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I turn dials and fiddle with knobs to hone in on harmonic rotations

Thick chop alert // here is Tuesday NASDAQ trading plan

NASDAQ futures are heading into the final Tuesday of the second quarter down about -90 after an overnight session featuring extreme range and volume. Price steadily rotated lower overnight, traversing most of the Monday range but never exceeding its ranges. As we approach cash open price is hovering in the lower quadrant of Monday’s range.

On the economic calendar today we have consumer confidence at 10am.

Yesterday we printed a normal variation up. The day began with a slight gap down in range. Buyers resolved the gap with a small drive higher on the open before sellers stepped in and made a hard drive lower. This selling managed to tag the Friday naked VPOC nearly to the tick before finding a strong responsive bid. Said bidders stepped in ahead of the first hour, meaning no range extension had taken place. Instead there was a battle along the daily low before a spike back to the midpoint just before 11am New York. Sellers defended the mid twice, but on the first push just after lunchtime buyers pressed through the mid and rapidly made a new daily high, going range extension up in the process. Then price checked back to the mid late in the afternoon, buyers defended, and we wrapped up the session trading in the upper quad.

Of note—the daily VPOC never shifted up to the highs. Instead it remained down where that morning battle took place, down in the lower quad.

Heading into today my primary expectation is for buyers to work into the overnight inventory and close the gap up to 12,975.75. Buyers continue higher, tagging 13,000 before two way trade ensues.

Hypo 2 sellers gap-and-go lower, tagging 12,800 before two way trade ensues.

Hypo 3 stronger sellers tag 12,736.25 before two way trade ensues.

Levels:

Volume profiles, gaps and measured moves:

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NASDAQ down a scooch heading into the week // here is trading plan

NASDAQ futures are down about -55 after an overnight session featuring extreme range and volume. Price first worked lower overnight, trading down to last Friday’s midpoint, catching a little bounce, then further down, right about exactly to the 68% retrace level of the big Friday afternoon rally. Since then price rallied about +150 then faded down about -40. As we approach cash open, price is hovering in the upper quadrant of Friday’s range.

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

Last week we had conviction buying Monday. Seller control Tuesday through Thursday morning. Then a sharp excess low formed Thursday, ultimately leading to a rally into the weekend which was accentuated by a late Friday ramp. The last week performance of each major index is shown below:

On Friday the NASDAQ printed a neutral extreme up. The day began with a slight gap down in range. Buyers quickly resolved the gap during an open drive up and price went into a range extension up before New York lunch. Then the action became choppy, chopping all over the midpoint and eventually making a new high of day before a hard sell pressed to a new low of day and into a neutral print. Those sellers never took out overnight low. Instead just before 3pm a responsive buyers stepped in and what followed was a strong ramp that eventually made a new daily high and close at it.

Heading into today my primary expectation is for buyers to work a gap fill up to 12,959 then continue higher, up through overnight high 12,978. Look for sellers up at 13,000 and for two way trade to ensue.

Hypo 2 stronger buyers trade up to tag the 03/23 naked VPOC up at 13,092 before two way trade ensues.

Hypo 3 sellers press down through overnight low 12,807.50 on their way to tagging 12,800.

Levels:

Volume profiles, gaps and measured moves:

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Subjecting the readers to art and a clear bias emerges heading into Q2

Extreme emotions are not helpful to the investor/trader. Nor is it to be totally dead inside. Awareness is key. Know thyself. Know also that your ego is not your amigo. So whatever that dashing lad in the mirror is saying to you in your pretty head–take it with a grain of salt.

We gotta be so careful to protect our energy. Our job as progressive, successful participants in society is to seek good explanations for events. There are billion dollar industries, and even modestly successful websites, built on peddling bad explanations for how/why the market behaves the way it does.

For years, about nine, I’ve offered an objective explanation for market behavior and walked through life, live, one week then one day at a time, chronicling how I see things, what I am doing and how it is working out.

Last week was, in my subjective point-of-view, a body of work that I would consider art. Behold:

Alongside these entries, I further discussed my actions on Twitter (@IndexModel) where I am easily one of the most well-known and least popular finance handles in existence.

