Another Gap to Swing High

The globex markets are the setting for bullish progress this week and early this morning we saw another wave of buying roll through the market.  As we enter the thick of earnings for major tech companies, the index teeters at annual highs.

The intermediate term is showing signs of coming out of balance.  Below yesterday we have a volume pocket separating us from the balance formation.  However, we could still explore a bit higher to settle out the imbalance existing from bottom tail-to-mid verses top tail-to mid.  I have highlighted this level as well as the pocket and key LVNs below:

07232014_IntTerm_NQ

Yesterday we printed a very clean “normal” day.  This type of day is characterized as having no range extension from initial balance and suggests an aggressive early entry by the buyers was following by balanced, two-way trade.  The placement at new swing highs suggests acceptance of these higher prices.  The late-afternoon selling was widely expected to continue but instead the dip was bought.  The one unique quirk that had so many day traders expecting a new LOD yesterday was the triple-bottom at initial balance low paired with the big gap.  These traders were stopped out but will be hunting a break of 3942.25 on any weakness.  I have highlighted this level and a few other observations on the following market profile chart

07232014_marketprofile_NQ

Consolidations Are Not My Style

Day two over here of being tossed around by locals during a consolidation and boy do I feel frustrated.  I think I know what is happening here—I have a tendency to hunt out and buy into consolidating stocks.  The consolidating stock affords me the opportunity to clearly define the risk of my swing trade.  However, my trading style intraday on the /NQ_F is different.  I am not riding a position which can sit through the noise until a clear break emerges.  My risk per trade is too tight for this.  Thus, if a consolidation emerges my job going forward is to wait it out until an abnormal rotation takes place.

Otherwise I will keep donating my hard earned ticks back to the locals and robots.  I am defining my edge here, real time, using small position size.  I am happy to learn my methodology while it is still inexpensive.  I feel closer than ever to a workable trading model here.

To anyone who desires to trade discretionary in any product, my best advice so far is to find out what works for you while trading SMALL.  Also find out what is not working.  Consolidation trades are not working for me, at least not while trading the 1 lot.

When I envision trading more size, I would have carried a unit into the consolidation with a nice scale in place.  It would be much more simple to manage this position because my risk would be way below the consolidation zone as opposed to initiating fresh risk amid the consolidation.  Do you see how the two trades differ?

Anyhow, here are my daily stats below.  I dipped into the red today but spent most of the session confident in my methodology.

07222014_performancereport
I bought a Twitter weekly call early in the session, but when we fell out of the short squeeze, P-shaped profile I brought the risk back to cash.  The rest of my book stayed the same.  My DDD calls are not looking too hot, but I will see one more day of trade before acting.

Gapping into A New Swing High

Nasdaq futures are up to new swing highs overnight in a session that was predominantly buyer controlled.  I am preparing this analysis just after the core CPI information has been released.  Most of the data came out in line with expectations and the initial reaction to these in-line numbers is more buying, putting the Nasdaq futures up to a new high on the session.  The move did however find a responsive seller, and as we come into USA cash open we are just shy of pro gap territory.

Coming up today, we have House Price Index at 9am and Existing Home Sales at 10am.  We will here from the Richmond Fed Manufacturing index both at 10am and after hours.  We also have major earnings out after the bells coming from AAPL and MSFT to name a few.

There were a few clues about the bullish undertone yesterday if you were watching market/volume profile.  On the intermediate term timeframe I noted a balance had formed last week.  This balance was inside a larger balance spanning the entire month of July.  The balance inside the balance was forming along the highs.  Then yesterday the VPOC shifted higher, right toward the end of the session.  This threw the entire 5 day (now 6 day) balance out of whack, thus requiring some upward discovery to restore balance.  See below:

07222014_IntTerm_NQ

Here’s the slightly larger intermediate term balance, a profile spanning the entire month of July (presented yesterday in relation to all monthly profiles):

07222014_IntTermBIGGER_NQ

Finally I present the levels I will be observing today on the following market profile chart:

07222014_marketprofile_NQ

Neutral Fuel

Both the Nasdaq and the S&P were in neutral territory this afternoon.  The trade on a neutral print is to find a price to lean on and fade the second range extension back to the mean.  This trade was not an easy one to stomach today, and quite frankly the buyers defended the pants off of their progress.

