcome a retest at some point in the month.  See below:

09022014_monthlyVP_NQ

Looking at the intermediate term, we can see the market beginning to come into balance although buyers still control this timeframe.  The value migration higher began to slow last week.  Overall the structure just below current prices is well-auctioned and likely to provide support in the short term.  If we push down through it however, it would then be considered an overhang of supply.  I have noted the key intermediate price levels below:

09022014_intterm_NQ

Finally, I have marked up the market profile with short term levels I will be observing today.  One piece of context which gave me confidence to press long through the weekend was the high on Friday.  This was a prime example of a poor high, one vulnerable to be taken out.  I will likely merge the small Monday auction into Friday’s profile, but kept them separate for us to observe the poor high:

09022014_marketprofile_NQ

Envisioning Doom on The Horizon

Somehow my atomic alarm clock with battery backup fails to wake me at my customary time.  The iPhone backup chimes are muffled after falling off the bed and under a pile of blankets.  The air conditioning coil froze into a four inch block overnight and the house is a sultry eighty one degrees.

Forced to forego my methodical morning, I opt for a glass of water and a slice of untoasted bread smothered in ghee and almond butter.  I take said rations via tray to my desk and spill a bit of water on the mouse.  The mouse is fine but all the signs are there, it will be a day determined to challenge.  After taking my first bite of bread I power up all three monitors and accidentally smudge peanut butter on my second screen.

My eyes struggle to focus on the screen because I have slept with my contacts in by mistake effectively caking my eyeballs with thin plastic sheaths.  Nasdaq futures are deep in the red, down over 45 points after printing an abnormal 60 point range.  I cannot adjust my chart to show current prices until I wash the nut butter off my sticky hands.  We are off the lows which are another 10 points lower.  My intermediate term composite tells the story, it looks something like this:

0902HYPO2014_IntTerm_NQ

Rushed, I mark up the market profile levels in haste and struggle to locate all the key price levels from back on 08/22.  I barely have time to write my hypotheses and hit send on the hypos as the opening bell sounds.  Just at that moment, my secondary computer which houses key intelligence including news feeds, The 12631 power group, The PPT, twitter, blogs, and stock charts forces a shutdown.  I overlooked the 15 minute countdown to finish installing the god damned latest Windows 8 update.

Over the next 15 minutes, while the computer slowly reboots, the market open drives lower.  The order flow meter is screeching the whole way down, my portfolio is a sea of red, down well over 4% by now, and the overnight low has been breached, sending us into the land of low volume pockets below—levels leap frogged in the preposterous gap-and-grind higher swing.  I have no time to scan the week’s economic calendar and miss noting the ISM manufacturing number at 10am which turns out to be a reasonable excuse for another wave of selling to push into the marketplace.

Twitter announces they have prices a secondary offering, effectively shaving 8% from the share price overt the weekend.

By 11:15 the market is down 70 points and my book just a touch over six percent.  I am forcing myself to ignore the empty pit that is my stomach, foregoing nourishment and staring like a deer caught in headlights.  I am wearing purple underwear, why the hell am I wearing purple underwear?  Of all the days to wear such royal garments, gluttonous fool.

Famished, I react and throw on some risk, more than intended because panic has set in and all planning is now subject to abandonment.  The plan is shelved for reliance upon old fashioned survival hormones which are coursing through my veins.

Part of me wakes up and I step away for lunch.  I slide cold leftover meat off skewers while swilling down the lukewarm glass of water I never finished from the morning.  Still hungry, I eat a large plate of spaghetti and a piece of chocolate cake.  20 minutes later, I am clinging to conciseness after my spiked glucose crashes through the floor.

I nap, for the love of nourishment.

I wake, now 3:30pm and my book down just a touch over ten percent.  We snap off the lows as the President makes an impromptu announcement from the White House.  The message is obfuscated but mentions ISIS and we rally.  Emboldened and overrun with patriotism, I press more risk into any chart I can find.  I feel pretty good because the market is holding its snap off the lows.  In the final 10 minutes a real liquidation wave of selling swells into the market and takes me with it.  The Nasdaq has lost over 100 points of value and is now trading inside of 08/15’s gnarly neutral print.   I stop out my winning positions in a last second attempt to ‘right’ my ship, ignoring the new risk which has managed to lose forty percent of its value since the morning.

The market closes, I read philosophy books and eat McDonalds on the couch.  Unable to sleep, I make a third attempt to watch The Grand Budapest Hotel and fall asleep sitting up, fast food bag in tote.

For some awful reason you cannot seem to shake this song which is stuck and looping in your mind:

Labor Day Morning Stat Session

During the week long market profile webinar we talked about ‘the story’ and how when we choose to focus on the market activity in the context of an auction we react in planned ways.  As the market moves we can constantly return to reading context by asking ourselves a few questions:

  • What has the market done?
  • What is it trying to do?
  • How good of a job is it doing?

These questions help us answer the final question which determines how we react, if at all—what is the market likely to do from here?

You truly need to see this in action, like seeing a big rotation and running through the questions real time, to see the effect it has on your mental vision.  You return to these questions, you use market profile as a tool for seeing the auction, and the process provides a logical decision making process.

Probabilities can be just as logical a basis for decision making.  They are statistics derived from past market behavior and it is reasonable to include them as part of a decision process.  For example, if the overnight low breaks 89.52 % of the time and you have entered a short position which is working in your favor and is within a few points of the overnight low, then pressing for at least a 1-tick break of the overnight low makes sense, especially if the session has matured a bit, increasing the probability of a break.  These little inches we fight for add up to miles when it comes time to calculate expectancy.

Relying on these foundations (logos, as the Greeks called it) for trading will yield better results and a more objective eye.  Imagine your statistic does not fulfill because that is the simple nature of the markets.  This resistance to the laws of large numbers will speak to the context too.

Enough emphasis on why statistics matter, yes?  Without further adieu, I have performed a study on five years of trade in the Nasdaq futures.  The raw data has been pulled from the IQ Feed servers via their symbol @NQ# which is the continuous contract.  Some key points:

  • Overnight high/low break occurred 89.52% of the time, with 73.28% of breaks occurring before noon
  • The normal volume on an overnight session is between 17-39k contracts
  • The normal range of an overnight session is between 16-46 points

09012014_ON_breakSTATS

09012014_ON_range_histogram

09012014_ON_volume_histogram

Expectancy Shows The Obstacles

The numbers are the truth and the numbers can be your friend if you are on the proper side of the expectancy equation.  After reviewing all trades taken over the last two months, my best strategy per the numbers has been buying out of the money call options.  The ‘when’ question has been a prickly one, because my worst strategy has been the always sexy YOLO.  Coming in second place has been good old stock trading, which is toeing the zero line of expectancy.

My current win rate on normal options trades is 34.5% and 18.9% on YOLOs.  My stock trading win rate is at a frumpy 50% aka coin flip.  Yes, think about that next time you blindly follow me into a trade.

My average win on a stock trade is just a bit greater than the average loss.  This is a very thin edge at the moment, almost not worth the intense time commitment and effort.  My average win with options is about 3.5x the size of the average loss.  Notable big winners contributing to the large average win size were X, C, CELG, TWTR, and MBLY.  My average win trading YOLOs is only 2x my average loss.  This could be because a solid win has not occurred to skew the data set.

There are a few areas for improvement.  First is becoming more selective with stock trades.  These type of positions need considerable amount of thought and planning and might be better as longer-term trades.  Next is throttling back to YOLOs.  The best strategy for me appears to be sticking with a YOLO for about 3 weeks, willingly purchasing another week of time as best is possible, and cutting bait if the trade never pans out.  Two YOLO positions at a maximum with no more than 1.5% of risk committed.

Overall I have been using about 10% of my risk capital in normal option plays.  After reviewing the statistics it seems reasonable to increase this overall exposure to 15 percent, slowly of course, with a penchant for only the best chart setups.  Remember, this is the tendency with expectancy, to increase activity where expectations are highest.  This in turn can lead to lower quality entries, very much something to watch out for.

The rest of my risk capital must either sit in cash or longer term investments.  Current investments are TWTR, LO, GPRO, TLSA, and XON.

Thus my risk book looks something like this at the present:

Cash – 35%

Investments – 42%

Stock Trades – 14%

Option Trades – 9%

As you can see, I am in the uncomfortable position of having a heavy cash position into the start of a new month.  I will be seeking to correct this as trade ensues next week.

Not Trying To Be Rude But

If you are confined to a desk as others decidedly “slack off” into the holiday weekend, then why not turn on your radio?  Why not beat those assholes by picking the fastest horse for next Tuesday’s event?  Build, build build, an event might rear its head!  Or nothing happens.

Well, something happens.  There will be winners in this pragmatic contest of wit—stocks who prevail amidst a downturn.  It is your job to find them and wrap a proper risk profile upon them.

I have made my bed with a slew of candidates (extra R. Kelly).  I bought the KNDI liquidation or dilution, depending on your perception and added to P.  Other top picks into the holiday include ONVO, GLUU, and the WB.

Of course I am long all of these, and more.  Godspeed

RKelly

Up Gap To Wrap The Week Up

Nasdaq futures pushed higher overnight and achieved a news swing high in the globex hours.  The thrust occurred right around 3:30am and does not align with any economic release, thus it is the result of either a news development or simply more buyers than sellers.  As we approach US cash open, prices are off the highs of the session.