What is popular? Jokes. MEMES. I like memes. Strong emotional outbursts.

I like memes. Last week’s boat memes have been great fun.

What is not popular? Some dude with laser eyes putting on a seminar in consistent profitability.

Fine.

I never wanted to be popular on the internets. It comes at too great a cost. Too many loons and I work to hardt as it is to have privacy so I can do my psychedelics in peace.

Anyhow. I have several indicators lining up bullish into quarter end. I intend to work the long side of the tape via the NASDAQ 100 futures as good set-ups present themselves while doing nothing with my massive Twitter and Del Taco positions.

Cheers to the week.

Raul Santos, March 28th 2021

And now, the Sunday Research that powers everything I do. Enjoy:

Stocklabs Strategy Session: 03/29/21 – 04/02/21

I. Executive Summary

Raul’s bias score 3.50, medium bull*. Choppy, sideways action into quarter-end, perhaps with a slight upward bias. Then look for non-farm payroll data Friday morning to provide direction into the weekend.

*Extreme Rose Colored Sunglasses (e[RCS]) bullish bias triggered. See Section IV.

II. RECAP OF THE ACTION

Conviction buying Monday. Seller control Tuesday through Thursday morning. Sharp excess low formed Thursday then a rally into the weekend which was accentuated by a late Friday ramp.

The last week performance of each major index is shown below:

Rotational Report:

Strong rotations across the board, except for key Discretionary sector. Slightly unsettling leadership from Staples and Utilities.

neutral

For the week, the performance of each sector can be seen below:

Concentrated Money Flows:

Don’t forget the major buy flows three weeks back. We have not seen any follow through on them yet, nor have we seen any selling of a magnitude that would expect us to doubt upside follow through.

Two weeks ago most of the selling was seen in energy industry groups which we’ve already established trade independent of the overall market.

Last week’s flows did skew slightly bearish, but not quite enough to negate that massive buy flow three weeks ago.

Median return last week  was below -1.5% and volume delta over the last 30 days is negative.

What we need. And I will discuss this with The Fly, is a 1-week volume delta. That would help us make actionable use of the volume delta data Stocklabs has.

Money flows are neutral.

Here are this week’s results:

III. Stocklabs ACADEMY

Three month oversold signal lines up with e(RCS) into quarter-end

On Thursday, March 18 Stocklabs flagged oversold on the 3-month technical and hybrid signals. You may notice I never include any 3-month signals in the Weekly Strategy Session, but lately I’ve been giving it more consideration.

The 3-month has a decent probability of success into the second half of the cycle. Now we also have a 6-month Tech oversold cycle in play AND Indexmodel going extreme Rose Colored Sunglasses bullish bias.

These factors are stacking up to favor a bullish bias.

Note: The next two sections are auction theory.

What is The Market Trying To Do?

Week ended searching for sellers.

IV. THE WEEK AHEAD

What is The Market Likely To Do from Here?

Weekly forecast:

Choppy, sideways action into quarter-end, perhaps with a slight upward bias. Then look for non-farm payroll data Friday morning to provide direction into the weekend.

Bias Book:

Here are the bias trades and price levels for this week:

Here are last week’s bias trade results:

Bias Book Performance [11/17/2014-Present]:

Semiconductors probe top of balance, Transports discovery up mode

Markets fluctuate between two states—balance and discovery.  Discovery is an explosive directional move and can last for months.  In theory, the longer the compression leading up to a break, the more order flow energy to push the discovery phase.

We are monitoring two instruments, the Nasdaq Transportation Index and the PHLX Semiconductor Index.

Transports steadily discovering new higher prices.

See below:

Semiconductors have that head-and-shoulders pattern printed and it is so obvious it likely won’t play out how technical analysts expect. However, we are nearing the top-side of our range. How we behave up here will tell a story heading into Q2.

See below:

V. INDEX MODEL

Bias model is flagging extreme Rose Colored Sunglasses after being neutral for three weeks after signaling Bunker Buster four weeks ago and being neutral for the thirteen weeks prior to that. E(RCS) calls for a sideways drift, perhaps with a slight upward bias.

Here is the current spread:

VI. QUOTE OF THE WEEK:

“We buy things we don’tt need, with money we don’t have, to impress people we don’t like.” Chuck Palahniuk, Fight Club

Trade simple, clarify your reason for getting’ money

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Still in the Fed trap but it’s Friday // here is NASDAQ trading plan

NASDAQ futures are coming into the final Friday of March (the last Friday in Q1) with a slight gap down after an overnight session featuring extreme range and volume. Price initially worked higher overnight, probing up beyond the Wednesday high around 1am New York and sustaining these prices until about 3:30am when sellers knocked price back down into the nearby balance. Then around 6:30am sellers became initiative and formed a steady down rotation that sent price below the Thursday midpoint. At 8:30am personal income and outlays all came out in-line with expectations and then international trade in goods did the same. As we approach cash open price is hovering about +20 above the Thursday mid.

Also on the economic calendar today we have consumer sentiment at 10am.

Yesterday we printed a normal variation down. The day began with a gap down below the Wednesday range. Buyers drove higher into the opening bell quickly resolving the overnight gap. Then about +30 points into Wednesday range sellers stepped in and rejected price out of the range. This all happened within the first 45 minutes of trade and soonafter we pressed range extension down. Sellers managed to trade down below last week’s low before a responsive bid was discovered near the lows of March 9th. From about 11:30am to 1:30 buyers managed to regain the daily midpoint. Sellers chopped down through it in the early afternoon before we ultimately ramped higher into the close. Closing near session high but never pushing neutral.

Heading into today my primary expectation is for buyers to work into the overnight inventory and close the gap up to 12,793. From here buyers continue higher, taking out overnight high 12,881. Look for sellers up at 12,900 and for two way trade to ensue.

Hypo 2 sellers press down through overnight low 12,676 and test below Thursday low 12,609.75. Buyers are just below at 12,600 and two way trade ensues.

Hypo 3 stronger sellers blow through 12,600 on their way to tagging 12,500. Stretch target 12,479.75.

Levels:

Volume profiles, gaps and measured moves:

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Not out the Fed trap yet // here is Thursday NASDAQ trading plan

NASDAQ futures are coming into Thursday down a quick -60 after an overnight session featuring extreme range and volume. Price was balanced overnight, balancing along the lows of Wednesday’s range until about 7:45am when buyers stepped in and pressured the tape lower. At 8:30am GDP data came out in-line with expectations and jobless claims data slightly better than expected. As we approach cash open price is hovering down near last week’s lows.

On the economic calendar today we have 4- and 8-week T-bill auctions at 11:30am followed by a 7-year note auction at 1pm.

Yesterday we printed a double distribution trend down. The day began with a gap up in range that sellers drove down into at the open. Said selling erased Monday’s conviction buying and probed down into the Friday-to-Monday gap a bit before discovering a strong responsive bid. That bid sent price higher in a campaign that successfully recovered the mid and much of the territory lost during the early sale. It could not, however, make new session high. Instead sellers reclaimed the mid and after chopping along the bottom-side of mid for about an hour began a campaign to go range extension down. Range extension down happened around 1:15pm then after a pull back sellers became initiative and drove lower into the close, eventually closing on session low.

Heading into today my primary expectation is for buyers reclaim Wednesday low 12,787.25 and work a gap fill up to 12,801.25. Buyers continue higher, taking out overnight high 12,859.50. Look for sellers up at 12,875 and for two way trade to ensue.

Hypo 2 buyers to work into the overnight inventory and trade up to Wednesday low 12,787.25. Sellers reject a move back into Wednesday’s range and two way trade ensues.

Hypo 3 gap-and-go lower sets up a liquidation down to 12,600. Stretch targets are 12,500, 12,479.75 then 12,400.