We saw a slight risk aversion divergence when /ES made a new high without the /NQ and at that point I was looking for short entries despite the poor high printed at HOD.  Net I had a decent day, loaded with machine gun error strikes after my best trades.  This is a bi-product of trading a 1 lot.  I know that my trades might yield more than my first scale point.  Thus, I become overzealous in reentering.  I need to frame my mind as if I am still in the original trade and how I would manage my position if that was the case.  This will eliminate these errors.  I am thinking like a 1 lot chump.  One might presume I could simply bump up to a two lot and this error would magically vanish.  I won’t lie, I considered it.  However, the more disciplined approach to this issue is to avoid taking a poor reentry.  This will pay off big when I do start increasing size, because I will be more familiar and comfortable with proper re-entry/re-sizing tactics.  See below:

07212014_performancereport

I left my book alone today.  If anything, I would have increased my long exposure because something about today’s neutral print smacked me in the face as BOOLISH.  But I didn’t—I rode my cycle instead. I will be poking around the sacred halls of iBankCoin for another long idea this evening.

Nasdaq Round Up Heading into The Week

Nasdsaq futures are trading a touch lower overnight in a balanced session of trade.  We are quiet on the economic from this morning.  The Chicago Fed National Activity index came out at 8:30am a bit below forecast but the response was low in the Nasdaq.  Looming in the minds of many participants are the rising tensions across the Atlantic, where the Israelites are waging battle in Gaza and finger pointing over the Malaysian airline crash continues.

The balance I have been tracking on the intermediate term has grown to encompass the entire month of July.  Thus I present the intermediate term balance below in the context of 2014:

07212014_Monthly_NQ

The weekly chart shows the long term timeframe where responsive buying formed two tails recently, suggesting an excess low was presented to participants—prices perceived as discounts.  This activity requires a significant amount of energy, thus we will need to see buyers muster up additional strength if they are to build upon their response.  Also note the still-open 14 year gap above:

07212014_Weekly_NQ
Last week our five sessions aggressively formed a bit of balance.  This balance is taking place within the balance of the month, to overall form a solid, thick, state of balance on the intermediate term.  The intermediate term timeframe was very active last week, thus I am consolidating my eye to 5 days to view the intermediate term timeframe:

07212014_IntTerm_NQ

Finally, I have presented the relevant prices levels I will be watching today on the following market profile chart:

07212014_marketprofile_NQ

Contextual Approach To a Short Term TSLA Trade

As you may recall, I have been in and out of TSLA common stock for much of 2013 and a good portion of 2014.  My most recent common stock swing began 06/10 and is up just a bit over eight percent.  Sometimes I juice my position with some leverage, pinning on short dated call options.  I came into Friday with August 1 $230 calls and closed them early in the session with the intention of buying the calls back at the end of the day for a discount.  It turns out I was trying to be fancy, and I ended up paying a bit more for the position come 4pm.  However, I like the short term contextual read on TSLA right here, and I have presented my case below.  The yellow box is an expansion of a 15 day ATR.  My expectation is for price to achieve the upper target by the close of next week, thus allowing me 2-3 days of opportunity to smack a home run.

See below:

TSLA_July192014

OPEX Battle Royal

As an intermediate term balance ages more and more fine lines begin to show on the face of the distribution.  The more crowded the profile becomes with lines, the more likely we are to see the profile left to explore for new, youthful prices.  Such is the case with our current intermediate term profile which is becoming rather crowded with relevant prints.

Don’t assume I mark this chart up all willy-nilly with lines simply to obfuscate my own job.  These levels have proven significant both via price action and the resulting volume footprint.

We are currently priced to open just below the VPOC of our intermediate term balance.  Whether buyers respond to these prices like they are a sweet discount or hold off will telling as we close out the week.

