The Sane Push Higher

After a gap lower today the market was mostly occupied with buying which kept the S&P on a tight grind higher throughout the entire session.  It’s had a slight algorithmic feel the entire session.  Despite the steady strength of the bulls, I spent most of my session lightening up current longs.  The only exception was my AM purchase of $MLNX, a longtime favorite stock of mine, that continues its dog like ways.

Tomorrow we get to hear earnings from JP Morgan and Goldman, two of the high velocity rockets that have been vital in lifting these markets higher.  They are both trading well into earnings with their stocks still showing positive momentum and even offering what could be considered an entry point today.  They’re almost trading too good to remain constructive on the names into earnings.

Now I could be wrong, and as Fly pointed out this morning traders don’t belong in the earnings forecasting game, but both Goldman and JP Morgue could announce stellar earnings and profits and still sell off.  Should this occur it would be a soggy blanket on the entire rally.  The way the benchmark S&P has been trading in conjunction with a weak Apple and flat banks is impressive.  But I’m embracing the uncertainty of tomorrow’s news.

My cash levels are near 50% after selling out of GS.  Obviously now I welcome any pullback.  I feel a little underinvested, so I will be digging into the charts this evening to flush out some potential longs I can grab should we continue pumping.

I still like meats.  I still like Textile and Apparel.  I had no idea my “Amalgamation” pick (SU) would trade so slowly but I still like it.  Everything else is subject to whimsical liquidation.

One of the first things I looked at this morning was a zoomed back chart of all the 2013 daily auctions.  I then traced the progression of the high volume nodes to shine light onto the intermediate term auction.

The trip thus far has been a very orderly auction, with the first pullback tagging the high volume node (not leaving it naked) and the pump following the pullback achieving new highs.  When trading momentum this is exactly the type of behavior you want to see.

The last three days have seen the progression of value slowing and beginning to tightly overlap, with our prior two sessions actually sharing a point of control at 1464.25.  The behavior around these levels the next time they trade will be a key piece to the overall picture.

As of this writing the globex session is making fresh lows and we could be starting our second pullback.  However I’m hesitant to call direction with the several macro events occurring today.  Instead my plan is to give more weight to the afternoon session and simply manage my existing positions.

Should we trade lower we will look for signs of buyers at the 01/09 VPOC at 1455.75 then the same day’s value area low at 1454.  If those levels can’t hold the sellers will target the 01/08 value area.

As you sit in your chair with your eyes fluttering, day dreaming of your bed as you digest your carb-heavy lunch, preparations are being made to resurrect the chicken.  Two tribesmen are burning thickets of sage to ward off the evil spirits as we call to the land of the dead.  We call for the chicken, we call for the chicken to ARISE!

Seriously, the smoke from these sage leaves is burning my nostrils and staining the crowned molding.  These guys mean business I’m sure of it.

I put the #meattrade on your radar this weekend over at chartpin.com were you paying attention?  Is anybody paying attention?  Or should I start talking about football and man-whoring?  Please do realize my derriere is on the line and my site statistics are teeny-weeny.  Fly’s going to toss me off a cliff like a deformed Spartan baby unless you start telling your financially driven friends how much coin we’re making over here.

Don’t worry, our edge won’t vanish.  It’s based on the laws of nature.

PS If you were REALLY paying attention back in the blogger network days, we grabbed 60% upside in $PPC last quarter.  Indeud.

Into the Facebook event I reduced exposure in a few of my social names and may continue selling exposure as the day continues.  However, the market continues to behave constructively and lots of breakouts are occurring across the board.

In order to keep my cash levels low, currently hovering around 20-25% I bought Quick Silver (ticker: ZQK) which I highlighted last night.  I also started buying back into the meat trade, buying up shares of my favorite PPC aka Macho Taco.

I still like ZNGA today.  I’ve tried selling it twice and it’s charmed me into sticking around both times.  This could change.

Friday featured a blunt shaped profile as the S&P resisted the urge to sell off instead opting to properly auction the toothy area from Thursday’s afternoon thrust.  However it sustained the level on the lowest volume since starting the year. Sustaining those levels was telling of the demand for equity exposure.  However we want to be aware of price levels that could signal a change in risk appetite.

Given the progress we saw last week, the risk range below has increased significantly.  I’ve noted in blue our first key area of support.  Coming into the US morning we’re seeing the Globex session off nearly six handles after making new highs at 1471.25 overnight.  As of 8am, we’re set to open near this first level of support.  Thus how we open will be very informative of the early tenor of market participants.

Should we break the Friday VAL (noted below in blue) it will be a quick trip to the naked volume control point.  If buyers aren’t present here we could see a quick rotation through Thursday’s value area and a test of our major support for the week noted in green.  Seeing us back in the 1450’s should not be a cause for closing out all long exposure, but we should closely observe the markets behavior at these levels should they trade.

The recent downdraft in Lululemon stock and the behavior that lured me back into shares of American Apparel had me turning a curious eye on the whole textile and apparel industry this evening.  A few swipes into The PPT on my Windows 8 touchscreen laptop and I’m laser focused on the industry’s stocks and The Fly’s robot brain is spewing diagnostics across my screen.  I’m multi-touching, feeling like Tom Cruise in Minority Report finding future pumps and looking awesome.  The future is good so far.  I’m glad to be living in it.

