NASDAQ futures are coming into Wednesday gap up after an overnight session featuring elevated range and volume. Price worked higher after several hours of balance. As we approach cash open, the market is hovering just above the midpoint from Tuesday’s range. At 7am MBA mortgage applications came in lower than last week.
Also on the economic agenda today we have industrial production/manufacturing capacity at 9:15am, NAHB housing market index at 10am, the Fed’s Beige book at 2pm, and long-term TIC flows at 4pm.
Yesterday we printed a double distribution trend down. The day began with a pro gap up and early drive higher. A strong responsive sell stepped in within 30 minutes of cash open and reversed the entire drive higher. Then, sellers became initiative on the day and closed the entire weekend gap. Then, the continued lower, pushing into the lower quadrant of the trend from last Friday, eventually finding a responsive bid towards the end of the day.
Heading into today my primary expectation is for sellers to work into the overnight inventory and close the gap down to 6763.25 before two way trade ensues.
Hypo 2 we drive higher off the open, trade up to 6818.50 before two way trade ensues.
Hypo 3 stronger buyers sustain trade above 6825 setting up a move up to 6830.
Why: Our first meet-up of 2018 will take place at Brew Detroit. We will meet on Tuesday, January 23rd and hold an open forum, loosely centered around active trading. We will discuss the basic tools needed to actively trade, what to trade, and the habits that you can start building now to prepare for active trading.
I spoke with the co-organizer of our Detroit Investors and Traders group last week and it looks like he will be in attendance as well. Should be good fun.
If you have any stocks or cryptos or commodities you want us to analyze on the spot, I will have a laptop and we can run through them. Brew Detroit has promised us free WIFI, so feel free to bring your own devices if you would like.
There is no set format for this meet-up. It is just an environment for us to discuss what is and is not working in our trading. All skill levels are welcome.
If you want to take control of your investment decisions, this is a great place to start. Come out next Tuesday, January 23rd from 5:45 – 7pm and meet professional investors and traders.
Brew Detroit produces small-batch craft beers available only through its tasting room. There are about 15 beers on tap. There are also non-alcoholic beverages available including coffee, water, and soda. Once I have a decent headcount, we will pick up a few Supino Pizzas.
Markets were closed Monday in observation of Dr. Martin Luther King, Jr. day). The NASDAQ is coming into the holiday shortened week pro gap up after an overnight session featuring extreme volume and elevated range. Price worked higher overnight, nearly uninterrupted, and as we approach cash open prices are at record highs.
The economic calendar is light today. We have US Treasury activity only. They are auctioning off a 4-week T-bill at 11:30am. Also a 3- and 6-month T-bill at 11:30am.
Last week we balanced early in the week then rallied into the weekend. The last week performance is each major index is shown below:
On Friday the NASDAQ printed a double distribution trend up. The day began with a strong drive higher after opening flat. Then buyers became initiative inthe afternoon, continuing to press the market higher into the Friday close.
Heading into today my primary expectation is for sellers to work into the overnight inventory. Look for buyers down at 6788.25 and two way trade to ensue.
Hypo 2 gap-and-drive higher. Look for trending action up through overnight high 6819.25. Upside target is 6830.
Hypo 3 stronger sellers press harder, down through overnight low 6776 then continue to close the weekend gap fill down to 6765.50.
Exodus Members: there is a critical notice inside this week’s strategy session regarding some of the data showing on the historical ledger. Please be sure to read Section III of the Sunday Strategy Session.
– RAUL Santos, January 14th, 2018
Good day kind people of the interwebs,
You must endure through any cynicism that may show up over these next few paragraphs because I have something important and actionable to share with you. But first, I must bring your attention to the following tweet. It was sent out from my account over the weekend:
Sauna etiquette should be taught in school but it's not so here we go:
1. shower your stankin' ass first 2. wear a bathing suit, a robe, a towel, or any combination thereof 3. flip-flops are advised but not required 4. no other footwear is permitted
Just before year-end I picked up a case of the consumption from the gym sauna. I took all the proper precautions—flip flops, mask over face, etc—but it seems a festering bacterium living inside the disgusting stranger next to me had too strong a will to live. They saw my perfect body and decided to upgrade their host. Their vessel, to something infinitely more sexy. Since then the disease has ebbed, but took a turn for the worse late last week.
I quit going to the aforementioned gym after 6 loyal years because it has become a dung heap. Last week I found a new gym and worked out extremely hard. Apparently I had not kicked the consumption yet, and with my immune system compromised from intense weight training, the illness regained a foothold in my lungs.
But I have something urgent to tell you so please bear with my cynicism.
The models are whispering. The end of our current rally is near.
According to the robots you have, all of you have about five trading days left before a pullback materializes.
How can I make such specific predictions? So brazenly? Because I speak to you from solid grounds, immovable boulders of quantitative logic and auction theory. The model lads, which draws its data from auction theory and the robust predictive algorithms inside Exodus, the very model that had us BULLISH AF last week, is generating some rare readings. Extremely high readings. The last instance of readings this high was October 15th, 2017.
I have noted October 15th, and all other instances of these extreme readings on the following daily candle chart of the NASDAQ 100:
You may notice, that long term this has not mattered to much. That is fine. We have been in a secular bull run. But if you zoom your lens a bit, you will notice that in every instance there has been a few more days of rally, like 2-to-5, then a couple big red candles. THOSE RED CANDLES, those are distribution days. A futures trader can make a few month’s worth of gains on those days if prepared to do so.
Do these extreme readings mean you should adjust your long-term accounts? No.
Do they mean we should start shorting the market as early as Tuesday, intra-day? No.
I am being as specific as possible here, to avoid any confusion in my own mind or yours.
What this means is we are frothy. Individual stocks, especially garbage stocks (sub ~ $3.00) can make jaw-dropping upside moves in these final throes of bull passion. Final throes, like just before the money shot. The ejaculate. Very exciting times for a mammal.
Then the male rolls over and goes to sleep. Naturally.
The bull market is set to ejaculate all over the faces and hairs of its doubters next week, causing a magnificent mess, than he is going to take a nap.
I told you I am sick.
That nap period is when I can sneak into the arena and take some of the bulls hard-fought gains, then scuttle back into my hiding hole, never once forced to resist any idiot humans on armed horses wielding hooked javelins.
This is what I constantly seek in life. Opportunities to make a few dollars without rambunctious mammals jabbing me with sharp objects.
The life of a reptile I suppose.
And that is it. That is what I had to tell you.
To recap, mammals carry disease. Sauna etiquette is what separates shit holes from Valhalla. Robots help us better understand mammal behavior. A lizard with robot friends is suited well for making a living in the futures markets. Prepare for ejaculate then a nap, however you want.
Inside Exodus you can see the high risk stock I bought last week. I intend to hold it long term as it jibs with my core investment theme of 2018. Also it was brought to my attention by my chief scientists. The same scientist who put us into SGMO at the beginning of 2017. Though I intend to hold it long term, I love the price chart as we work through this late-cycle bull action and hope it puts a nice capital cushion below my entry point.
For all other raw insight into how I will attack the market this week and next, tune in to my morning trading plans which have been en fuego.
Distinguished members of Exodus Market Intelligence, the 165th edition of Strategy Session is live, go check it out!
NASDAQ futures are coming into Friday gap down after an overnight session featuring elevated range and volume. Price worked to a new record high overnight before falling lower right around 8:30am. At 8:30am Consumer Price index data was better than expected and advance retail sales data was below expectations. Not sure if these data points moved the market.
There was also some news out of Facebook this morning that had the shares lower by as much as -4%.
The only other economic event scheduled for today is business inventories at 10am.
Yesterday we printed a neutral extreme up. The day began gap up and after a brief morning rally, we traded lower, range extension down, and closed the overnight gap. Then we traversed the entire daily range and rallied beyond it, closing near the highs, and earning the extreme designation to our neutral day.
Heading into today my primary expectation is for a battle at the open. Look for sellers to test down through overnight low 6704 but look for buyers down at 6702.25 and then a move higher to close the overnight gap before two way trade ensues.
Hypo 2 stronger sellers trade down to 6690.75 before two way trade ensues.
Hypo 3 buyers work into the overnight inventory straight off the open, close overnight gap up top 6726.75 then continue working higher, up through overnight high 6744.50 before two way trade ensues.
NASDAQ futures are coming into Thursday gap up after an overnight session featuring normal range and volume. Price worked higher overnight after spending most of the evening in balance. At 8:30am initial/continuing jobless claims data came out mixed.
Also on the economic calendar today we have a 30-year bond auction at 1pm and a monthly budget statement at 2pm.
Yesterday we printed a normal variation up. The day began gap down, down below the Tuesday range. Buyers worked into the overnight inventory but were rejected from regaining the Tuesday range. We then took out overnight low. After that a strong responsive bid stepped in and we spent the rest of the day slowly working higher, eventually closing on session high.
Heading into today my primary expectation is for sellers to work into the overnight inventory and close the gap down to 6677.25. From here we continue lower, down through overnight low 6664.25. Look for buyers down at 6647.25 and two way trade to ensue.
Hypo 2 buyers defend ahead of 6670 setting up a move to take out overnight high 6697.75 and make a run to test record high mark 6707.25 before two way trade ensues.
Hypo 3 stronger sellers trade us down to 6622.75 before two way trade ensues.
I just put down the nastiest morning trade session so far in 2018 and I am taking to the pen instead of using this chest full of courage to give back any gains.
Was long in the pre- per the primary hypothesis. Let’s dissect the plan and take a magnifying glass to it, shall we? First:
Heading into today my primary expectation is for buyers to work into the overnight inventory and test re-entry into the Tuesday range 6667.25.
This expectation, that we would push into the overnight inventory had me long ahead of opening bell, targeting the Tuesday low. Then I watched 6666 because I am weird but also because I wanted to see sellers step in. THEY DID. And then, a gift from the tape gods, a retracement for me to sink my teeth into, crocodile style. Look:
I had time to think but not much. Why would I go short around 6662? Because of some EMA or other chart magic? Not really, the renkos just help to time entries and manage risk. I went short because of the next part of the primary hypothesis:
Sellers defend here and we go down to take out overnight low 6640.50.
This is why I blog. This is why I write a morning trading report before I even think of stepping into the arena. I could not care less if the gen-pop reads my reports. I hope some of you, the ones who really are totally immersed into investing and trading start to see how helpful this approach to trading is. But I know there aren’t many hardcore trading nerds out there.
The morning plan clarifies my vision. It has one piece left, but I will not engage. I will take my quick 600 bucks and go pursue other interests. If I were still trading, I would look for this action to continue lower, eventually tagging 6623. Why? Sentence three of the primary hypothesis:
From here we continue lower, down to 6622.75 before two way trade ensues.
It could be wrong, how we trade the daily midpoint around 6650 is the pivot. And I do not feel like mucking around inside choppy value.
Listen, this post is a bit robust and braggiose, I suppose I am happy that I stuck to my plan and did so with the tenacity of a crocodile. I do not seek your admiration. Just hoping to inspire anyone struggling to gain a grasp of how the auction works.
We do not have much to go off of over on bitcoin. The CME instrument is only a few weeks old. These are the two hypotheses I laid out on Monday:
So here we go:
2-3 day trend : 2
2-3 week trend: 2.5
strongest volume: 2.5
Excess high/low: 2.5
SCORE: 2.6 MEDIUM BEAR
It looks like primary hypo (hypo 1) is on the table. We are bouncing along the range-lows of a messy balance. Keep an eye on 14,340 as a pivot back to neutral, otherwise look for more selling.
Listen, like all facets of life we take trading one step at a time. On Sunday we form a bias. Every morning we write a plan. Then we take it one trade at a time. Trade THIS TRADE RIGHT NOW, then once it is complete, reassess the plan and get ready for the next trade. THEN TRADE THAT TRADE. I believe this is how best to achieve the coveted ‘zone’ so many professional athletes talk about.
Up in the mountains, there is no better feeling then when all your equipment is dialed in, a good song is playing in your helmet, a couple of bros are with you, and the mountain has good conditions below. There is a similar feeling when trading.