Levels:

Volume profiles, gaps and measured moves (note how VPOCs are still concentrated right along the pre-FOMC levels):

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Still stuck in the Fed trap // here is Wednesday NASDAQ trading plan

NASDAQ futures are coming into Wednesday up a quick +90 after an overnight session featuring extreme range and volume. Price was balanced overnight, balancing along the bottom-side of Tuesday’s midpoint until about 4:20am New York when buyers initiated a rotation higher. Said buyer sent price up through Tuesday mid but not beyond the Tuesday high. As we approach cash open price is hovering about +15 points above the Tuesday mid.

On the economic calendar today we have more testimony from Fed Powell and Treasury Yellen at 10am, crude oil inventories at 10:30am, a 2-year note auction at 11:30am followed by a 1pm note auction at 1pm.

Yesterday we printed a neutral extreme down. The day began with a slight gap up inside range. Sellers quickly resolved the open gap after an open two way auction. Sellers could not take the conviction buying zone printed Monday however. Instead a weak double low formed before we set off to probe beyond the Monday high. This probe higher put us into a range extension up but was quickly faded back to the mid. After several hours chopping the mid sellers pressed to a new low of day late in the session and closed down on it.

Heading into today my primary expectation is for sellers to work into the overnight inventory and close the gap down to 13,029. Look for buyers down at 13,000 and for two way trade to ensue.

Hypo 2 buyers take out overnight high 13,145.25 on their way to closing the FOMC gap up at 13,189.

Hypo 3 stronger buyers trade up to 13,272.25.

Levels:

Volume profiles, gaps and measured moves:

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Stuck in the Fed trap // here is Tuesday NASDAQ trading plan

NASDAQ futures are coming into the second trading day of the week with a slight gap up after an overnight session featuring extreme range and volume. Price was balanced overnight, balancing along the top half of Monday’s range. As we approach cash open, price is hovering about halfway between the Monday high and the mid.

On the economic calendar today we have new home sales at 10am, a 52-week T-bill auction at 11:30am, congressional hearings from Fed Powell and Treasury Yellen at 12pm, then a 2-year note auction at 1pm.

Yesterday we printed a double distribution trend up. The day began with a gap up and drive higher, driving up to 13,000 then briefly pausing before continue to trend back up into the reaction spike we saw last Wednesday after the FOMC announcement. Buyers couldn’t quite manage to resolve the gap that we left behind last Wednesday. Instead price slowly rotated lower during late-afternoon trade, eventually ending the day about 30 points above the mid.

Of note: Since the FOMC announcement last week no real price discovery has happened. First we spiked higher and found our top bracket, then lower through Friday to find our bottom bracket. It seems the market is waiting for more information before leaving this balance. Perhaps earnings from major NASDAQ component Adobe, due out after-the-bell could be the catalyst.

Heading into today my primary expectation is for buyers to work up above overnight high 13,105.25 and continue higher, taking out overnight high 13,157. This sets up a run to close that Wednesday gap up at 13,189 before two way trade ensues.

Hypo 2 sellers work into the overnight inventory and close the gap down to 13,078 then continue lower, tagging 13,000 before two way trade ensues.

Hypo 3 stronger buyers trade up to 13,270.25 before two way traded ensues.

Levels:

Volume profiles, gaps and measured moves:

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NASDAQ up a quick +90 into final full week of March // here is Monday trading plan

NASDAQ futures are coming into Monday gap up after an overnight session featuring extreme range and volume. Price worked higher overnight, first by taking out the Friday high around 10pm New York, then after several hours of balance along the Friday high by continuing higher. As we approach cash open price is hovering in the upper quadrant of Thursday’s range.

On the economic calendar today we have Fed Chairman Powell set to speak at 9am, existing home sales at 10am and then 3- and 6-month T-bill auctions at 11:30am.

Last week was choppy. Buyers drove higher through Tuesday. Wednesday markets gapped down then marked time until The FOMC announcement then shot higher. Thursday through Friday morning saw sellers erasing the Fed move. Then buyers resumed control into the weekend with a mellow rotation higher. The last week performance of each major index is shown below:

On Friday the NASDAQ printed a normal variation up. The day began with sellers making an early try down below Thursday low. This selling was reversed before the first hour was complete and a sharp excess low had formed. From then on it was buyers in control. Buyers reclaimed the mid then defended a check back to it, ultimately leading to a tight balance along the daily high and into the weekend.