The chart is the final arbiter when determining whether to place a trade, but I love adding layers, measuring results, and building context.  I especially like to poke around and see what kind of news flow is occurring.  After observing the following chart, I turned an eye to the news flow.  First just look at the chart and observe the volume on this pump:

I figured something was afoot so I fired up the finviz news feed.  Look, they’re getting all giddy and noisy about a new CEO:

Early December, Bloomberg reported the prior-rumpled CEO was getting sued:

So here’s our context.  The company’s chief was sued, he was quickly and kindly shown the door and they brought in a hot boy replacement (so homo).  They brought in Andy Mooney.  He came to QuickSilver from Disney where he was chairman of consumer products.  And the market loves the news.

Take that context and layer it onto our context on the big indices, currencies, and industries and you’ll have a lovely feel for context.

This stock looks as overheated as the rest of the market.  The stock could certainly pullback before ripping higher.  Pull out to the weekly chart and you will see we’re nearing a critical price level.  Sellers are going to be at work up here, but we’ve rammed up here aggressively and on volume.  For a trade only and if it fits the whole markets behavior, I may grab a few shares on strength tomorrow.

On the swing timeframe the stock looks good down to $4.25.

Don’t be afraid to grip and rip, just make sure you define your risk.

In all the excitement last week of stocks pumping hard from their pullbacks, I began buying and selling with great disregard for the underlying companies.  My hon3y hole was showing up everywhere and I was simply grabbing on to the letters presenting my setup.

Next thing I know it’s closing bell and my portfolio is riddled with social media stocks.  Holy moly, I own FB, ZNGA, OPEN, Z, and SINA.  Yeah that settled in this morning like a hangover.  But I must say, the charts say yes.  I’m just wondering if the Facebook event is a sell the news type situation.  They’ve certainly intrigued me.

As for the twitter and blogosphere, I’m thrilled to have all my new followers and I look forward to adding value to your trading day.  I’d like to extend a special thank you to RaginCajun for highlighting me on his new #FF blog series.

The morning trade in the S&P played out in the constructive manner I suggested in my morning posting.  We’ve seen a thorough auction of yesterday’s upper range.  The market has sustained these levels even with the overall weakness from the financials.  I think that adds a layer of constructive bullishness to this mild mannered auction.

There are only three scenarios as we wind down into the close of the week:

1. Close within the auctioned range from today
2. Upside breakout
3. Downside breakdown

Scenario one and two are both bullish.  However, should scenario one occur, I will be more apt to scale long exposure off.  I would consider such a move a bit euphoric.  Scenario three isn’t damning to the bull case unless we lose the key support I referenced this morning.

http://youtu.be/V8rZWw9HE7o

There are times when the profile formed by a day session doesn’t look quite right.  Often this is a result of price being jerked around by the indecisive participants jostling their books.  Specifically, the upper range yesterday looks poorly auctioned.  It looks toothy, with no clear distribution of TPOs or volume.  One of the most constructive things the market could do today is properly auction the upper range from yesterday.

Overnight the S&P found support at 1465 but to my eye what’s most important today is where we sustain trade relative to the upper volume distribution noted below in blue.  Notice the very Gaussian form of the distribution, with a high volume node (point of control on the day) residing near the middle of the distribution.  This is a healthy auction.

One last note, the aforementioned distribution makes up the upper half of yesterday’s value area.  I’m giving yesterday’s value area a bit less significance since the lower distribution isn’t as uniform.  However, if we begin trading below the VPOC at 1462 a slip down to the value area low becomes very likely.  If we visit the value area low and whether the bulls show up at that level will speak volumes to the conviction of longs going into the weekend.

This morning I defined a price level where I wanted to position for the pump.  That way, even if I get pulled into a meeting to talk IRS bullshit or jerked around by my favorite underlings I can always pick up my chart and see where we’re trading and whether I should act.  It turned out to be a busy day.

When it comes time to buy into a rally, I want to buy.  I bought SE early on, thinking the market would hold my pivot at 1460 on the S&P March contract.  When the level broke, I cut TIVO.  For all I know, TiVo could rip tomorrow.  But when it was weak in a strong market and the market began giving back its early gap, I cut.

Next my eyes turned to Zale Corp to see how it was behaving after TIF missed on revenues.  They dropped some hot same-store data too, double pumparoo.  ZLC loved the news.  People who can no longer afford Tiffany but still need to get iced out can shop at Zale’s.  Shares ripped hard off their 200 day moving average and I hunted a dip to buy in.  I barely caught a riskier secondary entry after the primary entry vanished as soon as I loaded up the chart.  When I bought the stock it was already up almost 10% so it felt sketchy.  Thus I only purchased a 1/3 position.  The position was in question all day.  My swing setups are all based on how the stock closes.  Obviously I had no clue where the stock would close at 11am, but given the strength of the market and the strength in the name I gave it the benefit of the doubt.  It closed strong.  Nice.

Just before lunch I took a small ¼ scale in FB.  I usually scale in thirds, but the stock has been far too beast.  I’ll ride peak-to-trough if needed to see higher prices.  However, it’s always prudent to take gains when you’re at prior levels where price has demonstrated curious behavior.  I also purchased BGMD near the highs of the day only to sell the degenerate stock near the LOD.

Coming into the closing hour of the day it became apparent the market was accepting higher prices.  All I wanted to do was get longer.  I bought GOOG to bring my cash levels down.  Then I bought APP.  I know, busy day.

Finally, I scaled off 1/3 of my full size SINA position.  It seemed a proper sacrifice to the stock gods.

All this action and I still have 35% cash in case the hanging man candle forming on the index wants downside follow-through.  It was the only warning indicator flashing to my eyes, but it could signal buyer exhaustion.

I have to go swim now I have far too much energy.  Take care and get out of that chair friends.

RA RA WITH THAT SINA: