RISK, IT IS ON

I have been maiming bears today inside the NASDAQ, and I’ve had enough.  I am blood soaked and while this may seem like a ‘late-update’ on the situation, I had strong feeling early that today was the day.

A few things happened.  First, and I will name names because why the hell not?  Mr. @allstarcharts was so smug early this morning I almost had to vom.  In the past, I would get all worked up and throw a kanipshin on the Twitters and be no better off because of it.  Instead I would look like a jerk and be too busy to make money.  Today I just let it marinate, how arrogant he was about his stupid head and shoulders pattern, and I went to work.

Next was the velocity downward.  Finally some real speed!  My man RaginCajun was all over it.  Even his comments featured some folks throwing shade on the market.  Sentiment was real nasty this morning.  I even got some random, one word texts from friends, “Scheisse!” …he’s in Germany.

Then, for the second time this year, we had one of those bursts off the lows that says, “MASH THE RISK ON BUTTON.”  I even said so on Twitter.  Again, more negativity commenced.

Finally, some big, and I mean huge, ticks started rolling through the New York Stock Exchange.  Audio alerts I haven’t heard since the summer were going off, “PUNCH THE LOAD” “ALTITUDE” …the mothership is a wonderful creation.

So yes, I might be sticking my dick through an uncertain glory hole, but I think this one can stick for a day or two.  I KNOW, CRAZY TALK.

If this post offends you, you might want to consider the fact that none of this matters.  Soon your reactions will blow away, like a dried up leaf.  However I am a stone, 10 tons in weight, fortified by logic, patience, and love for the game.

RISK ON

NASDAQ futures are down to a new swing low overnight after a globex session featuring extreme range and volume.  The session kicked off with a trend down which located a responsive bid just above the weekly ATR band (low).  This level also lines up with a gap left behind on 08/25/2015.  After finding the responsive bid the market came into balance.  At 7am MBA Mortgage Applications came in below expectations and at 8:30am Consume Price Index came in below expectations.  The initial reaction is small buying.

Also on the economic calendar today we have a 4-week T-bill auction at 11:30am.

Yesterday we printed a normal variation down day.  After price opened gap up we spent the morning filling the gap.  Responsive buyers at these levels were overrun and price pushed deep into last Friday’s range before finding a responsive buyer and closing at session mid.

Heading into today my primary expectation is for buyers to push into the overnight inventory and work price up to 4107.75.  Look for responsive sellers here to defend yesterday’s range and push price back down to 4050 before two way trade ensues.

Hypo 2 buyers struggle to push above 4081 setting up a move lower.  Price sustains below 4050 setting up a move to target overnight low 4035.25.  Look for responsive buyers at 4032.25 and two way trade ensues.

Hypo 3 buyers muster up a full gap fill up to 4145.75.  First they capture and sustain trade above 4107.75.

Hypo 4 full-on-liquidation.  Take out overnight low 4035.25 early and sustain trade below it.  Stretch targets are 3997.50 then off the road, down to 3867.50.

Levels:

Join the club, Greenlight.  2015 was a tough year for the stock picker.  In the firm’s letter to its partners they discussed having three large losses in a single year (CNX, MU, and SUNE) and the overall inability of all their other ideas to produce any fruit.

Meanwhile, as if trying to be wrong on purpose, they were short the top two performing stocks in the S&P 500 (Netflix and Amazon).

Listen, I am not poking fun at these guys. 2015 sucked.  It changed me (Read: Raul Is Swearing Off Stock Trading).  This was the right move.  Shifting my focus to improving my NASDAQ trading has paid-off big to start the year, even while my investments get kicked down the elevator shaft every day.

Eventually (and it always does) this volatility will be gone, and Einhorn and the Greenlight team can go back to winning.  For now, the non-systemic risk of owning individual stocks is through the roof.

Here’s the first few pages of a tough-to-read letter from the Greenlight Capital team:

NASDAQ futures are coming into the holiday shortened week pro gap up after an extreme overnight session.  Both range and volume are beyond third sigma on price that held last Friday’s low before working up to last Thursday’s midpoint.  The market has held a tight balance since about 4am.

On the economic calendar today we have NAHB Housing Market Index at 10am, 3- & 6-month T-Bill Auctions at 11:30am, and Net Long-term TIC Flows at 4pm.

