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Much like basketball, finance is a sport dominated by the United States. This week we celebrated our stock market by keeping it open while the Chinese guzzled cheap whiskey. Next week our markets will be closed Monday to celebrate dead presidents aka money. The three day weekend is a perfect time to get up to speed with the stock market.
We know this, which is why we are hosting an open house tour of Exodus Market Intelligence. Join us as we scour the subtle nuances of over 5000 traded financial instruments. See the ballet of fine-tuned algorithms measuring and generating probabilistic predictions about the future.
Remember: each-and-every Sunday I put my entirety of my brain power, the full RAM capacity of Mothership, and a small wisp of soul into producing the Exodus Strategy Session. At iBankCoin we abhor the newsletter, that’s why my research is openly published for all Exodus members. All past reports are archived if you want to poach them via copy/paste, and just for stopping by you can read my report on the upcoming week. Not bad right?
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Every week I calculate working ranges for each index based on the 14-period average true range. These levels are used in conjunction with auction theory to form the win/loss scoring for my model. These calculated levels also tell me a story about the market.
When we blow above or below one early in the week it can mean the market is changing, becoming more volatile. Sometimes the NASDAQ will hold while the Dow Jones breaks, telling me where participants are more interested in investing, etc.
This week I was perturbed because my analysis suggested the Dow would be the most resilient, and it turned out to be the weakest.
However, heading into the weekend, it appears to be holding its lower bracket, and I like that…see below:
NASDAQ futures are coming into Friday gap up after a session featuring extreme range on elevated volume. Price managed to hold above Thursday’s mid before spending the rest of globex trade working higher. The market stalled out just below the weekly high print from Wednesday. At 8:30am Advance Retail Sales data came out slightly better than expected. The initial reaction is buying.
Also on the economic calendar today we have the preliminary February read of U. of Michigan Confidence at 10am and the Baker Hughes Rig Count at 1pm.
Yesterday we printed a neutral extreme up. Price opened gap down and after briefly going range extension down buyers responded. A second attempt was made to go lower but buyers defended again, pushing us through the range and neutral, then closing us in the upper quadrant to earn a neutral extreme day.
Heading into today my primary expectation is for sellers work into the market and test the 3980 handle. Responsive buyers defend here and work to take out overnight high 4012.50. Price rallies up to 4050 before two way trade ensues.
Hypo 2 buyers gap and go higher, push up through 4012.50 and push to target 4050 before two way trade ensues.
Hypo 3 full gap fill down to 3963. Look for responsive buyers down at 3960 and two way trade ensues below 3980.
Hypo 4 gap fill down to 3963, responsive buyers at 3960 are overrun and we work to take out overnight low 3953. Liquidation takes hold and we continue lower. Stretch targets are 3922.50 then 3910, and 3896.50.
Despite the bitter despair traders expressed today, and Janet Yellen doing her absolute best to spout out senseless drivel, thus killing the NASDAQ, we have formed a rather orderly balance.
These are the building blocks of a rally, if I may be so bold.
Caveat: we put in swing low during globex. Not good! [Extra Trump]
These are your balances, use them well:
NASDAQ futures are coming into Thursday gap down after an extreme overnight session, both in range and volume. Price spent most of the session working lower until finding a responsive bid around 7am. Buyers were found just below the open gap left behind on 10/20/2014. At 8:30am Initial/Continuing Jobless Claims data came out better than expected. The initial reaction is buying.
Also on the economic calendar today we have Fed Chair Janet Yellen’s testimony before the Senate Banking Committee. Expectation is for a continued rhetoric that does not strike a dovish tone. We also have a 30-Year Bond auction at 1pm.
Yesterday we printed a neutral extreme down. Price started the day gap up, and after a morning of buying and a brief range extension up, a sharp excess high formed and price worked lower to close near session low.
Heading into today my primary expectation is for buyers to work into the overnight inventory and trade up to 3925 before responsive sellers step in (responsive relative to the open, initiative relative to yesterday close). Sellers then work to take out overnight low 3862.25. Look for responsive buyers at 3848.50 and two way trade ensues.
Hypo 2 buyers push up through 3951.75 (yesterday low) and sustain trade inside of it, setting up a move to target overnight high 3971.75. Look for responsive sellers up at 3977.25 and two way trade ensues.
Hypo 3 gap and go lower. Take out 3872 early and sustain trade below it setting up a move to target 3862.25. Buyers put up a brief defense at 3848.50 but are ultimately overrun as sellers target 3825.25.
The market is officially on day 1 of a bounce. In 2016 markets, an upside move that lasts more than a few hours is an event to note. Despite meticulous research over the weekend, I picked the slowest horse in the race–the Dow Jones, which is up a mere 20 basis points as we head into the close.
Last year I eliminated picking stocks to trade, opting instead to focus on futures trading and investing. Now I am entertaining the idea of using Motif to go long all four indices when I want to take a position trade.
The best methods are the simplest. Simplicity is durable.
The bounce is mature in bear market terms, but perhaps my lenses have been fogged by the harsh conditions and the bounce is still young and the Dow can rise to outperform the others.
You can see all my weekend research for free these next five days if you take us up on the free trials we are offering for Exodus. Just sign up, no credit card required, then go inside and click the Strategy Session. Here’s the trial link:
For the fourth time this year we are seeing a hard buy rotation push into the market. Tracking these strong responsive bids is important, because they represent times when the higher time frame steps in and buys this toxic market.
The third such instance occurred last Wednesday afternoon. Those bids were steamrolled. The first major up rotation earlier this year suffered the same fate, but the second rotation resulted in a multi-day rip. I did a crass write up on the matter. It appears all my charm was burned off while standing too close to the sun.
There were signs of impending buy opportunity over the weekend as well. The New York Times wrote a, “kill the bankers” piece:
— Raul (@IndexModel) February 7, 2016
The hard rally is a key feature to today’s market. The mechanics of investing have changed. Tactical asset allocation is now commonplace for money managers, and with one mouse click they push their clients into risk. This was one of the topics discussed during the second annual iBC Investor Conference. Bulls are looking for the cliche turnaround Tuesday–let’s see if it sticks.Comments »
This week is an opportunity for the USA to trade without the incessant nagging of a crumbing Chinese stocked market. Instead they will keep their market closed all week as the celebrate the year of the monkey.
I have expectations, and I have laid them out inside the Exodus Strategy Session. I channeled the clairvoyance one can only achieve from well over 10,000 vertical feet before the sun rises.
After the index model nailed the come out for February, I plan to take it easy into week two. Monday will have investors groggy after their Super Bowl celebrations and this is a weird month, a leap year. No sense forcing anything.
Two weeks running the Dow Jones has been a bastion of hope in an otherwise grim market. The index is fortified with steel and brawn and men of industry, not software nerds selling software designed to sell software. It is these men and their industry that will lead us out of the trenches and onto the offensive.
Look for physical industries like Machine Tools and Industrial Equipment to lead on the next bounce. I will only invest in companies servicing the United States, the only industrious nation that can hold its water when the going gets tough.
Investors are spooked. We have generational uncertainly in politics, the Chinese and other fake capitalist nations risk breaking their currencies, and oil is back to being a cheap sludge much to the chagrin of resource cursed Arabian nations.
The Utilities sector is up nearly 8% year-to-date. Certain REITs are doing well. Walmart, telecommunication, etc. If American social media companies are worth 30-40% less than we perceived them last month then Chinese social media stocks are damn near useless.
If you are itching to increase your equity exposure next week, look to the Dow Jones and its core components. Investors having been hiding out there. Conversely, they may be next to meet the guillotine if we decidedly turn lower. But at least for the next 5 market days, my data is optimistic.
More tomorrow after I complete the Exodus Strategy Session which was all over last week’s action.Comments »