The Ultimate Fun Gu La

Today our good friends in Europe delivered the latest batch of pure, refined, crack. Over the next several months, tens of thousands of drone-crafts will fall from the sky, saddled with big bags of white powder.

They will land in corporate parking lots—elementary school playgrounds, and god willing one will crash right upon my skull—splitting me clean in half and exploding my body into an orgy of kittens and money like a capsule from Sonic The Hedgehog.

But let’s move beyond the Central Bank cartel.   You want to make money as do I. Where is the next setup?

You come here demanding setups, and that’s okay.

I can give you setups. It’s a necessary part of financial blogging. I am sticking with what works. The next major opportunity according to fungula logic is SOLAR.

The chart, it’s so ugly, so bearish—like AMZN. It is safe to say the TAN chart qualifies for some CMT bearish pattern recognition.

This is why it entices me to buy it, especially if it legs lower to set a lovely trap.

Listen, I missed VA because I have become deeply convinced that fading is the only way to enter these markets. When it was only up 1.5% this morning, it was already “chasing” for me. I am sick, but its working. Today the spider caught a few flies over at TWTR.

There will be more. I have gone on too long. Look to buy weakness in solar and let’s hope the markets don’t turn into a geriatric center now that more QE is here.

Due to the heightened volatility surrounding this open, I will not be offering any hypos. Here are my levels and if I make any major adjustments today, you will know it:

The sellers continue their aggressive campaign at $49.10, the micro composite VPOC. Buyers are in the passenger seat until they can claim this level:

Step up and short the best looking technical setups you can find. Sell, naked mind you, shares to me. If you would be so kind, allow me to use leverage.

Then pucker up. You are about the feel the stiff grooves of my juicer. You will be squeezed, and I will drink your blood. Your meat will be discarded in the nearest waste receptacle.

The false move, fast move is working until it doesn’t. Amazon has been my ‘tell’ for the duration of this strategy. If that stock plummets into the cold abyss then I will cease performing this hedonistic practice.

I managed to scale off a piece of S today which brings my cost basis down to $3.71. Knife catching is much more passive with a cost basis like that, yes?

Other moves: scaled most of my weekly FB calls and scaled half of the CLDX shares I took $20 delivery on last Friday. Running and gunning. Puts my cash up to nearly 35% ahead of the big ECB meeting aka I am back in the bunkers ready to pounce like a tiger, long or short.

Nasdaq futures are lower as we head toward cash open. The range and volume associated with the move are about as normal as it comes, both falling right in the middle of their respective Gaussian distributions. Price managed to take out yesterday’s cash high 4175.25 for a while but eventually traded lower. Yesterday evening’s big surprise came from NFLX earnings, which propelled the stock much higher in after-hours trade. The Presidential State of The Union had little effect on index price. Just ahead of the 8:30am housing-type data we saw a run-up in prices which has subsequently faded off/traded flat since.

Yesterday we were gap up to start the week (on a Tuesday) and subsequently faded lower for much of the morning. It was only when price attempted to enter the value zone established when combining last Thursday and Friday that we saw a sharp responsive buyer. Their behavior was strong enough that it reversed the auction process in the opposite direction and we ended the day with a Neutral Extreme print.

The Neutral Extreme print carries strong directional conviction, second only to the trend, or, conviction day. Contributing to the validity of this structure was an end-of-day VPOC shift to the high end of the range. Calling the strength into question is cumulative delta, which, could not manage to stay positive.

Heading into today, my expectation is for buyers to push early on to close the overnight gap to 4167.25 then struggle a bit with 4171.50 before working to take out overnight high 4178.50 and targeting 4184.25 where we see sharp responsive selling.

Hypo 2 is sellers on the open work down to take out overnight low 4149 and target 4146 – 4142 where we see responsive selling and then an attempt at filling the overnight gap.

Hypo 3 is a stronger buying drive early on that takes out 4184.75 early on and opens the door to run up the zipper to 4229.75.

Hypo 4 is strong sellers take out 4142.50 and work back down into Tuesday’s lower distribution and target 4127.50.

These levels are on the following charts:

These days are huge. Never mind the tumultuous emotions neutral days tend to conjure. The gains on my swing book, while a welcome respite, also are of no concern to me. What is exciting is the daily opportunity this volatility brings to index trading.

My happy place.

If you add together only the major swings the Nasdaq made today, there was over 200 points worth of range to scalp inside. If you can’t pull at least 50 points out of that, well, then, you must work harder!

So while oil takes my UWTI down 20% and TQQQ makes a little bloop and CLDX gets to dancing, I am more focused on making hay while the sun shines a burning beam of volatility.

Nasdaq futures are higher overnight on a slow-grind type session of trade. As we head into cash open sellers are recapturing some of the progress. The gap up to start the week has been a common feature the last several weeks; a common feature which gives way to selling. Whether that continues to be the case this week will be interesting to observe. Range is on the high end of normal for a globex session and volumes are running in the 2^nd sigma.

At 10am we have the NAHB Hosing Market Index as well as Fed’s Powell speaking. The housing data may carry an elevated impact on market prices after the weak showing from the Residential Construction industry last week. Several of the premarket earnings came in well. After hours, two of the majors we will hear from are IBM and NFLX. We also have a Presidential State of the Union Address set for 9pm. More housing stats are set for release in the premarket tomorrow.

Prices are trading inside a big area of acceptance currently, the microcomposite VPOC sits right at 4144.50. These high-volume areas tend to produce murky, choppy trading action. On either edge of this value we have volume pockets which are where the greater opportunity for trend-like behavior resides. Overall, the intermediate term timeframe is neutral-to-bearish. See below:

Short term we are gap up with some magnets below. Early on my expectation is for sellers to push into the overnight inventory and take us back to the MCVPOC at 4144.50 and continue lower to close the open gap down to 4134.75. I will look for signs of responsive sellers here (responsive relative to the overnight session, initiative relative the Friday) who work toward taking out the overnight high 4168.

Hypo 2 is buyers enter aggressive early and take out overnight high 4168.25 and continue higher to 4184 and possibly trend through that area.

Hypo 3 is sellers close the overnight gap 4134.75 and continue lower to 4120 area. I have highlighted these areas on the following market profile chart:

The market is rewarding participants who have the nerve to call its bluff. The uglier the chart, the more likely you can milk a quick 3-9% out of it. And let’s be honest, that’s all I want. Slow plays are just that, slow, and something you earmark 4 times a year. But the fire needs to be on the menu every day.

That’s just one small component to the Weekly Strategy Session. The rest is designed to build a thorough contextual feel while I trade. Does the entire thing matter when I am taking a 60 second scalp? I actually don’t know the answer to that.

Happy Martin Luther King Day. Enjoy an extra day away from the markets then be ready for an intense week of Central Banking foolishness, economic data pointing, and earnings season whipsaws.