Last week we started out gap up and faded lower through most of Monday before finding a late-day responsive bid.  Tuesday was gap up and faded lower to close the gap before finding an early-afternoon responsive bid.

Wednesday was gap up and after making a brief weekly high, it reversed and turned into a trend day down.  Thursday was gap up and had a sharp move lower to a new weekly low before finding a sharp responsive bid and trending higher.

Friday finally had a huge gap down then a grind lower that ultimately formed an excess low and came into balance.

Heading into today my primary expectation is for sellers to work into the overnight inventory to test 4168.  Look for responsive buyers here to reject a move back into last Friday’s range and work higher to take out overnight high 4215.75.  Look for responsive sellers just above at 4220.50 and two-way trade ensues.

Hypo 2 sellers work down through 4158 to and and work the full gap fill down to 4141.50.  Look for a continued move to target 4130.  Look for responsive buyers around 4121 and two-way trade ensues.

Hypo 3 gap-and-go higher.  Take out overnight high 4215.75 early and sustain trade above 4220.50 setting up a secondary leg to test up to 4250.75.

Levels:

Growing up, David Bowie was a mythical creature to me.  Raised in a fortified shelter of parochial schools and church, my exposure to his music was limited.  Instead I knew him as Jareth the Goblin King who liked to steal babies and break into song from the confines of his Labyrinth.  Eventually his music caught my attention due to its galactic sound and direction.  But what needs to be logged forever into the hallowed halls of iBankCoin was his success in finance.  David Bowie executed one of most successful leveraged buyouts of [his own] intellectual property in the history of music.

He wanted to own 100% of his music but could not afford to buy out his former manager, the 50% co-owner of his songs.  He turned to the bond market and in the process pioneered the use of intellectual property as collateral.  ‘Bowie Bonds’ were backed by the current and future revenues of the 25 albums he recorded before 1990, in his more heady years.  A portion of the proceeds were used to buy back rights to his content.  A leveraged buy out of his own work, a boss power move.

The bonds performed flawlessly.  They were bought for US$55 million by Prudential Insurance.  The debt was issued with an A3 rating (the 7th highest rating) at an interest rate of 7.9%.  His royalties succeeded in paying back the debt and the interest entirely.  His vast library of early work (287 songs) and the rights to the income from the songs reverted back to the spaceman/fashion/film/music legend.

We lost a rock god, but we’re also saying goodbye to an innovative businessman who possessed incredible foresight and confidence.  RIP Jareth, ruler of the Goblins, your legacy will never fade from my world.

Last week my bias model spit out the venereous Bunker Buster long signal and it turned out to be correct.  We tagged the upper ATR (Average True Range) band first, before ultimately reversing and trading lower.

It is interesting, that this calculated level devoid of market profile logic, often behaves as a turning point in the markets.  I have seen it happen countless times.

However, the week ultimately closed lower, thus the secondary goal of my bias model, which is to call a positive/negative week overall, was not achieved.  And although it failed at this task, I managed to have my best trading week in months.

Big volatility creates big opportunity to day-trade.  In reviewing last week’s trades, I was amused by the fact that I earned most of my money on long trades.  It seems asinine, yes?  But the 2016 market has been methodical and extremely compliant with the levels generated by auction theory aka the reports I freely publish every morning here on iBankCoin.

Over the last two weeks I have been discussing my approach heavily on Snapchat [VCali].  It has been a tremendously positive experience and I suppose I will keep doing it.  You can follow me there freely as well.  We discuss what the markets are doing in real-time, and I will answer any of your questions with a video response.  That means you get to see me when I talk to you..I think that is so cool.

When it comes to trading, I treat it like a business.  In business, I tend to stick with what’s working.  Right now my trading is working.  Whether or not the continuous conversation I am having with people on Snapchat is the reason or not I am unsure, but I will stick with it.

As for this week.  I have some work to do regarding my position trades.  It looks like we are in store for another adventurous week.  I heard rumors the (pardon my blunt tone) bullshit Middle Eastern stock markets (lolz) had oil down like 6% this morning on the Iranian sanctions being lifted.  I didn’t know this, but in the Middle East, where the camels roam, Sunday is the first working day of the week.  Disgusting.

Let it be known I work extremely hard every day of the week, but I respect the fat American’s right to enjoy superfluous television, food, and relaxation on Sundays.

Exodus Members – The latest Strategy Session is published.  Be sure to check it out.

NASDAQ futures are down about 120 points heading into Friday after an extreme session both in volume and range.  Price spent the entire session trending lower, and we are set to open right around the low print from yesterday.  At 8:30am Advance Retail Sales data came out in line with expectations, but worst than expectations ex Gas and Auto.  At 8:30am Empire Manufacturing also came out and was surprisingly low at nearly -20%.  The initial reaction to the news is hard selling–price is lower by nearly 40 points since the data.

Also on the economic calendar today we have Industrial/Manufacturing Production at 9:15am, U of Michigan Confidence read at 10am, and the Baker Hughes rig count at 1pm.

Yesterday we formed a double distribution trend day up.  Price opened gap up and quickly faded lower to take out overnight low before finding a strong responsive bid and grinding higher.  Sellers stepped in toward the end of the session.

Heading into today my primary expectation is for buyers to work into the overnight inventory and trade back up to 4175 (the scene of the 8:30am data).  Look for initiative sellers here (initiative relative to yesterday’s close, responsive relative to the open) who work to take out overnight low 4127.  Look for responsive buyers t 4119.75 and two way trade ensues.

Hypo 2 gap and drive lower.  Take out 4119.75 and set our sights on the open gap down at 4074.75.  Look for a strong responsive buyer here.

Hypo 3 buyers push up through 4175 and sustain trade above it to set up a secondary leg to target yesterday’s VPOC 4222.

Levels:

We came into today with some major unsettled business.  I was talking this out inside Exodus yesterday afternoon and this morning–when a trend day prints there is a high probability we exceed it, if only for a tick, the next session.  Then we made another little mess overnight when we made a new swing low during Globex.  However, the stock market did the dirty work this morning.

The trend day logic was settled.  The gap up this morning was a problem.  If bulls stepped into it and ran price higher, it was likely to lead to a soft afternoon.  Another one.  Instead we had a strong open-rejection-reversal down off the open.  The low print from yesterday was breached.  Golf clap.

Then sellers really had their juices flowing and took out overnight low.  All the sudden the clouds broke and a ray of sunshine burned into the dark hole where seller were celebrating Marti Gras.  It was at that moment their world was turned upside down.

Now I know most of you are not excited about this move, citing breadth and broken charts and every other problem.  But I have seen this script play out many times in recent history.  Breadth can catch up to the indices or we just run on narrow participation.  I have been flabbergasted more than once by how soon we return to all-time highs.

Today the market did what it needed to and took care of it fast.  Have you ever woke up to duct take on your forearm?  One of the boys playing a rotten prank?  You can either cringe and peel it off, hair by hair, or you just rip that fucker off in one foul swoop.

Today we did the latter.

One of my favorite market profile formations is the string of single prints.  We left behind a trail of them yesterday.  Often times the market blows right through them.

Some call them zippers, on the way up I call them poles:

NASDAQ futures are coming into Thursday gap up after a Globex session featuring extreme, 3rd sigma, range and volume.  The session was balanced overall but did manage to exceed yesterday’s low before settling into two way trade.  As is always the case, a swing low made outside of regular trading hours is considered suspect.  At 8:30am Initial/Continuing Jobless Claims data came out worse than expected.  The initial reaction is a small amount of buying.

Also on the economic calendar we have a 30-Year bond auction resuming at 1pm.

Yesterday we printed a trend day down.  Price opened gap up and sellers made short work of filling the overnight gap which opened the door up for a test below overnight low.  Initial responsive buyers in this area were overrun and we spent the rest of the day trending lower and making a new swing low.

Heading into today my primary expectation is for sellers to work into the overnight inventory and close the gap down to 4175.50.  From here I will look for a test down to overnight low 4152.  Look for responsive buyers just below this level and two way trade ensues.

Hypo 2 buyers make a gap and go higher.  They take out overnight high 4214.75 early on and find responsive seller ahead of 4224 settling up into two way trade.

Hypo 3 buyers push up through 4224 and sustain trade above it setting up a pole climb up to 4262 before two way trade ensues.

Hypo 4 sellers work gap fill down to 4175.50, take out overnight low 4152 and liquidation takes hold.  Stretch targets to the downside are 4119.50 then 4074.75.

Levels: