Tuesday, February 9, 2016
I turn dials and fiddle with knobs to hone in on harmonic rotations
Joined Oct 26, 2011
2,265 Blog Posts

Welcome To The Year of The Monkey


This week is an opportunity for the USA to trade without the incessant nagging of a crumbing Chinese stocked market.  Instead they will keep their market closed all week as the celebrate the year of the monkey.

I have expectations, and I have laid them out inside the Exodus Strategy Session.  I channeled the clairvoyance one can only achieve from well over 10,000 vertical feet before the sun rises.

After the index model nailed the come out for February, I plan to take it easy into week two.  Monday will have investors groggy after their Super Bowl celebrations and this is a weird month, a leap year.  No sense forcing anything.


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The Dow Jones Will Save Us


Two weeks running the Dow Jones has been a bastion of hope in an otherwise grim market.  The index is fortified with steel and brawn and men of industry, not software nerds selling software designed to sell software.  It is these men and their industry that will lead us out of the trenches and onto the offensive.

Look for physical industries like Machine Tools and Industrial Equipment to lead on the next bounce.  I will only invest in companies servicing the United States, the only industrious nation that can hold its water when the going gets tough.

Investors are spooked.  We have generational uncertainly in politics, the Chinese and other fake capitalist nations risk breaking their currencies, and oil is back to being a cheap sludge much to the chagrin of resource cursed Arabian nations.

The Utilities sector is up nearly 8% year-to-date.  Certain REITs are doing well.  Walmart, telecommunication, etc.  If American social media companies are worth 30-40% less than we perceived them last month then Chinese social media stocks are damn near useless.

If you are itching to increase your equity exposure next week, look to the Dow Jones and its core components.  Investors having been hiding out there.  Conversely, they may be next to meet the guillotine if we decidedly turn lower.  But at least for the next 5 market days, my data is optimistic.

More tomorrow after I complete the Exodus Strategy Session which was all over last week’s action.

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The @IndexModel Lays Waste To Its Mortal Enemies


The market is being dismantled despite the bullish fund flows often in play when a new month starts on a Monday.  The downward price action marks a decisive victory for my index model, a working strategy inside the Exodus Strategy Session.

Rose Colored Sunglasses [RCS] triggered its first 2016 short signal on Sunday, and its cold stats were paired with a bit of contextual mojo to formulate my predictions heading into the week.  This post is not bringing your attention to this victory so I can pat myself on the back, but instead to demonstrate that the market continues to be methodical and compliant with auction theory–the only viable theory for consistently approaching this market with poise and objectivity.

What is the market likely to do from here?  Well the NASDAQ is trying to lead lower, but the other indices aren’t cooperating.  This is a classic Option Addict risk divergence.  Heck, I bet he is considering a long /NQ trade any minute now, if I had to guess.

I will not participate in such trades.  Instead I will wait for tomorrow when I will be in the smog infested air surrounding L.A.  If at that time I see fit to procure equity exposure, I will do so via the QQQs.

In the meantime, chalk up another win for the good guys.

Want to see more?  Here’s an expert from last Sunday’s Exodus Strategy Session:

Bias Model: Rose Colored Sunglasses Short Bias

After two weeks of neutrality, the model has a short bias heading into the new month. I am hesitant to initiate new shorts, especially early in the week, due to the seasonality of a new month starting on Monday. However, by Wednesday I will be looking for a potential position short into the end of the week.

Here is the current spread:


Want even MOAR?  Here is the ‘Thesis for The Week’ from Sunday’s Strategy Session, an executive summary for those too busy to read the entire report:

Buyers continue working higher Monday based off last Friday’s strength.  A gap up Wednesday is reversed and we spend the rest of the week trading lower with the Non-farm Payroll data Friday accelerating the selling into early Friday before the week finishes with quiet, two-way balanced trade.


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NASDAQ Futures Green After Big Overnight Session


NASDAQ futures are coming into Wednesday positive after a Globex session featuring extreme range and volume.  Price worked down below the Tuesday low before reversing around midnight.  Since then price traded up to the session mid from yesterday.  At 7am MBA Mortgage Applications came in way below expectations and at 8:15am the ADP Employment Change was better than expected.

Also on the economic calendar today we have ISM Non-Manufacturing at 10am and crude oil inventories at 10:30am.

Yesterday we printed a double distribution trend day down.  This day-type carries the second most directional conviction.  Therefore, opening gap up is likely to surprise a few participants.

Heading into today my primary expectation is for sellers to work into the overnight inventory to close the gap down to 4191.25.  From there look for a move to test4173.50 before responsive buyers step in and two way trade ensues.

Hypo 2 buyers work up from the gap and trade up to 4224.25.  Look for responsive sellers here and two way trade to ensue north of 4173.75.

Hypo 3 sellers accelerate down through the gap fill at 4191.25 and sustain trade below 4173.75 setting up a test below overnight low 4175.25.  Look for responsive buyers around 4147.

Hypo 4 strong buying drives up through 4224.25 and moves to target 4247 before two way trade ensues.



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Down in The Slip Zone


NASDAQ is pushing down into the single prints from last Friday.  In theory, not much information has changed since Friday morning, but what has?

Don Trump took the #2 slot in the IOWA caucus without using nearly as many resources as the other candidates.  Trump wants to kill Wall Street.

Alphabet became the biggest company in the world.  Therefore the internet surpassed the gadgetry that takes you to the internet.  Some call it a paradigm shift.  I call google The Leader.

That’s about it.  Everything else is the same, so buyers ought to act the same down here, yes?  Behaving with the same tenacity and vigor they sported Friday morning?

Perhaps, but these single prints, once reclaimed, tend to be thoroughly examined once we spend time inside them.

Therefore, if buyers do not show up ASAP, we are likely to close on the lows, bros.

Over the weekend Rose Colored Sunglasses triggered, a working short bias generated by my index model inside Exodus.  The week is young, but the model nudged toward taking home the victory this week.  It took the ‘IOWA caucus’ victory already in the Russell (a risk-off divergence) but I will not consider it a proper victory until (and only if) the NASDAQ tags 4147.

Here is the slip zone I am going on about:


Stay sharp.  February is starting to act a lot like January.

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Sellers Cut into The First Night of February Trade


NASDAQ futures are lower heading into Tuesday after an overnight session featuring extreme range on elevated volume.  Price spent most of the session working lower but sellers were contained ahead of the Monday low.

On the economic calendar today we have a 4- and 52-week T-Bill auction at 11:30am.

Yesterday we came into the week gap down and after very briefly exceeding overnight low price worked higher to close the overnight gap.  From there we continued higher up through overnight high.  The afternoon also saw a rally.  Yesterday afternoon, just after closing bell price spiked higher on strong earnings from Alphabet. The rip was faded by sellers to form a distinct excess high on the session.

Heading into today my primary expectation is for buyers to work into the overnight inventory but struggle to fill the gap.  Instead sellers stall out around 4268.  From here we work lower to take out overnight low 4234.25 before two way trade ensues.

Hypo 2 buyers work up though 4268 and sustain trade above it.  Look for buyers to target 4277.  Buyers struggle to get up through 4282.50 but eventually do a full gap fill up to 4289.50.  From here buyers are likely to take out overnight high 4293.25.  Look for responsive sellers ahead of yesterday session high 4309.25 and two way trade ensues.

Hypo 3 sellers push off the open and take out overnight low 4234.25.  Unable to recapture 4242, the market continues lower to target 4215.50 before two way trade ensues.

Hypo 4 strong buyers drive higher off the open and close the overnight gap up to 4289.50.  They take out yesterday high print 4309.25 and we trend higher to target 4330.



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Alphabet Beats, Boasts 1B Active GMAIL Users


There are only four internet stocks worth owning and Google, er Alphabet just proved they are one of them.  The company reported Q4 EPS $8.67 vs $8.10 estimates on $21.34 billion in sales.

During the conference call CEO Sundar Pichai said Gmail crossed 1B active users.

The earnings sent the NASDAQ ripping during settlement period but price ultimately settled out right about where we primarily expected it to in the morning report.

Risk appetite is already reaching cookie monster status as we enter February, a sentimental condition I was calling for yesterday.  Stay sharp.

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Tesla Bends The Knee, Applies for Michigan Dealer License


Everyone has to find a way to work around Governor Rick Snyder.  When he’s not spending his time poisoning the people of Flint, he is busy pandering for the auto dealer vote via laws forbidding auto manufacturers from selling directly to consumers.  Although Tesla’s business model does not include dealerships, The Detroit News is reporting the electric car company has applied for a Michigan dealer license.

Tesla applied for a “Class A” dealership license to sell new and used cars. Under the classification, it also must have a “repair facility as part of their business or have an established relationship with a licensed repair facility,” Woodham said in a Sunday email to The Detroit News.

The stock is up over 2.5% so far in February.  No price reaction of note has occurred since this news dropped.


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Wrist Slapped: Credit Suisse To Pay Pittance to SEC Over Dark Pool Shenanigans


Dark pools never affect me.  In the futures market, transparency is high and spotting icebergs and other ‘dark’ orders is just a matter of having the right software.  However, big banks like Credit Suisse and Barclays did enough harm with these devices to be considered unlawful.

No jail time will be served, instead a fine will be levved and the banks can go back to back-alley banking in no time.

WASHINGTON Jan 31 (Reuters) – Barclays and Credit Suisse are poised to settle federal and state charges that they misled investors in their dark pools, with Barclays admitting it broke the law and agreeing to pay $70 million, according to a person familiar with the matter.

The settlements between the banks and the Securities and Exchange Commission and New York Attorney General, which are expected to be formally announced on Monday, will mark the two largest fines ever paid in connection with cases involving dark pools.

All together, the banks are expected to pay a combined total of $154.3 million, said the source, who spoke anonymously because the deal has not yet been finalized and made public.

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Day After Trend Day; First of The Month Logic


NASDAQ futures are heading into Monday gap down after an overnight session featuring normal range on slightly elevated volume.  Price briefly exceeded the Friday high before spending the rest of the session in a slow-grinding lower but sustaining above the Friday midpoint.

At 8:30am we had Personal Consumption Expenditure data which came out inline.  At 10am we have ISM Manufacturing, and at 11:30am there are 3- and 6-month T-Bill auctions.

Last Friday, despite weak guidance from Amazon, the market opened flat and a strong rally took place early on. The market balanced through the lunch hour then went into trend day up mode to close the week out strong.

Heading into today my primary expectation is for buyers to work into the overnight inventory and close the gap up to 4263.75.  From here buyers take out overnight high 4273.  Look for responsive sellers up at 4288.75 and two way trade ensues.

Hypo 2 buyers push up through 4288.75 and sustain trade above it to set up a trend up to 4329.75.

Hypo 3 sellers work down through overnight low 4230.75 but struggle to push below 4225.  Instead responsive buyers step in and work up to 4258 before two way trade ensues.

Hypo 4 sellers accelerate down through overnight low 4230.75 and make a liquidation move down to 4207.25 before two way trade ensues.



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