Nasdaq futures are pricing in a gap higher overnight after a liquidation trade took hold yesterday.  With U of M Confidence data out at 9:55am and the gap higher, we may see some murky trade early in the session before finding direction.  Google is gapping higher after announcing earnings yesterday after the bell.  Today is also OPEX for monthly stock options.  Earnings are just around the bend for most stocks and we are heading into an uncertain weekend according to the news cycle.  This is a challenging environment to possess conviction, however the reward for either side is great.  With that in mind, we pay see other time frame (OTF) participants active today, jockeying for position ahead of the weekend.  That means larger intraday rotations and stronger conviction then the fickle day trader or local.

I have highlighted the key characteristics of the intermediate term balance profile, as well as the key market profile levels on the below charts.  Note yesterday’s profile is split in two.  When a catalyst (news, Fed) hits the tape and creates a change I will split the profile the better see how participants are behaving the new environment:

07182014_IntTerm_NQ

07182014_marketprofile_NQ

Take It Back

I have a pretty bizarre imagination, but I couldn’t make up a day where a Malaysian airplane was rocketed down on the Russian border, Israel launched a land battle in Gaza, and the White House was put on lockdown even under a peyote educed bout of psychosis.  What a day.

I earned some new rules today, trading the /NQ.  Here’s the thing, willpower is finite much like land on an island.  If I sit here, and prices are going all the hell over the place, then over time it becomes more and more difficult to restrain the urge to break discipline.  I have the tools to trade well.  I have the environment to trade well.  I have the ability to trade well.  When a person is selected to join the special forces, like the Navy Seals, we know they have the physical ability to complete the challenges they face.  However they are tested, nearly tortured, and the entire time invited to “ring the bell”.  This is a test of their mental fortitude, their will power.  Those who can maintain the will power can become Seals.  This is because often times their missions require incredible strength.  Some missions require days of reconnaissance and patience in grueling conditions before making a precision strike or insertion or extraction.

Willpower is a muscle, it can be strengthened.  However, until it is stronger one must take steps to ensure their own safety.  Two rules – 3 losing trades in a row? DONE for the day.  45 ticks to the good or more on the day?  DONE.

This will require shutting the DOM down and/or going away from the trading desk.  It is too enticing otherwise, the action.  If I want to abstain from cookies and every 20 minutes someone brings a hot batch out and puts them on the table, then I will eventually break and mangia some cookies.  I know my own weaknesses.  I will strengthen them, avoided impulse in all aspects of life.  Not just trading.  For now, I will create a physical barrier.

ONE MOAR RULE

I am frustrated with myself because I gave back good gains on the day.  Fade trades after 3pm, no, forget that.  The final hour of trade is like the wild west on a Futurama set.  Here are my daily (over) trades:

07172014_performancereport
How cool would it have been to sashay onto iBankCoin and show everyone the money I made in the morning and then how I lounged for the remainder of the day, drinking Kool Aid with my homies?  Instead you see my continued struggle to make the turn.

I stopped out about half my book.  I have work to do, my performance swinging stocks this year is atrocious.  I still have some calls in TSLA and GPRN, August variety.  I am going to work on my back and biceps until they burst then re watch my performance tapes on the week.  Oh yeah.

Please don’t coddle me, or offer advice.  This was stupid what I did today and I know better and I am feeling a little sensitive about it.  That being said, if you know a good tune for a warm summer day please pass it my way.

Island Trade

Nasdaq futures are clawing back some of their losses this morning but are still priced to gap down at the open of US trade.  One of the bigger headlines overnight was a press release from President Obama.  This hit the wires around 5:45pm yesterday, however the real sell flow did not kick in until early this morning.  On the net we printed a 30 point range during the globex session.  On today’s economic docket we have the Philadelphia Fed at 10am and Google and IBM reporting their earnings after hours.

The interesting feature of price action coming into today is the “island” of prices left behind by this gap lower today.  We gapped up yesterday and held the gap in a rather blasé round of summer grind.  Under the surface momentum names were mixed but certainly not advancing.  By gapping lower today we have completely abandoned the prices we printed yesterday, including a fresh swing high early in the day.  The result is a day of trade with gaps on both sides, an island, a somewhat uncommon feature.

On the intermediate term timeframe, we can see trade clearly continues to be balanced.  We have a clean bell curve with a solid VPOC right near the mid.  We are currently priced to open somewhere near the upper half of value and we have some interesting price levels in play early on.  Sellers may want to press down into the other side of value to search for a quality bid, to make sure the buyers are still possess the conviction to perceive prices below our VPOC as discounted and an opportunity to make some money.  It would also flush out some weak hands.  However, if the lower boundary of value gives way, we may be in store for a full on liquidation.  I have highlighted these levels and others below:

07172014_IntTerm_NQ_noon
When you zoom into the market profile, we can see prices are trading inside of Tuesday’s range, a WIDE range established during Fed Chair Janet Yellen’s semiannual Senate hearing.  This value area is fairly established, thus I consider its levels significant.  If we spent more than an hour trading inside this range, then my expectation is for us to traverse the entire value area.  Otherwise, we may reject out of it with some responsive buying back to yesterday’s range.  Either way, it is a great piece of context to monitor today.  I have highlighted the key levels I will be watching on the following market profile chart:

07172014_marketprofile_NQ

Expected More

I had a strong feel on the market this morning, and my primary hypothesis was playing out very well.  I was able to capture several lovely trades during this time.  After lunch we formed a tight consolidation which I played very poorly.  I waffled all over the place, paying my broker and allowing the locals to make me into delicate sausage.  Then my discipline broke in the afternoon where I could be seen waffling out of a good short and then greedily expecting too much from my fade long.  This breakdown in discipline gave back half the days gain and plummeted an otherwise solid win rate I had going.  Here is a chart of the performance:

07162014_performancereport

I expected more from my book of risk too, which instead received several kicks to the scrotum.  I changed nothing and will see what tomorrow brings.

Another Gap to Swing High

The globex markets are the setting for bullish progress this week and early this morning we saw another wave of buying roll through the market.  As we enter the thick of earnings for major tech companies, the index teeters at annual highs.

The intermediate term is showing signs of coming out of balance.  Below yesterday we have a volume pocket separating us from the balance formation.  However, we could still explore a bit higher to settle out the imbalance existing from bottom tail-to-mid verses top tail-to mid.  I have highlighted this level as well as the pocket and key LVNs below:

07232014_IntTerm_NQ

Yesterday we printed a very clean “normal” day.  This type of day is characterized as having no range extension from initial balance and suggests an aggressive early entry by the buyers was following by balanced, two-way trade.  The placement at new swing highs suggests acceptance of these higher prices.  The late-afternoon selling was widely expected to continue but instead the dip was bought.  The one unique quirk that had so many day traders expecting a new LOD yesterday was the triple-bottom at initial balance low paired with the big gap.  These traders were stopped out but will be hunting a break of 3942.25 on any weakness.  I have highlighted this level and a few other observations on the following market profile chart

07232014_marketprofile_NQ

Consolidations Are Not My Style

Day two over here of being tossed around by locals during a consolidation and boy do I feel frustrated.  I think I know what is happening here—I have a tendency to hunt out and buy into consolidating stocks.  The consolidating stock affords me the opportunity to clearly define the risk of my swing trade.  However, my trading style intraday on the /NQ_F is different.  I am not riding a position which can sit through the noise until a clear break emerges.  My risk per trade is too tight for this.  Thus, if a consolidation emerges my job going forward is to wait it out until an abnormal rotation takes place.

Otherwise I will keep donating my hard earned ticks back to the locals and robots.  I am defining my edge here, real time, using small position size.  I am happy to learn my methodology while it is still inexpensive.  I feel closer than ever to a workable trading model here.

To anyone who desires to trade discretionary in any product, my best advice so far is to find out what works for you while trading SMALL.  Also find out what is not working.  Consolidation trades are not working for me, at least not while trading the 1 lot.

