Off The $BIS Bus

With the forecast calling for chop, and after four consecutive session of slowing markets, I saw fit to book my biotech short, via BIS, for now.

I still think the ultimate biotech comeuppance is coming—an event so gory it leaves a lasting scar on the psyche of bulls for a generation.  I will revisit this theme at month end and, GOD WILLING, at higher prices.

TBD

We are currently priced for a gap up in the NASDAQ futures after an overnight session that featured normal volume.  The range was also normal.  It started by holding the Wednesday low then a rally up through the entire range resulted in a test above the high, briefly, before price settled back into it.  At 8:30am Initial/Continuing jobless claims data was better than expected.  We also had CPI data out better than expected—the initial reaction is selling.

We have a slew of medium impact events to wade through today.  The Philadelphia Fed puts out their reading at 10am.  We have natural gas storage at 10:30am followed by crude/distillate inventories at 11am.  Then at 3:30pm a Monthly Budget Statement will be issued.

Yesterday we printed a neutral extreme down day.  It started with a range extension lower which took out the overnight low and probed just below last Friday’s low before catching a bid at making a new high on the day.  Said high was only made by 1-tick, a failed auction.  We then travelled back through the entire range to close near session low, earning the day an ‘extreme’ addenda to its neutral nature.

Heading into today, my primary expectation is for chop.  We have option expiration tomorrow and lots of medium impact economic events.  The markets are also digesting several earnings announcements.  Look for sellers to work down into the overnight inventory down.  They will be targeting 4332 but may stall out beforehand.  Then look for two-way trade around the MCVPOC at 4360.

Hypo 2 sellers work down to 4330 and set their sights on a gap fill down to 4326.50.  Look for them to take out overnight low 4323.50 and probe Wednesday’s low 4317.50 before finding responsive buyers and two way trade ensues.

Hypo 3 buyers gap and go higher, target overnight high 4366.75 then set their sights on 4384.25.  Stretch target is 4392.

Levels:

I was all over the NASDAQ this morning. Equipped with a primary hypothesis and a wavering short bias, I trounced the morning high ticks like a caveman chock-full of pre workout.  When I was done bashing the brains of early buyers in, my decisiveness was gone.

For the rest of the day I was a leaf blowing in the wind.  Even the most rudimentary task, like ordering lunch, would flicker in-and-out of my brain like the ass of a lightning bug.  Everything is taking exponentially longer than normal.

So I fully turned my attention to civic duties.  I am responsible with dolling out free samples of Exodus to the plebian reader class.  Fine, it is a noble undertaking, to grant unfettered access to our market intelligence platform (email [email protected] if you want a trial).  Yet even during this repetitive task my brain would wander away, like a stubborn donkey.

You cannot whip a stubborn donkey into compliance.  And you certainly can’t trade without a cooperative donkey.  Actually, you can trade, but in 3 minute intervals your account will be chipped away, failure, failure, failure—done.  I used to do that all the time.  Now, and budda willing it sticks, I can see when my mind goes AWOL and just pack up my robots and do something else.

This also meant putting words together to make a blog was harder than taking the SAT.  Do you see what is happening here? Did you make it this far.  I’m sorry if you did.  I have nothing to offer.  I’m just grateful I made money before the affliction hit.

Just take two free trials of Exodus and call me in the morning.

NASDAQ futures are coming into Wednesday flat after a normal session of trade.  By normal I mean both range and volume were within their respective first standard deviation.  Price pushed down below yesterday’s range and down into last Thursday before finding buyers and rotating back up to the high.  Advance Retail Sales at 8:30am came in slightly lower than expectations and introduced some sellers into the market.

Bank earnings were sort of a non-event—BAC is up a touch, WFC and JPM are down a touch.  SanDisk is holding onto its gains after work of a sale came out yesterday evening.

We also have the Fed Beige book today at 2pm.

Yesterday we formed a neutral extreme down.  After a borderline pro gap was snapped up by buyers we formed an excess high and then traversed the entire range to close near the low of the session and just below initial balance (hence the neutral extreme classification).

Heading into today, my primary expectation is for buyers to make a push to take out overnight high 4350.50 and target the MCVPOC at 4361.  Just a touch higher at 4366 look for responsive sellers to emerge and two way trade to ensue.

Hypo 2 sellers work down through the overnight range and take out overnight low 4321.  Look for a move to target 4310.50 then look for responsive buyers and two way trade to ensue.

Hypo 3 sellers move fast, take out 4310 early setting up a move for the 4300 century mark. Stretch target is the MCVPOC we established last week down at 4290.

Hypo 4 buyers sustain above 4366 setting up a test of yesterday’s high 4390.75.

Levels:

Every time this company comes to mind, I’m reminded of the Wall Street Warriors episode where a couple of hot-shot brokers concentrate a butt load of client money into an SNDK earnings gamble.

I just spent like 10 minutes looking for the clip.  It was a painful ten minutes, but ultimately I failed to produce the video showing these jokers in action.  I digress.

The sleuths over at Bloomberg reported that SanDisk is working with financial advisors (?) because they want to prepare to sell their company.  Shares in the company have been on a death march this year, down about 35% as of today’s close.

The stock was up about 15% afterhours on the rumor.  Normally I couldn’t care less about this event, but considering the sensitive location of the PHLX Semiconductor index (SNDK is a component) I have to wonder if the top-end of range is at risk of being breached—throwing a wrench in this week’s short bias.

As always, TBD.

Let’s see if anyone is paying attention to all the auction logic I’ve been providing.

MULTIPLE CHOICE Once a market establishes value, and barring an external force changing it, what do you do?

A. Buy below value, with intent to sell at/above value

B. Short sell above value, with intent of buying to cover at/below value

C. Eat tacos

D. All of the above

The last 3.25 days managed to shift value higher, albeit slightly.

You can see it on the updated volume profile chart, pictured below.

The market likes these prices, so we can just flop around them until a catalyst comes blowing into town.

..and it acts like a range, it’s definitely not a trend.

Breadth is decently low, below 40% inside Exodus. Financials leading us lower has me questioning the validity of the sellers because banks don’t matter until tomorrow.

In the meantime put your eyes on the PHLX Semiconductor index, right on the top end of what appears to be a range, see below:

Transports are nearing the top end of their intermediate-term range as well, after sellers failed to defend bracket low, post breakdown.

USD/JPY is flirting with the breakdown, again.

And EEM has already rolled over? Perhaps…TBD

Heading into Tuesday, NASDAQ futures are priced for a gap down. The overnight session started with a small spike beyond Monday’s high on comments from Brainard before reversing course and pushing lower. Range is slightly elevated on normal volume, and price managed to push below Monday’s low and through nearly all of last Friday’s range. At 6am NFIB Small Business Optimism came out better-than-expected and brought some buyers into the market.

The economic calendar is quiet this morning aside from earnings announcements. Fed’s Bullard has been speaking since 8am, but the calendar is otherwise open.

Yesterday we started the week gap up, quickly filled it, then worked higher before stalling into a slow grind session. It was Columbus Day and many major financial institutions were closed. However, we did push a bit deeper into the 09/17 swing high day before turning lower.

Heading into today, my primary expectation is for buyer to work into the overnight inventory. However, look for them to struggle at filling the overnight gap, instead stalling out below 4362. From there look for a move to take out overnight low 4339.25 setting up an exploration of the low-end of value, look for responsive buyers down at 4311.

Hypo 2 sellers push off the gap down and take out overnight low 4339.25 early. They continue down through 4311 and target the 4300 century mark.

Hypo 3 buyers fill the overnight gap up to 4376 then set their sights on overnight high 4381.50. Upside target is 4392 with a 4400 stretch target.

Levels:

After reporting earnings below estimates, Healthcare juggernaut Johnson & Johnson announces a massive $10B Buyback Plan.

This attempt to quell investor concerns does not appear to have done much—shares are lower in pre-market trade.

Buybacks aren’t what they used to be.