NASDAQ up a quick +30, $IBM $NFLX earnings after the bell, here’s the trading plan

NASDAQ futures are coming into Tuesday gap up after an overnight session featuring elevated volume and range.  Price worked higher overnight, escaping a 5-day old value area by balancing for a bit along the Monday high then making another exploration higher.  As we approach cash open, price is hovering at levels unseen since October 3rd of last year.

On the economic calendar today we have industrial/manufacturing production at 9:15am, NAHB housing market index at 10am, then API crude oil inventories at 4:30pm.

Earnings season officially gets started today after market close when both IBM and NFLX report earnings.

Yesterday we printed a normal variation down.  The week began flat.  After a brief 2-way auction at the open, price drove lower, trading down through the Thursday low before discovering a strong responsive bid.  Buyers came to terms with the bottom-end of our daily mid for a few hours before continuing their campaign higher.  We ended the day near session high, up a few point on the day.

Heading into today my primary expectation is for buyers to gap-and-go higher, trading up to 7700 before two way trade ensues.

Hypo 2 sellers work into the overnight inventory to close the overnight gap down at 7648.50.  Sellers cannot take out overnight low.  Instead we work higher to 7700 before two way trade ensues.

Hypo 3 stronger sellers trade down through overnight low 7644.75 setting up a move to target 7624 before two way trade ensues.

Levels:

Volume profiles, gaps, and measured moves:

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NASDAQ futures are coming into Monday with a slight gap down after an overnight session featuring normal range and volume.  Price marked time overnight, holding to less than a 20-point range.  Price briefly poked beyond Friday’s high for a bit, and and we approach cash open, price is hovering above the Friday midpoint.

On the economic calendar today we have 3-and 6-month T-bill auctions at 11:30am followed by long-term TIC flows at 4pm.

Last week was a slow drift.  Price steadily worked higher, slowly, advancing in a methodical auction.  Along the way the Dow started to lag behind.  The last week performance of each major index is shown below:

On Friday the NASDAQ printed a normal variation down.  The day began with a gap up and probe up beyond the weekly high.  This introduced some selling into the tape.  Said sellers worked lower, nearly closing the gap before finding responsive buyers who slowly campaigned price higher for the rest of the day.  They did not, however, press the market neutral.  And while the gap did not officially close, given the nature of NASDAQ futures, stopping just 1.50 point ahead of it is sufficient enough for me to consider the gap ‘filled’.

Heading into today my primary expectation is for buyers to work up through overnight high 7657 setting up a move to target the open gap at 7665.50 before two way trade ensues.

Hypo 2 stronger buyers trade us up to 7697, likely tagging the 7700 century mark, before two way trade ensues.

Hypo 3 sellers press down through overnight low 7638.25 setting up a move to target the 7600 century mark.  Look for buyers down at the open gap at 7593.25 and two way trade to ensue.

Levels:

Volume profiles, gaps, and measured moves:

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Yesterday I went to the funeral of a skate park in Detroit that was loved by kids in the neighborhood.  The basketball courts and skate ramps will be cleared to make way for another high-end condominium development.  I enjoy seeing the final flickers of my anarchic city sparkle away, especially when the youths start lighting things on fire.  A bittersweet finale to a different era.  Urban centers nationwide are undergoing a major transition.  If we love our neighborhoods then we need find a way to take back the land before another capricious development claims another corner.

Not much else for us to discuss heading into week three (option expiration) of the second quarter.  Earnings season is heating up; keep an eye on the futures Tuesday afternoon when both IBM and Netflix report.  In case you missed it, the new Our Planet on Netflix is beautiful, they even put David Attenborough on the track.  Basically Netflix produced a Planet Earth which is ballin’.

What else? What else…ah yes the models.  The models are bullish again lads.  Real bullish.  There are undercurrents of selling which have me cautious, but then there’s the semiconductor index back up at all-time highs.  The semiconductor index has lead the broad indices for the last few years.  So if semis are bullish, and the model is bullish, then I have to shelf those bearish undercurrents and keep pressing my longs.

Transitions, nature documentaries, bullish five day forecasts.  What do all these things have in common?

Nothing, and that’s fine, I just needed to unload what few thoughts were left in my otherwise pretty clear mind.

Thanks.

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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, making a steady campaign higher after briefly probing below the Thursday low.  The move higher was accented by Chinese economic data, and as we approach cash open, price is hovering near the Thursday high.

On the economic calendar today we have the primary April reading of sentiment from the University of Michigan.

Yesterday we printed a normal variation down.  The day began with a slight gap up beyond the Wednesday high that sellers quickly worked into.  Within 30 minutes of the cash open, price had taken out overnight low and discovered a responsive bid.  Sellers defended a checkback to the midpoint and made a second, initiative move lower which tagged the Wednesday naked VPOC at 7606.25 before buyers stepped in and drifted price a bit higher into the close.  We ended the day below session mid.

Heading into today my primary expectation is for buyers to gap-and-go higher, trading up through overnight high 7665 to set up a move to target 7700 before two way trade ensues.

Hypo 2 sellers work into the overnight inventory and close the gap down to 7616.  Sellers continue lower, down through overnight low 7601.50 to close the gap at 7593.25 before two way trade ensues.

Hypo 3 stronger sellers trade us down to 7588.50 before two way trade ensues.

Levels:

Volume profiles, gaps, and measured moves:

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NASDAQ futures are coming into Thursday flat after an overnight session featuring normal range on extreme volume.  Price worked higher overnight, trading up beyond the Wednesday high before settling into balance.  At 8:30am initial/continuing jobless claims data came out better-than-expected.  As we approach cash open, price is hovering at the Wednesday high.

Also on the economic calendar today we have 4-and 8-week T-bill auctions at 11:30am followed by a 30-year bond auction at 1pm.

Yesterday we printed a normal variation up.  The day began with a gap up in range.  Sellers were unable to resolve the overnight gap, instead we began to campaign higher, closing the Monday gap before drifting back down to the daily mid before the 2pm FOMC minutes.  Third reaction after the FOMC minutes was up and we spent the rest of the day auctioning higher, eventually closing near session high.

Heading into today my primary expectation is for sellers to press down through overnight low 7624.50 setting up a move to target 7615 before two way trade ensues.

Hypo 2 stronger sellers trade down to tag the 7600 century mark.  Look for buyers down at 7588.75 and two way trade to ensue.

Hypo 3 buyers press up through overnight high 7661 setting up a move to close the open gap at 7665.50 before pausing, building steam then making a second thrust higher to tag the 7700 century mark before two way trade ensues.

Levels:

Volume profiles, gaps, and measured moves:

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NASDAQ futures are coming into Wednesday with a slight gap up after an overnight session featuring elevated volume on normal range.  Price worked down through the Tuesday low last night before popping back up through the daily midpoint.  At 8:30am consumer price index data came out below expectations.  As we approach cash open, price is hovering right along the mid.

Also on the economic calendar today we have crude oil inventories at 10:30am, a 10-year note auction at 1pm, and FOMC minutes at 2pm.

Yesterday we printed a neutral day.  The day began with a gap down in range.  After an opening two-way auction, buyers began to work into the gap but were unable to completely fill it.  Instead, shortly after going range extension up the market ran into sellers.  Two more attempts were made to work higher before sellers pressed down through the entire daily range and sent us neutral.   Late in the day we worked back up off the lows.

Neutral day.

Heading into today my primary expectation is for buyers to work up through overnight high 7612.75 to target the open gap at 7624.25.  Then look for the third reaction after the FOMC minutes to dictate direction into the second half of the day.

Hypo 2 sellers work into the overnight inventory and close the gap down to 7593.25 then continue lower, down through overnight low 7575.75.  Look for buyers down at 7556.75, then look for the third reaction after the FOMC minutes to dictate direction into the second half of the day.

