Nasdaq 100 TICK Stats

Ahoy mates, I saved you the rigmarole of running standard deviation studies on the NASDAQ 100 TICK. Using high quality IQ Feed data, I ran a study on 1-minute bars to determine 1^st-3^rd standard deviation for the indicator.

I set audio alerts for the 2^nd and 3^rd thresholds using Multicharts. We’ll see if those last or end up in the junkyard with the other algo scraps.

Here’s how the data looks on my side:

Positive TICK 1^st, 2^nd, 3^rd sigma: 36, 54, 70

Negative TICK 1^st, 2^nd, 3^rd sigma: -37, -52, -68

Why does any of this matter? Have you ever looked at something and thought, “hmm, that’s different”? Would you want to know if something you’re seeing is in fact abnormal? I do. When I am in a trade I accept that my limbic system will be active and a big part of my job is being aware of the waves of emotion that sometimes get in the way of trading. One of my boulders to channeling that creative energy into objective trading is basing my observations and decisions on cold-dead numbers, logic.

Are they Holy Grail trading signals? No, but they do offer a peek inside the engine of our good friend /NQ_F.

It’s funny—I communicate with many traders. Some are further along, some are about where I am, others trade entirely different, and some are grommets finding their way. Of the lot, none of them ever suggested using a NASDAQ 100 Net Tick as I go about my day. And I never thought of it, until today.

I like the information it provides while managing /NQ_F trades, especially in a slow tape like this. It also makes more sense because it tracks just the 100 underlying components of the futures contract. Added bonus: +/- 100 are your polar extremes making it simple to reason through…although this week I intend to run a 1^st and 2^nd sigma study on it, for good measure.

MOoving on—I took some risk today and bought momentum dips. The risk profiles are actually quite tight, thus I feel silly even mentioning their existence. They just as easily could be sold tomorrow before lunch. Plus, you never know which prevalent algo hunter is watching *tips tinfoil cap*

It is about as uncomfortable to take short-dated-momentum risk atop Mount ATH as it was to buy down in the trough. I suppose you must revel in said conditions in order to encounter the fortuitous gains of our benevolent momos.

The Nasdaq is starting the week flat after an abnormally docile overnight session. Both range and volume are compressed below normal which is even more radical given the longer duration of the Sunday/Monday globex session.

Last we the market started at swing highs and spent three days [one, Monday, a holiday] trading flat before making a two day upward thrust. Friday’s action resembled a trend day although not an exceedingly strong trend day.

We have Existing Home Sales at 10am and Dallas Fed at 10:30am. Traders are already looking forward to Tuesday and Wednesday when Fed Reserve Chair Yellen is set to testify before the U.S. Senate and House. They will be listening for any hint of when the Fed will raise interest rates.

Heading into today, my primary expectation is for balanced, two-way action. Sellers may push into the long inventory a bit to test down into Friday’s move. I will look for responsive buyers to defend from 4423 -4420 area.

Hypo 2 is buyers continue drifting the market higher and sustain trade above 4435.

Hypo 3 is a sharp move down through 4423-20 area to test 4413 then 4408.

See what I am seeing, below:

Oil prices are back to their intermediate term value point at about $48.75. A few weeks back, sub-$50 oil was considered a “sweet deal” and buyers were soaking it up. This morning price has definitively returned to intermediate term balance.

We are likely to overshoot value a bit to the downside, but otherwise I am looking for prices to stick in the middle for a bit.

You know your blood is truly northern when 28 degrees feels balmy and a sweater is sufficient for going about the town. Suddenly you’re resisting the urge to put on shorts. It all goes back to relativity. For weeks we were single digits or negative. You bear the brunt of it on your hands. Friends start calling you Chappie because your knuckles are swollen and bloodied. But you are stronger because of it.

The same goes for trading [yes, I am going somewhere with this]. You go through hellish, choppy conditions and you come out of it better if your purpose is solid as stone. The wounds heal and you outpace the next set of young lads nipping on your heels.

Truthfully, that’s life in a nutshell. You grow, run like you’re being chased, and then you die.

Subs, I toiled all weekend to serve up some cool opportunities setting up in the equity complex. The Weekly Strategy Session should be hitting your boxes as I type. May it serve you well in forming a contextual read, mates.

Four days of drift came to an anticlimactic conclusion this OPEX week after investors were rip-savaged in January. With one week to go, the Nasdaq is on track for nearly a 6% monthly gain. Not many expected this type of action, almost a cruise control, especially without Fed tailwinds and the façade of a recurring Greek debt crisis.

If you examine our recent history, you may recall the illustrious winship we experienced to start last year. Champagne corks were popped daily and gains were well over 25% year-to-date. That was right about this time last year. Then we spent 12 grueling months in the grind house. It brought out the best, it brought out the worst, and it left a notch on your face.