NASDAQ futures are coming into Wednesday gap down after an overnight session featuring elevated range and volume. Price worked lower overnight before eventually finding balance halfway down into last Friday’s double distribution trend. At 7am MBA mortgage applications came out much stronger than last week.
Also on the economic calendar today we have crude oil inventories at 10:30am and a 10-year note auction at 1pm.
Yesterday we printed a normal variation up. The day began with a gap up which sellers drove down into at the open. Responsive buyers stepped in around the Monday midpoint and we spent the rest of the morning and lunch hour working higher, eventually taking out IB high briefly before drifting back down to the midpoint to end the day.
Heading into today my primary expectation is for buyers to work into the overnight inventory and test re-entry into the Tuesday range 6667.25. Sellers defend here and we go down to take out overnight low 6640.50. From here we continue lower, down to 6622.75 before two way trade ensues.
Hypo 2 buyers reclaim 6667.25 and work up to 6675.50 before two way trade ensues.
Hypo 3 stronger buyers sustain trade above 6675.50 and go up to take out overnight high 6692. Look for sellers at 6694 and two way trade to ensue.
NASDAQ futures are coming into Tuesday gap up after an overnight session featuring normal range and volume. Price worked higher overnight after spending most of the evening balanced. As we approach cash open price is up above the Monday high.
On the economic calendar today we have JOLTS job openings at 10am, a 4-week T-bill auction at 11:30am, and a 3-year Note auction at 1pm.
Yesterday we printed a double distribution trend up. Similar to last Friday. But with less upside velocity. The day began with a gap down that buyers quickly resolved. Then after some two way action price took out overnight high. WE spent the rest of the day consolidating near the highs.
Heading into today my primary expectation is for buyers to gap-and-go higher, tradign up to 6725.25 before two way trade enuses.
Hypo 2 sellers attempt a move back down into the MOnday range 6690.75. Buyers defend the attempt and we begin working higher. Upside target is 6725.25.
Hypo 3 sellers regain Monday range and trade us down to 6655 before two way trade ensues.
Hypo 4 buyers sustain trade above 6725.25 setting up a trend day.
Coming into the week with a bullish bias played a big part in Monday trade. Monday started out with a small gap down. 7 NASDAQS available. Inside Friday range. Inside upper quadrant from Friday’s double distribution trend up. The overnight high was another 13 points up. Looking for 20, risking 10. Drop dead stop at the overnight low.
Risking 1 to make 2. All day. Hell I’d risk 1 to make 1.25 with a directional bias and layer-upon-layer of auction theory support. I will wait weeks for these conditions. Fasting and waiting. Polishing the robots and reading old books.
Then all at once. Plugging gaps and sending runners for the highs. Or the lows. No allegiance to the bulls. Only the robots. I am their executor.
Anyhow, bitcoin futures are different natural market.
I have no statistics. I lack the reams of raw CME data needed to parse and model upon. I have no internals like TICK or NET ISSUES.
All we have is auction theory. So here it goes:
2-3 day trend: 3
2-3 week trend: 2
strongest volume: 2
nearby magnets: 3
Excess hi/low: 3.5
Score: 3 neutral
No short term directional bias.
What has happened so far?
Bitcoin futures were higher during the holiday shortened first week of 2018. After consolidating for most of the week, bitcoin came into Friday with a gap up and trend higher. The market continued to test higher into the weekend.
Monday it opened gap down, down below the prior consolidation area, potentially trapping supply above. The day began with a drive lower which revealed a strong responsive bid which resulted in a sharp excess low being formed. Price has traded in the first hour’s range since.
What is likely to happen next?
Primary hypothesis is for sellers to defend an attempt back into the prior consolidation area ~14,895 setting up a move lower.
And with all that in mind, I do not carry enough conviction to participate in the short term auctions for bitcoin. More information is needed. I will, however, continue to wait before adding to my long-term BTC reserve. I want to see how this overplay for the underlay resolves which is, as always, TBD.
Bias elevated my game. It would behoove you to develop a habit of forming your own bias. Maybe you pluck a few arrows from my quiver. Hopefully you craft some of your own. Then you will better understand the nuance of it all. The in-between. The raw materials. Pure, unadulterated data.