When I envision trading more size, I would have carried a unit into the consolidation with a nice scale in place.  It would be much more simple to manage this position because my risk would be way below the consolidation zone as opposed to initiating fresh risk amid the consolidation.  Do you see how the two trades differ?

Anyhow, here are my daily stats below.  I dipped into the red today but spent most of the session confident in my methodology.

07222014_performancereport
I bought a Twitter weekly call early in the session, but when we fell out of the short squeeze, P-shaped profile I brought the risk back to cash.  The rest of my book stayed the same.  My DDD calls are not looking too hot, but I will see one more day of trade before acting.

Gapping into A New Swing High

Nasdaq futures are up to new swing highs overnight in a session that was predominantly buyer controlled.  I am preparing this analysis just after the core CPI information has been released.  Most of the data came out in line with expectations and the initial reaction to these in-line numbers is more buying, putting the Nasdaq futures up to a new high on the session.  The move did however find a responsive seller, and as we come into USA cash open we are just shy of pro gap territory.

Coming up today, we have House Price Index at 9am and Existing Home Sales at 10am.  We will here from the Richmond Fed Manufacturing index both at 10am and after hours.  We also have major earnings out after the bells coming from AAPL and MSFT to name a few.

There were a few clues about the bullish undertone yesterday if you were watching market/volume profile.  On the intermediate term timeframe I noted a balance had formed last week.  This balance was inside a larger balance spanning the entire month of July.  The balance inside the balance was forming along the highs.  Then yesterday the VPOC shifted higher, right toward the end of the session.  This threw the entire 5 day (now 6 day) balance out of whack, thus requiring some upward discovery to restore balance.  See below:

07222014_IntTerm_NQ

Here’s the slightly larger intermediate term balance, a profile spanning the entire month of July (presented yesterday in relation to all monthly profiles):

07222014_IntTermBIGGER_NQ

Finally I present the levels I will be observing today on the following market profile chart:

07222014_marketprofile_NQ

Neutral Fuel

Both the Nasdaq and the S&P were in neutral territory this afternoon.  The trade on a neutral print is to find a price to lean on and fade the second range extension back to the mean.  This trade was not an easy one to stomach today, and quite frankly the buyers defended the pants off of their progress.

We saw a slight risk aversion divergence when /ES made a new high without the /NQ and at that point I was looking for short entries despite the poor high printed at HOD.  Net I had a decent day, loaded with machine gun error strikes after my best trades.  This is a bi-product of trading a 1 lot.  I know that my trades might yield more than my first scale point.  Thus, I become overzealous in reentering.  I need to frame my mind as if I am still in the original trade and how I would manage my position if that was the case.  This will eliminate these errors.  I am thinking like a 1 lot chump.  One might presume I could simply bump up to a two lot and this error would magically vanish.  I won’t lie, I considered it.  However, the more disciplined approach to this issue is to avoid taking a poor reentry.  This will pay off big when I do start increasing size, because I will be more familiar and comfortable with proper re-entry/re-sizing tactics.  See below:

07212014_performancereport

I left my book alone today.  If anything, I would have increased my long exposure because something about today’s neutral print smacked me in the face as BOOLISH.  But I didn’t—I rode my cycle instead. I will be poking around the sacred halls of iBankCoin for another long idea this evening.

Nasdaq Round Up Heading into The Week

Nasdsaq futures are trading a touch lower overnight in a balanced session of trade.  We are quiet on the economic from this morning.  The Chicago Fed National Activity index came out at 8:30am a bit below forecast but the response was low in the Nasdaq.  Looming in the minds of many participants are the rising tensions across the Atlantic, where the Israelites are waging battle in Gaza and finger pointing over the Malaysian airline crash continues.

The balance I have been tracking on the intermediate term has grown to encompass the entire month of July.  Thus I present the intermediate term balance below in the context of 2014:

07212014_Monthly_NQ

The weekly chart shows the long term timeframe where responsive buying formed two tails recently, suggesting an excess low was presented to participants—prices perceived as discounts.  This activity requires a significant amount of energy, thus we will need to see buyers muster up additional strength if they are to build upon their response.  Also note the still-open 14 year gap above:

07212014_Weekly_NQ
Last week our five sessions aggressively formed a bit of balance.  This balance is taking place within the balance of the month, to overall form a solid, thick, state of balance on the intermediate term.  The intermediate term timeframe was very active last week, thus I am consolidating my eye to 5 days to view the intermediate term timeframe:

07212014_IntTerm_NQ

Finally, I have presented the relevant prices levels I will be watching today on the following market profile chart:

07212014_marketprofile_NQ

Contextual Approach To a Short Term TSLA Trade

As you may recall, I have been in and out of TSLA common stock for much of 2013 and a good portion of 2014.  My most recent common stock swing began 06/10 and is up just a bit over eight percent.  Sometimes I juice my position with some leverage, pinning on short dated call options.  I came into Friday with August 1 $230 calls and closed them early in the session with the intention of buying the calls back at the end of the day for a discount.  It turns out I was trying to be fancy, and I ended up paying a bit more for the position come 4pm.  However, I like the short term contextual read on TSLA right here, and I have presented my case below.  The yellow box is an expansion of a 15 day ATR.  My expectation is for price to achieve the upper target by the close of next week, thus allowing me 2-3 days of opportunity to smack a home run.

See below:

TSLA_July192014

OPEX Battle Royal

As an intermediate term balance ages more and more fine lines begin to show on the face of the distribution.  The more crowded the profile becomes with lines, the more likely we are to see the profile left to explore for new, youthful prices.  Such is the case with our current intermediate term profile which is becoming rather crowded with relevant prints.

Don’t assume I mark this chart up all willy-nilly with lines simply to obfuscate my own job.  These levels have proven significant both via price action and the resulting volume footprint.

We are currently priced to open just below the VPOC of our intermediate term balance.  Whether buyers respond to these prices like they are a sweet discount or hold off will telling as we close out the week.

Nasdaq futures are pricing in a gap higher overnight after a liquidation trade took hold yesterday.  With U of M Confidence data out at 9:55am and the gap higher, we may see some murky trade early in the session before finding direction.  Google is gapping higher after announcing earnings yesterday after the bell.  Today is also OPEX for monthly stock options.  Earnings are just around the bend for most stocks and we are heading into an uncertain weekend according to the news cycle.  This is a challenging environment to possess conviction, however the reward for either side is great.  With that in mind, we pay see other time frame (OTF) participants active today, jockeying for position ahead of the weekend.  That means larger intraday rotations and stronger conviction then the fickle day trader or local.

I have highlighted the key characteristics of the intermediate term balance profile, as well as the key market profile levels on the below charts.  Note yesterday’s profile is split in two.  When a catalyst (news, Fed) hits the tape and creates a change I will split the profile the better see how participants are behaving the new environment:

07182014_IntTerm_NQ

07182014_marketprofile_NQ

Take It Back

I have a pretty bizarre imagination, but I couldn’t make up a day where a Malaysian airplane was rocketed down on the Russian border, Israel launched a land battle in Gaza, and the White House was put on lockdown even under a peyote educed bout of psychosis.  What a day.

I earned some new rules today, trading the /NQ.  Here’s the thing, willpower is finite much like land on an island.  If I sit here, and prices are going all the hell over the place, then over time it becomes more and more difficult to restrain the urge to break discipline.  I have the tools to trade well.  I have the environment to trade well.  I have the ability to trade well.  When a person is selected to join the special forces, like the Navy Seals, we know they have the physical ability to complete the challenges they face.  However they are tested, nearly tortured, and the entire time invited to “ring the bell”.  This is a test of their mental fortitude, their will power.  Those who can maintain the will power can become Seals.  This is because often times their missions require incredible strength.  Some missions require days of reconnaissance and patience in grueling conditions before making a precision strike or insertion or extraction.

Willpower is a muscle, it can be strengthened.  However, until it is stronger one must take steps to ensure their own safety.  Two rules – 3 losing trades in a row? DONE for the day.  45 ticks to the good or more on the day?  DONE.

This will require shutting the DOM down and/or going away from the trading desk.  It is too enticing otherwise, the action.  If I want to abstain from cookies and every 20 minutes someone brings a hot batch out and puts them on the table, then I will eventually break and mangia some cookies.  I know my own weaknesses.  I will strengthen them, avoided impulse in all aspects of life.  Not just trading.  For now, I will create a physical barrier.

ONE MOAR RULE

I am frustrated with myself because I gave back good gains on the day.  Fade trades after 3pm, no, forget that.  The final hour of trade is like the wild west on a Futurama set.  Here are my daily (over) trades:

07172014_performancereport
How cool would it have been to sashay onto iBankCoin and show everyone the money I made in the morning and then how I lounged for the remainder of the day, drinking Kool Aid with my homies?  Instead you see my continued struggle to make the turn.

I stopped out about half my book.  I have work to do, my performance swinging stocks this year is atrocious.  I still have some calls in TSLA and GPRN, August variety.  I am going to work on my back and biceps until they burst then re watch my performance tapes on the week.  Oh yeah.

Please don’t coddle me, or offer advice.  This was stupid what I did today and I know better and I am feeling a little sensitive about it.  That being said, if you know a good tune for a warm summer day please pass it my way.

Island Trade

Nasdaq futures are clawing back some of their losses this morning but are still priced to gap down at the open of US trade.  One of the bigger headlines overnight was a press release from President Obama.  This hit the wires around 5:45pm yesterday, however the real sell flow did not kick in until early this morning.  On the net we printed a 30 point range during the globex session.  On today’s economic docket we have the Philadelphia Fed at 10am and Google and IBM reporting their earnings after hours.

The interesting feature of price action coming into today is the “island” of prices left behind by this gap lower today.  We gapped up yesterday and held the gap in a rather blasé round of summer grind.  Under the surface momentum names were mixed but certainly not advancing.  By gapping lower today we have completely abandoned the prices we printed yesterday, including a fresh swing high early in the day.  The result is a day of trade with gaps on both sides, an island, a somewhat uncommon feature.

On the intermediate term timeframe, we can see trade clearly continues to be balanced.  We have a clean bell curve with a solid VPOC right near the mid.  We are currently priced to open somewhere near the upper half of value and we have some interesting price levels in play early on.  Sellers may want to press down into the other side of value to search for a quality bid, to make sure the buyers are still possess the conviction to perceive prices below our VPOC as discounted and an opportunity to make some money.  It would also flush out some weak hands.  However, if the lower boundary of value gives way, we may be in store for a full on liquidation.  I have highlighted these levels and others below:

07172014_IntTerm_NQ_noon
When you zoom into the market profile, we can see prices are trading inside of Tuesday’s range, a WIDE range established during Fed Chair Janet Yellen’s semiannual Senate hearing.  This value area is fairly established, thus I consider its levels significant.  If we spent more than an hour trading inside this range, then my expectation is for us to traverse the entire value area.  Otherwise, we may reject out of it with some responsive buying back to yesterday’s range.  Either way, it is a great piece of context to monitor today.  I have highlighted the key levels I will be watching on the following market profile chart:

07172014_marketprofile_NQ

Expected More

I had a strong feel on the market this morning, and my primary hypothesis was playing out very well.  I was able to capture several lovely trades during this time.  After lunch we formed a tight consolidation which I played very poorly.  I waffled all over the place, paying my broker and allowing the locals to make me into delicate sausage.  Then my discipline broke in the afternoon where I could be seen waffling out of a good short and then greedily expecting too much from my fade long.  This breakdown in discipline gave back half the days gain and plummeted an otherwise solid win rate I had going.  Here is a chart of the performance:

07162014_performancereport

I expected more from my book of risk too, which instead received several kicks to the scrotum.  I changed nothing and will see what tomorrow brings.