Today the market is bucking a negative news cycle and “all this tech money” is creating a hyper-pocket of wealth in San Francisco. Business is booming and you need yourself a way to capture some of its effects so you can pay your taxes and buy nice things.

Nice things are nice, but as many of you know Raul lives a peasant’s lifestyle—more hip to freedom than possession. Unlike a peasant my blood boils come springtime for conquest and battle. Are you ready for the monarch butterfly to emerge from his cocoon with glistening slabs of muscle girth? All directed upon your village and women?

Nasdaq futures are flat as we head into Friday’s trading session. The holiday shortened week featured flat trading until yesterday when an early OTF buyer came in and triggered a short squeeze. We then spent much of the afternoon drifting sideways with a slight upward skew.

The action carried into the overnight session where prices continued to drift higher until early this morning when a seller knocked them back a bit. Price held yesterday’s VAL and is working higher as we approach cash open.

Heading into today, my primary expectation is for buyers to push into this morning’ seller to close the gap up to 4414.75 and test yesterday’s high 4415.75. Here I will look for sellers to defend and then push us below the overnight low 4406.25 to work us back into Wednesday’s range 4393.50.

Hypo 2 is buyers take out yesterday’s high 4415.75 and target the overnight high 4425.25.

Hypo 3 is sellers push down through yesterday’s low 4387.25 early and down into Wednesday’s range to target 4382 mCVPOC. Extended target is NVPOC at 4360.

Markit MFG PMI at 9:45 may lend to a choppy 2-way open until after the number.

Levels below:

As we head into cash open, you can see oil prices are trying to hook around for a local higher-high. You can also see the key intermediate term levels on the following volume composite:

This week has been an exercise in patience AND diligence. It is easy to simply be patient, passive, and non-engaging. But to be engaged and ready to act when your number is called is slightly different.

For me it requires frequent small snacks to keep myself from becoming hungry aka distracted. I take a mandatory break from the screens entirely and do some basic calisthenics—squat jumps, planks, and a stretching routine. I also deploy a variety of audio alerts to certain market conditions.

Then I sit, and stay calm, and when the time comes to engage I do so, then back to sitting. It is paying. A big part of trading is sitting—I think Livermore said something of that nature.

Oil managed to tag my lower threshold today which was interesting, but it was snatched up. The two way market continues.

Despite the bigger range today, there was still little one needed to do in the Nasdaq. I took a few trades early on and missed the 12:30pm ‘dip’ by about two ticks—such is life. I am very selective in this slow environment because there’s no sense blowing hard fought gains when there won’t be many opportunities to recoup.  Today felt like a trend day by 10am and even more so by 10:30.  It is more of a P-shaped short squeeze but the unidirectional nature of it whispers trend.  I am still working the hypo 4 measured move target at 4417.50 thesis.

The reasoning behind strict plan adherence becomes evident when you reap the benefits.

The Nasdaq is up a touch, trading in the upper half of yesterday’s range. Price exceeded yesterday’s high briefly this morning on [untrue] reports of an agreement of sorts in Greece. The move went on to test the 4400 century mark before falling back into the weekly long value/balance we have formed.

At 8:30am Initial/Continuing Claims came out a touch worse than expected as was the revision to the prior number. This brought in a small bit of buying but nothing overly notable. At 10am we have Leading Indicators and the Philadelphia Fed, at 10:30am the Natural Gas Storage statistics, and at 11am Crude/Gas Inventory stats.

Wal-Mart reporting earnings this morning and they are often considered the purest data point to the overall health of the retail front in America. They are trading a touch lower premarket after beating earnings expectations and raising the dividend. The selling pressure may be attributed to their guidance where they cite the strong dollar as a potential headwind to forecasts.

As stated earlier, we are in 3 days of balance. This is occurring just after the market made new swing high and as we push through the monthly option expiration week. The action is in stark contrast to the rest of the year so far, which has featured large/fast ranges.

Heading into today’s session my primary expectation is for sellers to push into the overnight inventory and test down to 4382. Below here I will look for buyers to respond and start working toward yesterday’s high 4393.50.

Hypo 2 is sellers push down through the overnight low 4376. In this instance I will look for responsive buyers at 4372.75. They struggle to reclaim 4382 setting up a liquidation lower to target 4363.25 then the naked VPOC at 4360.00.

Hypo 3 is a variation of hypo 2 where the responsive buyers at 4372.75 hold and 2-way balance ensues a bit lower.

Hypo 4 is we drive and take out the overnight high 4400 century mark to target the measured move to 4417.50.

Levels are highlighted on the following charts: