Last week is looking like it might have been a good entrance into longs before the market goes back to work settling some unfinished business up above. We never truly know these things until price action plays out which is why we manage risk, focus on quality entries, and then milk winners for everything they’ve got. Back in April 2000, whilst a younger Raul attended high school, market participants were greeted with a spine tingling gap down to start the month. Said gap came on the heels of the greatest run up in Nasdaq history. What followed was one of the fastest market drops of our lifetime, the tech bubble had burst.
Amidst the carnage, you guys forgot to go back up and close the gap. Not all gaps must be filled. In fact, some don’t. However, when we approach a void the physics of price action start to change. The suction becomes a target for testing, are these prices still repulsive? Or do we need to give them a more proper exploration?
There are several different analogies being discussed about how our current bull tops out. For me, I am holding off until we test this 14-year-old gap in the Nasdaq Composite index. After all, what is leading us higher? I have highlighted the old gap on this weekly chart of the Composite, see below:
Hedgies are short beta which is nasdaq. The market will inflict pain on the most participants. Your scenario may play out. However, I think the DOW has peaked.
I take it one day at a time, reminding myself to stay in the present, but always keeping these bigger picture ideas in the context cake.
Nice to see your posts as the feature! and with some quick updates, too!
we’re doing it live, let’s update the auction, shall we?
intermediate term we are neutral-to-bullish, last week the market found responsive selling multiple times at micro composite HVN 3886. This morning we gap higher, open auction outside of range gives way to initiative buying, and then more chop. Market is sustaining trade above 3907 pivot highlighted earlier. Our last thrust higher made the midpoint of our session creep up to 3906.25. These consolidations up near daily highs have given way to selling consistently for many weeks. After New York lunch we might see responsive sellers finally wake up and enter the tape. How much progress they make and whether it finds a bid will be very telling. Is last week’s short seller being forced to cover? this would put a ton of demand out there, it does not look like that has happened yet.
this answers, “what has the market done?”
What is the market trying to do?
We are bidding higher, out of a week long consolidation and attempting to find a seller. Is the market done finding a seller?
Examine the quality of the high– decent volume taper, possible excess high, high looks to be of decent quality.
No real follow through yet, nor have we seen a strong impulsive push lower. We are still trading above the daily VPOC and midpoint and volume on the downside has been lower then the upside on a 15 minute bar chart
How good of a job is the market doing at exploring for a seller? This is going well, we are seeing big rotations upward, consolidation, and then secondary thrusts, the auction is facilitating trade in an orderly manner.
What are we likely to do from here?
We are likely to break this lunchtime consolidation lower and test the conviction of early buyers. A possible test of the midpoint at 3906.25 would be our next opportunity to assess the auction.
Alternatively, if we break higher, we will look to see if new highs run stop orders and provide a nice push, this would indicate there is more activity to pursue higher.
In short, sit on your hands for a bit
here’s our mid test, 906.25
Great to see you up here Raul
+1
+1
I am humbled by your readership. Keep trading’em well 🙂
Smooth..Sir Raul
Hey, I just thought I’d pop on and ‘Thank’ Kinder Morgan..
Kinder Morgan’s CEO made more than half a billion dollars today
BY MarketWatch
— 12:21 PM ET 08/11/2014
Richard Kinder consolidates four energy holdings, and shareholders cash in.
Yes indeed!
Have a great day all you Beautiful People.
nice SOoz
So what do you think about the gold stocks?
I got out last week after some nice gains thinking we were going to get a nice hit before we go higher based on seasonality.
It hasn’t happened and when on days like this (gold drifts lower but the stocks go up) I believe we may head much higher.
many of these miner charts look to be setting up…I missed an entry on EXK that I wanted but now I am hesitant because of how sharp the selling was on Friday. I thought the flight to metal trade would have been stronger by now given the conflicts being reported globally.
On the other hand better news out of the Ukraine and Mid East should have tanked the metal. But it didn’t.
A Goldman upgrade of ABX and a potential NEM-ABX hook up seem to be holding things up in the sector.
True. On a more objective basis I am neutral which makes me want to hunt a better entry point, even if it’s higher.
Shippers?
Would have liked to shop for them last week, lol, some huge gains out there today. I think BALT is looking nice with that big excess low print, base, then base break higher
and down goes the markets again
Did you type that in your Howard Cosell voice? I certainly hope so.
http://www.youtube.com/watch?v=JZEIMQ42-oU
lingering at the mid after falling through it, not a ton of interest yet in exploring below that mid, key off of 3906.25 – 3907
Raul,
What is your take on iron ore miners, specifically VALE?
Thank you
zzz
VALE – pretty slow stock, seems easily managed on the long side here vs. about 13.50 although the risk;reward is about 1:1 if you’re looking to get a scale ahead of prior swing highs.
Thank you. I really appreciate it
zzz
Are you British? Who the hell says whilst?