BEHOLD: The 100th Exodus Strategy Session, Free For Everyone

Greetings fine people of the interwebs, it is with humility and honor that I present to you the 100th Exodus Strategy Session, enjoy:

I. Executive Summary

Raul’s bias score 2.90, Neutral.  Look for markets to push higher to start the week as bulls attempt to break our current balance, up near annual highs, and continue exploring higher prices.  Keep a close watch on NASDAQ Transports. If transports sustain their breakout, it adds confirmation to our expectation for higher prices.  Otherwise be cautious to chase markets higher.

Fed Chair Janet Yellen speaks Friday at noon, and the subsequent market reaction may provide direction into the following week.

II. RECAP OF THE ACTION

A gap down Monday starts out a slow week, and afternoon sellers on Tuesday reveal a strong responsive bid.  Then, major indices went flat until we heard Non-farm payroll Friday morning.

Third reaction to the NFP at 8:30am Friday was a sell [buy, sell, sell] and led into a lunchtime push lower where both the S&P 500 and Dow Jones bullishly diverged from the Russell 2000 and NASDAQ, ultimately leading into a short squeeze back to Friday’s midpoint to close out the week.

For the week, the performance of each major index can be seen below:

Rotational Report:

Financials held the markets up last week.  Everything was lower.  Utilities continue to be rotated away from, which is a bullish indication.

However, with all sectors lower aside from Financials, we may have seen cash rotating away from equities last week.

Therefore rotations were neutral-to-slightly bullish.

For the week, the performance of each sector can be seen below:

Concentrated Money Flows:

Exodus [PPT 2.0] streamlines how we can research the individual behavior of each industry and how it pertains to overall market sentiment.

Using the Industries screen, we can filter for the Median Return [1 week] of each industry.  I have established an arbitrary -/+ 3% cutoff for qualifying industries of interest.

On an industry level we see a clear picture of money abandoning safe-haven plays like precious metals, REITS, and utilities.  Meanwhile the upside was lightly populated.

Concentrated money flows are neutral.  While money rotated away from risk averse industry groups, it was not put to work in the higher risk areas of the equity complex.

Here are this week’s results:

III. Exodus ACADEMY

Exodus Strategy Session. The report is issued every Sunday around 12 o’clock eastern.  Each report begins with an Executive Summary of the report’s findings.  This succinct statement drills down all the analysis into an easy-to-digest hypothesis for the upcoming week.

Then, we recap overall market behavior, focusing on the most objective information available—raw data from the stock market—and work from the top down to reveal a bias and key areas to monitor for confirmation.

At the heart of the report is a working auction theory model which combines Market Profile analysis with the predictive algorithms inside Exodus to generate long/short signals.

Note: The next two sections are auction theory.

What is The Market Trying To Do?

The week ended with markets trying to locate buyers.  There was a strong bid late-Friday, but as the week closed out prices were flagging lower, indicating the market was trying to find buyers.

The markets did a good job finding buyers several times last week.

IV. THE WEEK AHEAD

What is The Market Likely To Do from Here?

Bias Book:

The following biases were formed using basic price action and volume profile analysis. By objectively observing these actual attributes of the market we gain a sense of the overall market context. To quantify the effectiveness of this approach, each of the 4 equity indexes (/ES, /NQ, /YM, and /TF) has been assigned a fixed long/short target using a standard 14-period ATR. Each week there will be an outcome of win, loss, or timed stop on all four indexes. The first bracket level hit is deemed the winner in the event that both sides are tagged. This will be tracked and included in the Weekly Strategy Session.

Here are the bias trades and price levels for this week:

[Note: All levels are as quoted on the front month future contract (currently December 2016) by the IQFeed Data Servers. Prices may differ slightly from your data provider. If you do not have a platform which provides real-time futures quotes, please click here for a free (but limited) alternative.]

Here are last week’s bias trade results:

Bias Book Performance [11/17/2014-Present]:

Compression Watch: Transports Supporting The Long Bias

Markets fluctuate between two states—balance and discovery.  Discovery is an explosive directional move and can last for months.  In theory, the longer the compression leading up to a break, the more order flow energy to push the discovery phase.

We are monitoring two instruments, the Nasdaq Transportation Index and the PHLX Semiconductor Index.

Transports have broken out from several weeks of consolidation, of balance.  This type of behavior typically precludes a discovery phase.  In the case of Transports, it appears we are embarking on a discovery-mode up.  Price can become turbulent once it breaks balance, but look for Transport bulls to press higher next week:

See below:

Semiconductors continue to be one of the strongest industry groups in the market.  It is difficult to make a bearish argument about the price action from this building-block of technology.

See below:

Bias Model: Neutral

After last week’s bearish bias, the model is coming into the second week of October neutral.  No bias.

Here is the current spread:

V. QUOTE OF THE WEEK:

“To achieve great things, two things are needed; a plan, and not quite enough time.” – Leonard Bernstein

Trade simple, with a plan. Do it!

Writer’s note: On November 16th, 2014 The Fly put me in charge of the Strategy Session.  The discipline of building a week-long bias elevated my trading.  Thank you for the opportunity.

The report is clunky and esoteric, but I built it to supplement my trading style–medium frequency NASDAQ futures trading.

Also, thank you to everyone who has supported my research.  I hope it has been helpful for you and produced some ‘a-ha’ moments along the way, like it has for me.

Shout out to Trent and the whole team at IQ Feed for providing really clean, raw data from the major markets.  With any process, quality in is vital to getting quality out.

 Special thanks to FuturesTrader71 for contributing a Great Lake’s worth of trading wisdom and insight all these years, and to his brokerage Stage 5 for all the cool technology they create.

Finally, I would never be here if it wasn’t for a whole cast of people, but one person believed in me long ago.  It was RaginCajun.  I appreciate you, man.

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