Personal Consumption statistics came out at 8:30am in line with forecasts which initially has brought little activity into the market where we are holding onto the overnight gains.  We have Chicago Purchasing Manager at 9:45am and U of Michigan Confidence numbers at 9:55am.

Yesterday’s auction was effective and methodical.  You will often see the Nasdaq futures operating in this manner.  It will go about the day resolving unsettled items one after another.  The gap higher on Monday did not quite resolve on Monday when prices stopped a tick above the full gap fill.  Yesterday we filled the gap before finding a responsive buyer who returned us back into the upper balance formed this week.  They closed the weekly gap, then they closed the range gap between Wed/Thurs, then they targeted a full overnight gap fill, stopping just one tick shy of this achievement.  It was a very methodical process.

I have highlighted the key LVNs as well as a measured move target which is a point shy of where we printed our overnight high:

08292014_IntTerm_NQ

I have also noted the short term levels I will be observing on the following market profile:

marketprofile_08292014

Time Is On Your Side

If your positions are swelling in value, appreciating amidst this rally to all time highs, you are in a unique position ahead of the final month of the third quarter.  You are leading the pack, out front of the wave of money swelling beneath you, and your job is to catch that wave and ride it.

This market is demonstrating more of a ‘when’ than ‘if’ uncertainty if you are in the right charts.  The key is purchasing enough time if you choose to use options or sticking patiently with the common if this is your choice.  Do not tighten your stops unless you know exactly where you are in the market ebb, otherwise you are likely to be taken out by noise flow.

Deciding when to enter a position is in your control.  Determining how much risk you are willing to commit to an idea is in your control.  How you manage your position is in your control.  Once the position is on, your fate is out of your control.  Being right or wrong is now a matter of the direction of price and to commit much energy to this activity, an external event, is a waste.  There is no point.  Instead exercise willing acceptance, of all eternal events, right now at this very moment.  That is all you need.

Focus on your process, your plan, your method of entry, your risk exposure, your profit targets, and then review your actions and reassess your plan.  Do this over and over again to cultivate an continued learning experience.  This will save you from damning the ‘they’ and any other force which moves the market.

If you are just barely ahead of the game, use your patience, take pride in your plan, and let time work for you.

I did not buy anything today, but I really like the look of a few of my current positions, notably P.  I also love the negative sentiment surrounding my ONVO, what a dump of a stock :)

Milking Winners

This final week of summertime has been fruitful thus far, and I am harvesting more of the work from last week.  I am happy to report my wins are outstretching my losses nearly 3-to-1 meaning every one win cancels out three losers.  With a bit more patience that number could stretch to 4 or even 6-to-1.  This is a trading style that works well for me.

Also from the fronts, my shares of TWTR, a position dipped and ripped and then submerged under water for months is nearly back to par.  I have said before, when returning to par on my largest position, that I intend to continue holding this position well into fresh all-time highs.  I know a good thing when I see it.  Like Go Pro, another long term investment.

Shots are popping off across the momentum complex.  Today is our first Nasdaq gap down in ELEVEN sessions and it has been the most fruitful day of the entire rally.  So nasty, these conditions are, when you fight the tape.

What RSH is doing to shorts this week is brutal.  That dog of a stock is feeling its oats.  We have one more trading day, a summer Friday, then a holiday Monday, then mutual fund Tuesday.  It is about to get interesting in here.  I already have a roster of stocks I am salivating over.  But instead of buying today I am enjoying the scenery.  Patience, it may leave be in a cloud of dust, but it’s a virtue for a reason.

By the way, I love talking market profile hypothesis with you guys.  Even if you have any general questions or feel intimidated by the material, just ask.  There is no shame in being curious.

Back in The Thick of The Auction

There is only so much analysis one can do when the price of an instrument is climbing to fresh highs.  Mostly I rely on measured move targets to the upside and highlighting support levels.  This is important, but I much prefer the confines of territory we have already auctioned.

I have these expectations sometimes, based upon analysis, where I expect something like lower prices.  Yesterday I was expecting some follow through on the morning weakness in the Nasdaq.  The challenge with expectations, especially those built upon market profile logic, is the timing.  The old axiom says the market can stay irrational longer than you can stay solvent.  The duration of “longer than you can stay solvent” is drastically shortened when you add a big leverage element to your trading.

GPD numbers came in better than expected and jobless claims worse than expected.  The initial reaction to this cocktail of economic numbers is buying across the equity index complex.  Overall however, it appears we will be gapping lower on the open, an event we have not seen in the Nasdaq since 08/12.

I have highlighted the key composite price levels on the following chart.  I will be watching how we behave at these low volume nodes for clues about the ledge of overhead supply and looking for signs of dip buyers creating demand below:

08282014_IntTerm_NQ

I have noted the short term price levels I will be keying off of on the following market profile chart:

marketprofile_08282014