Hypo 3 stronger sellers press a liquidation, trading down to the open gap at 7518.75.  Then look for the third reaction after the FOMC minutes to dictate direction into the second half of the day.

Levels:

Volume profiles, gaps, and measured moves:

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NASDAQ futures are coming into Tuesday gap down after an overnight session featuring elevated volume on normal range.  Price worked lower overnight after briefly exceeding the Monday high.  As we approach cash open, price is hovering above Monday’s mid.

On the economic calendar today we have JOLTS jobs openings at 10am, 4- and 8-week T-bill auctions at 11am, and a 3-year note auction at 1pm.

Yesterday we printed a double distribution trend up.  The day began with a gap down and drive lower.  Said drive lost its steam after closing the 04/04 open gap nearly to the tick.  From then onward the market auctioned higher, encountering some sellers at the overnight gap zone before rebuilding strength and making a second, sustained push into closing bell.

Heading into today my primary expectation is for buyers to work into the overnight inventory and close the gap up to 7624.25.  From here we continue higher, up through overnight high 7633.75.  Look for sellers up at 7660 and two way trade to ensue.

Hypo 2 sellers press down through overnight low 7599.25 setting up a move to target 7556 before two way trade ensues.

Hypo 3 stronger buyers trade up to the open gap at 7665.50 before two way trade ensues.

Levels:

Volume profiles, gaps, and measured moves:

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NASDAQ futures are coming into Monday with a slight gap down after an overnight session featuring elevated range and volume.  Price worked up through last week’s highs briefly before falling back down into Friday’s range.  The nature of the move suggests a mini failed auction to the upside.  7600 is a key battleground for sellers as it marks where the aggressive selling began late last year as we ended Q3.  As we approach cash open, price is hovering below last Friday’s midpoint, about 10 points below 7600.

On the economic calendar today we have factory orders at 10am followed by 3- and 6-month T-bill auctions at 11:30am.

Last week began strong.  Unexpectedly strong economic data from China eased worries that the world’s second largest economy was leading us into a global recession.  The data put a strong big into the markets early Monday morning.  Buyers drove higher off the gap up clean through Wednesday afternoon before discovering strong responsive sellers.  The selling continued through Thursday afternoon before buyers again stepped and worked price higher.  Most of the indices finished the week at-or-near their highs.  The last week performance of each major index is shown below

On Friday the NASDAQ printed a normal variation up.  The day began with a gap up, inside the prior day range.  Sellers were unable to close the gap during an early two-way auction.  Instead we held a tight range above the daily mid for most of the day before finally going range extension up near the closing bell.

Heading into today my primary expectation is for buyers to work into the overnight inventory and close the gap up to 7605.75. From here we continue higher, up through overnight high 7619.75.  This sets up a move to target 7660 before two way trade ensues.

Hypo 2 sellers trade down through overnight low 7585.50 setting up a move to target 7556.75 before two way trade ensues.

Hypo 3 stronger sellers sustain trade below 7556.75 setting up a move to close the open gap at 7518.745 before two way trade ensues.

Levels:

Volume profiles, gaps, and measured moves:

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I have a long working list of reasons this market shouldn’t (the most dangerous word in speculation) be rallying, yet here we are again, just a 150 points or so from all-time highs on the NASDAQ.  The PHLX semiconductor index is already there.  This weekend more reasons were added to the ‘should not be rallying’ list like the continued leadership by the Materials sector.  What’s up with that?  Is inflation starting to be a thing, in a bad way?  Headlines are scary too, way too rosy, look at this hubris from Barron’s:

So yes, I am cautious.  But the system is the system and IndexModel, the model I built with brawn and raw exchange data is my only faithful guide during my active campaign to extract fiat American dollars from the global financial complex.  And IndexModel again signaled bullish this Sunday.  Therefore my directional bias these next five days is higher.

If we believe the markets to be a wholly efficient mechanism which has priced in all known information, then there are very few factors we need to consider before making a decision to buy or sell.  In reality, all we need to monitor is the way some goods are currently auctioning.  It is the flow of orders that happens in real time that gives us the relevant information we need to make day-to-day entry and exit decisions.

When it comes to investing, it helps to hard wire some assumptions into place. Things that only need to be reconsidered infrequently and ideally when you are high atop some mountain or way out in the ocean.  Some of my hard wired assumptions:

The Federal Reserve is the most powerful entity in the world.

Millions of W-2 employees blindly feed money into the stock market every pay period and their entire retirement is dependent upon a thriving stock market.  To placate the masses, The Fed will keep this puppy propped.

Technology has changed the pace and shape of economic cycles, and right now we are on the hockey stick growth curve portion of a Moore’s Law-esque chart (see: Let’s talk about AI and crocodiles for more info).

Baby boomers are finally losing control.

The economy is a zero sum game.

Nature always wins and is indifferent.

Market timing is possible.

Dollar cost averaging is easier.

With those rules in place, I only want to invest in cults.  If Scientology had a ticker you best believe I would own it.  Cults I will always have exposure to: Apple, Amazon, Google, Tesla, Adobe, Goldman Sachs, Twitter, Microsoft, bitcoin, longevity (CRISPR, etc).

Back to trading.  Trading is not investing.  You cannot dabble in trading just like you cannot dabble in mixed martial arts.  There are people like me who take trading very seriously.  There are thousands of hours of research, reams of data, planning, and thousands of hours of devoted screen time behind every trade I take.  I am ruthless and fast, like a fox, because the competition has more resources and plays as dirty as they can.  When you step into an arena like electronic futures, nothing else matters but the auction and mental clarity.  Distractions kill.  Hubris, kills.  Errors, kill.

To trade you need private office space fitted with some decent machinery (unless you’re sharing a space with other fully devoted traders).  You need full, distraction-free autonomy for at least 2-3 hours, lots-and-lots of money to lose while you learn, and a commitment to the craft.

Anyhow I am rambling.  Sunday research is complete, it is cautiously bullish heading into the second full week of Q2, and pretty much every thing we need to know will be seen on the PHLX semiconductor index.  Be sure to check out the morning trading reports, which I post around 9am New York.

I am off to shake away these Q2 scaries by digging some holes in the yard.

Cheers and trade’em well

Raul Santos, April 7th, 2019

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NASDAQ futures are coming into Thursday with a slight gap down after an overnight session featuring extreme volume on normal range.  Price more-or-less marked time overnight, balancing along the bottom-side of Wednesday’s midpoint.  At 8:30am initial/continuing jobless claims data came out better than expected.  As we approach cash open, price is hovering below the Wednesday midpoint.

The only other economic events today are 4- and 8-week T-bill auctions at 11:30am.

Yesterday we printed a neutral day.  The day began with a gap up and out of range, and after about 30 minutes of 2-way auction buyers stepped in and drove price higher, trading just a bit beyond the 7600 century mark before discovering responsive sellers.  Cum delta ran negative for much of the move despite heavy volume to the upside, meaning more orders were being executed on the bid than the offer, meaning the rally way being ‘sold into’.  By about 3:30pm the market went neutral, and this set up a ramp back to the daily midpoint by end-of-session.

Neutral.

Heading into today my primary expectation is for buyers to work into the overnight inventory and close the gap up to 7594.  From here we chop, marking time between 7600 and 7540.

Hypo 2 stronger buyers take out Wednesday high 7616.25 and sustain trade above it, setting up a move to target 7660 before two way trade ensues.

Hypo 3 sellers press down through overnight low 7558.25 and sustain trade below 7540, setting up a move to target 7513 before two way trade ensues.

Levels:

Volume profiles, gaps, and measured moves:

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