NASDAQ coming into mid-week trade down -20, here’s the Wednesday trading plan

NASDAQ futures are coming into Wednesday gap down after an overnight session featuring extreme volume and range.  The volume these past few weeks in Globex has been at a sustained extreme level unlike any volume we have seen in the last few years.  Price was balanced for most of the night, chopping along the bottom-side of Tuesday’s midpoint before selling off.  As we approach cash open, price is hovering just above Tuesday’s low.

On the economic calendar today we have crude oil inventories at 10:30am followed by a 5-year note auction at 1pm.

Yesterday we printed a normal variation down.  It nearly resembled a double distribution down, and that is okay.  We use these labels to gain a sense of the action but markets will not always fit cleanly into the definitions.  It was between the two, and slightly bearish.  Price began the day gap up, up beyond Monday’s high and into the single prints left behind last Friday when news hit Twitter that tariff talks had broken down between U.S. and China.  The morning auction made an attempt higher but was met with responsive selling, and the morning two way auction eventually gave way to selling.  Sellers worked an overnight gap fill and continued rotating price lower through lunch before discovering a responsive bid around 1:15pm New York.  Buyers stepped in near Monday’s mid-point and worked price back up to the daily mid.  We ended the session chopping along the bottom-side of the mid with sellers rejecting moves above it.

Heading into today my primary expectation is for buyers to work into the overnight inventory and close the gap up to 7563.75.  From here we continue higher, up through overnight high 7600.50 before two way trade ensues.

Hypo 2 stronger buyers sustain trade above 7600 setting up a secondary move up to 7670 before two way trade ensues.

Hypo 3 sellers press down and out of the Tuesday low 7537 and take out overnight low 7521.75.  Look for a buyers down at 7500 and two way trade to ensue.

Levels:

Volume profiles, gaps, and measured moves:

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NASDAQ futures are coming into Tuesday gap up after an overnight session featuring extreme volume on extreme range.  Price worked higher overnight, trading up beyond the high print from early Monday morning (globex) and well up into the Friday afternoon ‘tariff talk’ (tweet) induced sell-off.  As we approach cash open, price is hovering in the upper quadrant of last Friday’s range.

On the economic calendar today we have consumer confidence at 10am followed by a 2-year note auction at 11:30am.

Yesterday we printed a normal variation up.  The day began with a gap up that saw price open just below last Friday’s midpoint.  Sellers worked into the overnight inventory and nearly closed the overnight gap, the market reversed 2.5 points ahead of the gap fill and began to auction higher.  In a product as slippery as the NASDAQ, in these volatile conditions, I consider this a gap fill.  Price then worked to range extension up before settling along the midpoint for most of the day.  There was a late session ramp higher.

Heading into today, price is lingering into some single prints on the next profile to the left, these are pole climb conditions.  Look for buyers to gap-and-go higher, trading up to 7670 before two way trade ensues.

Hypo 2 stronger buyers sustain trade above 7670 and continue the pole climb all the way up to 7734.50.  Look for sellers up at 7750 and two way trade to ensue.

Hypo 3 sellers defend their news driven reaction from last Friday, pressing into the overnight inventory and closing the gap down to 7555.25 before continuing lower, down through overnight low 7547.75.  Look for buyers down at 7450 and two way trade to ensue.

Levels:

Volume profiles, gaps, and measured moves:

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NASDAQ futures are coming into Monday gap up after an overnight session featuring extreme range and volume, both are well beyond third sigma.  At the forefront of volatility is ongoing tariff discussions between China and U.S., with today’s talking point being President Donald Trump saying China called and asked to restart talks.  Price was careening lower Sunday evening and briefly exceeded the August cash low before finding responsive bidders and reversing higher.  The rally that followed briefly took price up beyond the Friday midpoint before settling into a choppy balance along the Friday mid.  At 8:30am durable goods orders came in stronger-than-expected.  As we approach cash open, price is hovering below Friday’s mid.

Also on the economic calendar today we have 3- and 6-month T-bill auctions at 11:30am.

Last week U.S. equity markets began with a gap up and small rally before chopping sideways through Friday morning.   Late Friday morning tarrif talk introduced heavy selling into the market and we went trend down into the weekend, across the board.  The last-week performance of each major index is shown below:

On Friday, the NASDAQ printed a double distribution trend down.  The day began with a gap down near the Thursday low.  Buyers resolved the overnight gap and poked just beyond the Thursday mid before sellers took control of the tape.  Price never went range extension up.  Instead the morning gap fill trade was taken back and then price accelerated to the downside before settling into a methodical rotation lower.  Late into settlement a bit of a ramp higher occurred.

Heading into today my primary expectation is for sellers to work into the overnight inventory and close the gap down to 7508.  Buyers defend the 7500 century mark and we begin auctioning higher, eventually taking out overnight high 7626.  Look for sellers up at 7670 and two way trade to ensue.

Hypo 2 gap-and-go higher, trade up to 7700 and sustain trade near hear, extended target is 7750.

Hypo 3 sellers close overnight gap then continue lower, down through overnight low 7353.25.  Look for buyers just below at 7346 and two way trade to ensue.

Levels:

Volume profiles, gaps, and measured moves:

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Well I’m back from the north shore of Lake Superior—a land so majestic and free, it makes a man feel whole a-gain.  No bears or moose or Canadians made to kill me, in fact Mother Nature was quite kind to this perfectly-formed flesh sack I inhabit.  The days were warm and sunny, the evenings a breezy 10 degree Celsius, and the mosquitoes were mild, all things considered…

And it looks like I picked a nice week to be in the solitude of nature, algorithms were really hewing it up all week, chopping along in an ultra-violent manner, essentially marking time.  Then late Friday we had some trade wars panic action that I couldn’t care less about because I already know how the Great Trade Wars of the ’20s plays out:

The USA government is compromised by corporations whose interests do not align with the people.  Putting a deranged businessman at the top of the military’s chain of command has revealed that America is, in essence, a weakening illusion—sort of like when David Copperfield made the Statue of Liberty disappear—you can only run effective propaganda when you control all the viewing screens/angles, and since we’re allowed to have Twitter, there is no way in hell the USA government can maintain their status as Number One Charlatan.

China can.  They fuck their citizens’ heads ten ways to Sunday.  Their manner of structuring society is an odd variation of a termite mound.  The mound itself is more intelligent than the individuals, and they are fed a series of inputs to keep them obedient to the Greater Cause, and to hell with human dignity.  They are playing the long game—America is still babying the babied boomers.

So after China wins, and America assumes a beta role in the global economy, we will be exactly where we are today, or at least where we can be today if we choose to—completely fine and doing whatever the heck we want.

There is a funny sort of dream that if we obtain some number in a bank account or some quantity of green papers wrapped in a burlap sack that we can then stop worrying about money.  That’s bullshit.  Being miserable in advance is a character trait carried by many a folk, especially people in the odd world of finance.  I think we were all drawn to this industry for one reason or another, but greed and fear are high on the list.  Fear of not being secure enough for some looming bad news or something that might happen soon.

This is silliness.  There is no point worrying about every possible outcome.  At best, you are wasting time and mental energy.  At worst, you could be putting your heath at risk and compromising your ability to take advantage of opportunities.  A person of action has not a need to worry about money, we’re too busy doing!

There’s an old stoic exercise that some of you probably think is too extreme, but I find it helps re-align the soul.  Spend a few days being homeless.  Sit outside of a gas station and ask everyone for money.  Collect aluminum cans or scrap metal out of the garbage.  Sleep in a ditch.  You come to realize it is not as scary as you might imagine.  It may knock your ego down a peg-or-two while you’re at it—for the better.

Me, I don’t worry about much but I have been blessed from birth.  There are two ways of winning the lottery at birth, either born to rich parents or with genetic advantages.  I was born really, extremely good looking.  Life is much easier for me because everywhere I go people are so happy to see something so beautiful.  It makes their day better, sort of like a golden retriever.  Of course I leverage this strength, and that is fine.  Most finance people are not beautiful, I understand that.  Most of my readers are hermits, unkempt and of weak physiological shape.  We cannot all outshine the Statue of David, but we can recognize where we do have an advantage over others and press that edge.

Like this guy I bought a used washing machine from last week.  He only has one leg, the other one is some robotic spring appliance.  Lost his leg in a motorcycle accident.  Now he hustles used appliances.  The dude is part man, part machine, and mechanics run through his blood.  He makes deals with the Lowe’s and Home Depot delivery guys.  They drop off old machines to his shop for pennies on the dollar and he rebuilds them and sells them at good prices.  This is good business!  He keeps machines that would otherwise end up in our landfills operational, and offers quality machines at a third of their new issuance cost.  I love a this country!  You find advantage, you press advantage, then you make your way through the world, no ones master no ones slave.

When I say I love this country I do not mean I love the set of documents and the lines on maps that say THIS IS AMERICA.  What I love is free market capitalism.  What these corporations are doing, with policy and lobby effect to create protectionism makes me sick, but I do not worry about this.  Like Chinese leaders, these corporations are easy to thwart.  Their size creates all sorts of blind spots.  Those blind spots are where ruthless profiteers like your old pal RAUL resides, gathering fiat american dollars.

Said fiat American is regularly converted into real assets like tractors and other machinery.  Land as far north as my constitution allows, away from the masses and their psychosis.  Said fiat is also converted into electronic money backed by proof of work, not by silly american Federal Reserve.  These archaic banking institutions are petering out of existence, likely in my mortal lifetime.  Google is immortal and omnipotent, the closest thing to what Christians call The Father.  Banks are more like the squid—it will always exist but mostly out of sight, deep beneath the surface, only occasionally washing ashore, dead.

There’s a reason the Tech sector (as measured by $XLY) is up more than +25% year-to-date while the Financials ($XLF) are only up +10%.  It’s because the power is clearly shifting away from nation states, and their banker friends, to immortal technology firms.  Believers in the technological revolution will be positioned nicely heading into the roaring ’20s, insulated from the chaos and carnage that comes with america losing their status as number one.  Because while China will be made to think they are Number One, real hitters will know it is Facebook, Google, Amazon, Tesla, and so on who rule the world and beyond.

So why you worry so much?  Try worry less, you live longer ^-^

Raul Santos, August 25th, 2019

Exodus members, if there is one thing we should be concerned with, it is making money over the next five trading days.  I made sure to highlight all the key factors to be aware of heading into month-end in the 249th edition of Strategy Session, which is live now inside Exodus.  Be sure to check it out!  Remember!  Nobody pays me to do this work, it is simply the work I need to do to make fiat american dollars.  Enjoy.

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Three people asked me last week if we were headed into a recession.  Two of them are degenerate real estate speculators who are leveraged to the neck, so I understand why they spook easily.

But the third is a man of industry, a business owner and hipster-whisperer.  It makes no sense for him to even spend one minute of his day fretting over something as abstract as a recession, and if you are intelligent enough to read the RAUL blog then the same likely goes for you.

I think this has something to do with most of us living through the Great Recession.  That was a pretty gnarly time.  People were actually pushed out of their homes and there were no jobs.  It was messy.  It is quite unlikely to happen again in my lifetime (age 34) unless it happens near the tail-end, say around 90 years old or so.  That was a major disaster and there were plenty of warnings before it happened—most notably was the spinner rims.  So many people who identify themselves by their mortal possessions were so flush with cash, due to wanton home lending practices, that you couldn’t drive anywhere without seeing a car on 5k worth of tires and rims.  That shit was hilarious.

The housing sector is running too hot, IMO, but the Fed doesn’t have the huevos to raise interest rates.  Cowards.

But the housing sector can run hot for much longer than any reasonable person expects.  The smartest thing one can do is buy the smallest house in the nicest area and just sit put.  Don’t move, don’t refinance unless it is money put right back into the property. Then if/when a recession comes, you will be insulated by the fact that you don’t live in a trashy new-build subdivision, surrounded by miserable fucks leveraged to the tits, teetering on the verge of adultery, divorce, and losing their homes.

Old money doesn’t feel recessions.  Own real estate amongst the old money tribes.

If you really want insight into the overall health of the housing sector, pay close attention to earnings this week out of Lowes and Home Depot, maybe even listen to the conference calls.  Much like Walmart earnings are far more insightful into the health of the U.S.A. economy than any statistic produced by the Federal Government, so too these home improvement stores provide a better glimpse of the mind of the home owner/builder than the nearly useless garbage data being produced by our dumpster fire of a government.

As for the self-employed business owners—it is always feast and famine.  Live the same way through both and to hell with the general economy.

Regarding stock market investments.  All of my investments are doing fine.  Walmart, Costco and Amazon are the only retail exposure one needs, and they are all recession proof.  Tesla is healing the world, this is a recession-proof mission.  Twitter is the greatest social media platform of all time and where all the world’s vital information is disseminated, it will be fine.  Match Group is in the love business—and that is not going away any time soon.

Anyone working on quantum needs to be invested in.  The mysteries of the entire universe (and the biology of everything nano and beyond) will be solved instantly by whomever solves quantum computing.  Microsoft, IBM and Google are must own stocks, period.

Most Americans are over-diversified.  You will never make a meaningful impact on your personal finances via quarterly allotments to a set of index ETFs.  Take concentrated bets and live with the consequences.

And for the love of anarchy buy some bitcoin.  Fiat currencies have done a hell of a job surviving, they are proven to be more durable than money backed by gold, but they are predicated on the silly notion of nations.  Nations are nothing more than an illusion, lines on a map.  If you cannot see how fickle this entire notion is, then I cannot help you realize why bitcoin matters.

As for me, I am appalled by the mania being pushed out of the entertainment news channels that we are entering a recession.  The long-held belief of this humble RAUL blog is that we are entering a period of economic prosperity the likes of which no living human has ever seen.  A rehashing of the roaring ’20s, complete with all the trimmings of real decadence.  My only question to you, is are you driven enough to wake up and take what is yours?  The moneys out there, in all forms.

Either you take it or someone else will.  Let the simple-minded among us waste their energy worrying about something as abstract as a recession.  It’s like worrying about winter.

It’s coming, and I welcome it.  I thrive in conditions others perceive as challenging.  You can too.

Raul Santos, August 18th, 2019

Programming note: I have been swimming in the fish tank for far too long, since like February.  The water is cloudy, there are cob webs on the hood above me, I cannot hardly see.  I am heading up into the land you call Canada for the week, up past the north shore of Lake Superior, to eat cans of fish and explore remote places as far from humans as possible.

Exodus members, the 248th edition of Strategy Session is live. Keep an eye on the NASDAQ transportation index, it is telling a story we cannot ignore.

 

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NASDAQ futures are coming into Friday gap up after an overnight session featuring extreme range and volume.  Price worked higher overnight, trending up in a steady ascent for most of the Globex session following stronger-than-expected earnings from chip-maker NVIDIA Thursday afternoon.  As we approach cash open, price is hovering near Wednesday’s high, effectively erasing much of the mid-week selling pressure.

On the economic calendar today we have University of Michigan’s prmary August reading of sentiment.

Yesterday we printed a normal variation down.  The day began with a slight gap up that sellers quickly resolved lower after a brief two-way auction at the open.  Price chopped around the midpoint for much of the day before extending lower twice.  We eventually ramped back above the midpoint and closed above it.

Heading into today my primary expectation is for sellers to press into the overnight inventory and trade down to 7545.  Buyers step in here and two way trade ensues.

Hypo 2 buyers to gap-and-go higher, trading up through overnight high 7600.75 and probing to 7640.25 before two way trade ensues.

Hypo 3 stronger sellers work a full gap fill down to 7493.50.  Look for buyers down at 7489.25 and two way trade to ensue.

Levels:

Volume profiles, gaps, and measured moves:

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NASDAQ futures are coming into Thursday with a slight gap up after an overnight session featuring extreme range and volume.  Price was all over the place overnight—until about 5am New York the market chopped around the inside of Wednesday’s range before driving lower in the early A.M. hours.  That selling nearly took out our recent swing low (set on 08/05) before discovering a strong responsive bid around 7am, just after Walmart and Alibaba both posted strong earnings data.  The second wave after the responsive buying took price up through the Wednesday midpoint briefly before we settled into another choppy balance.  At8:30am advance retail sales data from the US Government (likely less of an indication of the health of the retail market than WMT earnings) came out stronger-than-expected.  As we approach cash open, price is bouncing around the lower quadrant of Wednesday’s range.

Also on the economic calendar today we have NAHB housing market index and business inventories at 10am then long-term TIC flows at 4pm.

Major chip marker NVIDIA is set to report earnings after the bell.

Yesterday we printed a double distribution trend down.  The day began with a gap down to the low-end of Tuesday’s P-shaped (short-squeeze) profile.  After a brief two-way auction, sellers stepped in and began to campaign price lower, breaking down through Monday’s low in a steady decent lower.  Just after New York lunch, and right near the weekly ATR lower band, responsive buyers stepped in and we came into balance.  Late in the session sellers took price down through low-of-day and closed the session out on the lows.

Heading into today my primary expectation is for buyers to press up through overnight high 7572.75 to set up a move to tag the 7600 century mark before two way trade ensues.

Hypo 2 stronger buyers press up to 7640.25 before two way trade ensues.

Hypo 3 sellers probe down into the Walmart/Alibaba reaction, eventually trading down through overnight low 7388.25 and closing the gap left down at 7380.75 before two way trade ensues.

Levels:

Volume profiles, gaps, and measured moves:

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NASDAQ futures are coming into Wednesday gap down after an overnight session featuring extreme range and volume.  Price was balanced overnight until about 5am New York when sellers stepped in and drove down into the Tuesday morning rally.  As we approach cash open, price is hovering along the lower quadrant of Tuesday’s range.

On the economic calendar today we have crude oil inventories at 10:30am.

Yesterday we printed a normal variation up with a distinct short-squeeze P-shape.  The day began flat and after a brief two-way auction price drove higher, up through last week’s high to close the gap left behind on August first before settling into a tight range.  While the market was able to push range extension up, the shape of the profile suggests a temporary phenomenon known as a short-squeeze took place, which lacked the ability in entice initiative buyers.

Heading into today my primary expectation is for buyers to press into the overnight inventory and trade up 7700 before sellers step in and two way trade ensues.

Hypo 2 sellers gap-and-go lower, trading down through overnight low 7609.75.  Look for a battle at 7600 to eventually break down, setting up a move to target 7538.75 before two way trade ensues.

Hypo 3 stronger buyers work a full gap fill up to 7749.25 then continue higher, up through overnight high 7767.50 before two way trade ensues.

Levels:

Volume profiles, gaps, and measured moves:

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I used to write real doomy and brimstoney blog entries when IndexModel would signal bearish but I cannot afford to gussy up my thoughts.  Not now.  Not with option expiration on the bend.  Not with Berkshire, Walmart, Alibaba and Nvidia slated to report earnings.

Instead let’s just look at the facts.

IndexModel ranks five components of auction behavior across the four major indices—Dow, S&P, Russell 2000 and NASDAQ.  These rankings create one number which is then compared the the overall hybrid score inside Exodus.  This creates a value that oscillates through time, much like a CCI or RSI, look:

The bearish signal is called ‘Rose Colored Sunglasses’ because price action usually seems pretty calm on the surface, as if the main indices are tinting the lenses we use to see the market.  As where Exodus is looking at every single stock and factoring in lots of other macro data. And perhaps seeing more under the surface of strong indices.

But heading into next week the indices do not look rock solid and strong.  They are kind of whippy.  The last two weeks have been choppy.  Then there is the NASDAQ transportation index, which sort of looks like, at least when I draw the bottom line this way, sort of looks like price might be breaking down from a very well-established range:

Last week we saw a late-week recovery, but when you look at the sector rotations, Utilities led—hardly a vote of confidence:

Those are my bearish notes.  There are bullish cross-currents.

We are in the middle of a bullish ‘hybrid oversold’ cycle inside Exodus.  It lasts until the Monday after next.  There are other interesting data inside Exodus that remain bullish.

So what does it all mean? I have to form a bias to trade.  That does not mean you need to do so, but that’s how I trade my best.  Come Monday morning, I will distance myself from the trading buttons.  Once the morning action has abated, I will sit down and assess.  My theory is that we see some strength early Monday.  I want to see that, then I want to see sellers step in.  If they do I will join them by selling short the NASDAQ 100 both with a five day position in SQQQ and via short scalps in the /nq_f.  Given the recent volatility, I may try out the new micro contracts, the MNQ.

That’s about all I have to say.  I will spare you a spirited prose of destructive predictions.

If, for whatever reason, I can convince myself to instead go sit on some remote beach in northern Michigan instead of engaging this tape, that would be okay too.

As always, TBD.

RAUL SANTOS, August 11th, 2019

Exodus members, the 247th edition of Strategy Session is live.  I elaborate on all these observations in a bit more detail, be sure to check it out!

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NASDAQ futures are coming into Friday gap down after an overnight session featuring extreme range and volume.  Price worked lower overnight, drifting back down to the midpoint of Thursday’s range before chopping into balance.  As we approach cash open, price is hovering above the Thursday mid.

There are no economic events today.

Yesterday we printed a trend up.  The day began with a gap up and two-way auction.  Buyers rejected a move into the Wednesday range before the trend up began and lasted all session, eventually ending the day in the upper quadrant of last Friday’s range.

Heading into today my primary expectation is for buyers to press into the overnight inventory and close the gap up to 7735.75.  From here we continue higher, up through overnight high 7738.50.  Look for sellers up at 7761.25 and two way trade to ensue.

Hypo 2 stronger buyers sustain trade above 7761.25 setting up a move to tag the 7800 century mark.

Hypo 3 sellers press down through overnight low 7657.25 and then begin erasing the entire trend up, working down to 7607 before two way trade ensues.

Levels:

Volume profiles, gaps, and measured moves:

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