Heading into today my primary expectation is for buyers to gap-and-go up to 13,000 before two way trade ensues.

Hypo 2 stronger buyers trade up to 13,093.75 before two way trade ensues.

Hypo 3 sellers work into the overnight inventory and close the gap down to 12,829.75. Look for buyers down at 12,800 and for two way trade to ensue.

Levels:

Volume profiles, gaps and measured moves:

Comments »

Almost ready for battle

Was surprised this morning to see that we are already heading into the final full week of March. Options have expired, the sun is out, and I am still bogged by this kitchen remodel.

The only work I am contracting out is the counters. The installer scheduled himself to come out Tuesday and take measurements and then he’s running two-to-three weeks out. Yep. I cannot install the back splash, range hood, upper shelving until then. I haven’t had a kitchen sink for nearly three weeks and it is going to be three more until I do. Same with the dishwasher. I have no idea how people live long-term without a dishwasher.

So much of my strength and ability to help others comes from my kitchen. Even when I am trading, I often place my trades, work to neutralize the risk on a position, then head into the kitchen to let my runners work while I monitor from a distance, via the 70-inch sammy, whislt listening to tunes and frolicking to-and-fro from the garden to the kitchen. Making tasty health foods, the real medicine of the good life, for myself and familia.

The kitchen is where I consult weary travelers and apply salves. It is where I do much of my reading and writing. It is so essential to everything I do.

Now I’ve been ‘work-from-home’ for nearly nine years. What has been new to many of you is modus oporandi over here. I’ve been developing Mothership as a place of business this entire time. I usually have every inch dialed in and could tell you from memory where anything (ANYTHING) is. Losing the kitchen has been eye-opening. So many of my projects are off the rails. I can hardly remember to pay my bills on time.

Thankfully I have my office. I’ve managed to put down some good trades. Good enough to keep the lights on and pay for all the dang carry-out I’ve been eating.

The Mothership updates are likely to elevate my game to a new level. Along with the kitchen modifications I have big plans for the fields this years. I’ve expanded my working land significantly. I have three different non-gmo corn strains I am working with this year along with a variety of other foods. But the big show for me is corn. Being of Italian decent, I am the first of my people to take corn seriously. They’re too busy growing pomodori and basillico and frijolis. For whatever reason, they never made the leap to american agriculture aka corn babay. But look at me. I am the captain now. The elders are taking it easy these days and rightfully so. They’ve earned it. They’ve built more in the last 50 years that most of yous could ever dream. They are TIREDT. Not me. I shall take the reigns and continue our legacy.

Moral of the story? If your clan has been in america for more than 50 years and you are the patriarch, and you’re not holding shit down, sewing the land and operating a state-of-the-art kitchen to keep yourself and your family as happy and healthy as possible, you are going to fall behind those of us with the immigrant hustle embedded in our bones.

Okay back to work.

I am bullish heading into March. Time to do nothing with the accounts. They should have been added to back on the Bunker Buster. I am the captain now.

Raul Santos, March 21st, 2021

And now the Strategy Session. Be sure to check out the notes about concentrated money flows. They are telling a story.


Stocklabs Strategy Session: 03/22/21 – 03/26/21

I. Executive Summary

Raul’s bias score 2.95, neutral. Powell works price higher through Wednesday, then look for third reaction to GDP and jobless claims data due out Thursday morning to provide direction into the second half of the week.

Major NASDAQ component Adobe Inc. is set to report earnings Tuesday, after market close.

II. RECAP OF THE ACTION

Choppy. Buyers drove higher through Tuesday. Wednesday markets gapped down then marked time until The FOMC announcement then shot higher. Thursday through Friday morning saw sellers erasing the Fed move. Then buyers resumed control into the weekend with a mellow rotation higher.

The last week performance of each major index is shown below:

Rotational Report:

Energy slammed lower and continues to trade independent of the rest of the market. Otherwise mild sell rotations across the board. Slight green shoots from Healthcare and Staples.

slightly bearish

For the week, the performance of each sector can be seen below:

Concentrated Money Flows:

Don’t forget the major buy flows two weeks back. We have not seen any follow through on them yet, nor have we seen any selling of a magnitude that would expect us to doubt upside follow through.

Check out last week’s flows — most of the selling was seen in energy industry groups which we’ve already established trade independent of the overall market.

Median return on the week was right around -1% and volume delta over the last 30 days is essentially flat.

Money flows are slightly bullish.

Here are this week’s results:

III. Stocklabs ACADEMY

Three month oversold signal is useful

On Thursday, March 18 Stocklabs flagged oversold on the 3-month technical and hybrid signals. You may notice I never include any 3-month signals in the Weekly Strategy Session, but lately I’ve been giving it more consideration.

There are two bits of data from the 3-month oversold signals that are slightly better than 50/50 odds. The 5-day return on both Tech and Hybrid is around a 58% win rate with an average return of about 25 basis points. And the 10-day return of the hybrid algo. It has a 59.26% win rate with an average return of around 33 basis points.

This is useful, especially since we can draw statistical significance from the 10-year back test due to having at least 50 samples.

Note: The next two sections are auction theory.

What is The Market Trying To Do?

Week ended searching for sellers.

IV. THE WEEK AHEAD

What is The Market Likely To Do from Here?

Weekly forecast:

Powell works price higher through Wednesday, then look for third reaction to GDP and jobless claims data due out Thursday morning to provide direction into the second half of the week.

Bias Book:

Here are the bias trades and price levels for this week:

Here are last week’s bias trade results:

Bias Book Performance [11/17/2014-Present]:

Semiconductors still show balance, Transports could launch

Markets fluctuate between two states—balance and discovery.  Discovery is an explosive directional move and can last for months.  In theory, the longer the compression leading up to a break, the more order flow energy to push the discovery phase.

We are monitoring two instruments, the Nasdaq Transportation Index and the PHLX Semiconductor Index.

Transports clearly are in a continued discovery up phase. We can see how steep the ascent is. This is likely, at some point, to resolve with a sharp move in either direction to break from the wedge. My primary expectation is for a blow off buy move higher, but the break could just as well happen to the downside. For now, discovery up continues and is bullish.

See below:

Semiconductors have a head-and-shoulders pattern printed but more importantly we have a clear range to work with. Balance is the call until one of these edges cleanly breaks.

See below:

V. INDEX MODEL

Bias model is neutral for a third week after signaling Bunker Buster three weeks ago and being neutral for the thirteen weeks prior to that. No bias heading into next week. Here is the current spread:

VI. QUOTE OF THE WEEK:

“Of course I deprecate war, but if it is brought to my door the bringer will find me at home.” – James A. Garfield

Trade simple, be ready

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No news to report // here is Friday NASDAQ trading plan

NASDAQ futures are heading into monthly option expiration day gap up after an overnight session featuring extreme range and volume. Price was balanced overnight, chopping along the Thursday low until about 2am New York when sellers made an attempt down and away. This revealed a strong responsive bid and since then price has rallied about +180 off the lows. As we approach cash open price is hovering about -50 points below the Thursday midpoint.

There are no economic events scheduled for today.

Yesterday we printed a double distribution trend down. The day began with a gap down reversal of the Wednesday afternoon Fed driven rally. Price held a tight range for the first few hours of the day while taking out the Thursday low early on. Then after many chops across the daily midpoint sellers began a campaign lower around 2:30pm and continued to sell right into the bell—action which eventually took out last Friday’s low. Of note, the daily VPOC never shifted down to the low.

Heading into today my primary expectation is for sellers to work into the overnight inventory and close the gap down to 12,816.25. Look for buyers down at 12,800 and for two way trade to ensue.

Hypo 2 buyers take out overnight high 12,898.25 setting up a tag of 12,927 before two way trade ensues.

Hypo 3 stronger buyers trade up to 13,000 before two way trade ensues.

Levels:

Volume profiles, gaps and measured moves:

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