NASDAQ down -50 to start the week, here is Monday trading plan

NASDAQ futures are coming into Monday gap down after an overnight session featuring extreme range and volume. Price drove lower Sunday afternoon when the Globex markets opened for trade, eventually working down into the April 22nd range (two Wednesday’s back) before a responsive bid stepped in. After buyers worked back into last Friday’s range, we spent the rest of the session in balance. As we approach cash open, price is hovering just below Friday’s low.

On the economic calendar today we have factory orders at 10am followed by 3- and 6-month T-bill auctions at 11:30am.

Last week kicked off with a gap up. Monday was choppy. Tuesday was trend down. Wednesday trend up. Thursday choppy at the highs, Friday we went back down to weekly lows. Throughout the week the Russell 2000 demonstrated relative strength. The last week performance of each major index is shown below:

On Friday the NASDAQ printed a double distribution trend down. The day began with a gap down below the prior two sessions’ ranges. Buyer worked into the overnight inventory early on but were unable to reclaim the Friday low. Instead sellers stepped in and reversed early progress made by buyers and drove lower, trading down into the lower quadrant of Tuesday’s range before settling into a balance along the lows. We ended the week near weekly lows.

Heading into today my primary expectation is for buyers to work into the overnight inventory and close the gap up to 8716.75. Look for sellers up at 8728 and two way trade to ensue.

Hypo 2 sellers active ahead of 8681 setting up a gap-and-go lower, down through overnight low 8556.25. Look for buyers down at 8527 and two way trade to ensue.

Hypo 3 stronger sellers tag 8485.25 before two way trade ensues.

Levels:

Volume profiles, gaps and measured moves:

This entry shall be brief as it is already 65 degrees in the murder mitten and the forecast calls for sunshine and 70s. What I am about to tell you is based on the the following beliefs, which I hold to be true:

• The stock market is an indiscriminate mechanism that regularly eviscerates the majority of short term speculators.
• Beginners luck is real but doesn’t last long.
• Traditional technical analysis is often made to be a fool.
• Markets will naturally price in the COVID-19 economic shock.

First off, here is the rising wedge everyone is looking at. We can debate exactly where the lines need to be drawn (well y’all can, I dgaf) but the essence is here:

It is one of those technical patterns that anyone who has studied investing/trading theory has seen in a technical analysis portion of the book. There is one major flaw in clear technical patterns—we all see them. This leads people to make short term bets. Even option bets. The positions are loaded up, the backroom algorithms take in all this data, and then poof! said algos zero out these trades in one fell swoop.

To really screw the pooch, it works better if the move sort of starts to look like it is working. In this case, via a downward break from the wedge. This increases conviction in the technical set up. More people place bearish bets or raise cash. The algos jiggle with indifferent data, sounding the death knell in some otherwise quiet server room in Chicago.

I talk to a lot of people. I am a business man of the people. I do less talking and more listening. I listen to sentiment without applying any of my bias our perception to it. This I accomplish through a variety of mechanisms (it is complicated) but basically I am a mirror. Or a parrot. On some occasions even a mocking bird, but only if I need to demean someone into possibly changing their rotten ways.

Consensus is that the worse is yet to come. The real supply chains issues will hit in the fall, many say. This is said in real estate circles, manufacturing circles, not so much agriculture, but definitely from builders.

They are bored maybe and talking to me. They all perceive worse times coming.

The active traders I take seriously, they’re almost all expecting downside resolution.

These are just observations. Fine.

Systematically, I have reason to be bearish heading into the first full week of May. The wedge broke downward, whatever, what really weighs my bias is IndexModel. It is bearish heading into next week. However, that is only one week, and it is also the first full week of May. This is where everything becomes murky. Normally May is a time of celebration, or at least preparation for celebration—graduation, weddings, Mother’s Day and the like. It is when us northerners finally go outside in our bathing suits and relax.

But everyone has been “relaxing” for over a month now, sequestered to their homes. Some people love their home life, still others rue the day they can escape their family and return to the peace of their job/office/etc. These people may not know how to live, but they will be back to work. They will not be watching the stocked market as closely, they will be selling stuff, or sawing boards, or whatever it is people do for money.

Either thru leisure or jobber, attention will start to drift away from the markets. Markets will be markets, gyrating up and down until we establish a new, post-Covid value. Is that value lower than where we valued markets last May? I have no idea. Doesn’t seem like much has changed. If anything the proverbial deck has been reshuffled, but the winners are still winning and creating economic expansion.

So that’s it. I expect some downside early in the week which will serve to spook some investors into raising cash and cause active traders to increase their hedges/shorts. Then an about face higher, real vicious like.

Said simply—-the overplay for the underlay.

Raul Santos, May 3rd 2020

Exodus members, the 284th edition of Strategy Session is live, go check it out!

NASDAQ futures are coming into the first day of May and the last trading day of the week down a quick -200 after an overnight session featuring extreme range and volume. Price drove lower overnight, perhaps driven by earnings out of major components Amazon and Apple, which both traded lower following their earnings announcements Thursday afternoon. NASDAQ gave back its Wednesday gains before coming into balance, and as we approach cash open price is hovering near Tuesday’s close.

On the economic calendar today we have PMI manufacturing index at 9:45am and ISM manufacturing index along with construction spending at 10am.

Yesterday we printed a normal variation down. The day began with a slight gap down. Sellers spiked the open after a brief open two way auction, and buyers were seen pretty high up into Wednesday’s range, near the upper quadrant defending. These buyers were eventually overrun as we went down and tagged the Wednesday VPOC before a choppy balance ensued into the close. There was a ramp higher into the bell before the Amazon and Apple earnings, which during settlement pushed price back down near the lows.

Heading into today my primary expectation is for buyers to work into the overnight inventory and trade up to 8846.50. A battle ensues here before we eventually continue higher and close the overnight gap up to 8934.50.

Hypo 2 sellers take out overnight low 8725.25 and go a tad lower, down to 8695.50 before a choppy balance ensues.

Hypo 3 stronger sellers liquidate down to 8618.75 before two way trade ensues.

Levels:

Volume profiles, gaps and measured moves:

NASDAQ futures are coming into Thursday with a slight gap down after an overnight session featuring extreme range and volume. Price was balanced for much of the overnight session after springing higher during settlement on the wings of strong earnings from Microsoft, Tesla and Facebook. We traded into levels untouched since late February before settling into a chop above Wednesday’s high. Then around 7:45am New York prices eased off the highs. At 8:30am initial/continuing jobless claims data came out worse than expected. As we approach cash open price is hovering in the upper quadrant of Wednesday’s range.

Also on the economic calendar today we have Chicago PMI at 9:45am and 4- and 8-week T-bill auctions at 11:30am.

Yesterday we printed a double distribution trend up. The day began with a gap up in range, with price opening above Tuesday’s midpoint. Buyers drove higher after a brief two-way opening auction, trading to a new weekly high before settling into a tight flag. Then, after the 2:30pm Fed Chair presser buyers stepped in and campaigned a fresh leg of discovery higher. The close was choppy but we ultimately went out at session high.

Heading into today my primary expectation is for buyers to work into the overnight inventory and close the gap up to 9038.25. Look for sellers up at 9097.25 and two way trade to ensue.

Hypo 2 sellers gap-and-go lower, sustaining trade below 9000 to set up a move down to 8950 before two way trade ensues.

Hypo 3 stronger sellers trade down to 8900 before two way trade ensues.

Levels:

Volume profiles, gaps and measured moves:

Big day for the markets.

NASDAQ futures are coming into Wednesday gap up after an overnight session featuring extreme range and volume. Price worked higher overnight springing up through Tuesday’s midpoint around 9pm New York and sustaining trade above it for the duration of the session. At 8:30am GDP data came out weaker than expected. As we approach cash open price is hovering near the upper quadrant of Tuesday’s range.

Also on the economic docket today we have pending home sales at 10am followed by crude oil inventories at 10:30am. At 2pm we have an FOMC meeting annoucement with consensus being that the Fed is out of options and likely to stay the course of their current target 0% interest rates. At 2:30pm there is a Fed Chair presser and this is likely to drum up more of a reaction than the actual meeting announcement.

After the bell Tuesday Google parent Alphabet, Inc. reported earnings:

Alphabet Q1 EPS $9.870 May Not Compare To $10.330 Estimate, Sales $41.160B Beat $40.380B Estimate

Shares of the major NASDAQ component are +8% in pre-market trade.

Today after the bell we have more key NASDAQ components reporting. Microsoft, Tesla and Facebook are set to report earnings after the bell.

Yesterday we printed a double distribution trend down. The day began with a gap up to new swing high then a open sell drive down. Sellers quickly reversed all of Monday’s gains and closed the weekend gap before continuing lower, down through last Friday’s midpoint. The sellers met some responsive buying by late morning and we chopped along the session low for most of the day, eventually closing near the low before a spike higher during settlement (likely due to Alphabet earnings).

Heading into today my primary expectation is for buyers to gap-and-go higher, trad up to 8931 before two way trade ensues.

Hypo 2 stronger buyers trade up to 9000 before two way trade ensues.

Hypo 3 sellers press into the overnight inventory and close the gap down to 8720.25. Look for buyers down at 8700 and two way trade to ensue.

Levels:

Volume profiles, gaps and measured moves:

NASDAQ futures are coming into Monday pro gap up after an overnight session featuring extreme range and volume. Price worked higher overnight after being in balance until about 10pm New York. Since then price has exceeded recent swing high and as we approach cash open, we are hovering at the 03/04 open gap.

On the economic calendar today we have 6-month T-bill and 2-year Note auctions at 11:30am, then 3-month T-bill and 5-year Note auctions at 1pm. Likely to be purchased by the Federal Reserve.

Last week began with a gap down across all major indices. Early Monday strength gave way to afternoon selling that extended into much of Tuesday. Responsive buyers showed up late Tuesday and that set up a strong reversal trend up Wednesday. We then had big chop Thursday and Friday, which eventually resolved with us ending about flat on the week. The last week performance of each index is shown below:

On Friday the NASDAQ printed a double distribution trend up. The day began with a slight gap up. Sellers closed the overnight gap in early trade and exceeded Thursday’s low before a strong responsive bid stepped in. Buyers then reclaimed the midpoint then began a steady campaign higher, eventually trading up near Thursday’s high and closing near it (but not exceeding it).

Heading into today my primary expectation is for buyers to gap and go higher, trading up through overnight high 8898. Look for sellers up at 9000 and two way trade to ensue.

Hypo 2 stronger buyers trade up to 8934.50 before two way trade ensues.

Hypo 3 sellers press into the overnight inventory and close the gap down to 8767.50. Sellers take out overnight low 8730 before two way trade ensues.

Levels:

Volume profiles, gaps and measured moves:

It is hard being the voice of reason amid a bunch of wanton degenerates out to cure bordem via stock market speculation, but I have worked hardt for nearly 15 years setting my foundation stones and building my humble fort, and if I have to be strong for others then so be it.

Never interrupt your enemy when he is making a mistake. – Napoleon Bonaparte

I’ve never been one of the cool kids on Fintwitter, and after all the salacious things I’ve written, I don’t expect them to usher me into their clique anytime soon. If somehow you’ve stumbled upon this here humble Raul blog (hRb) it would seem you have good karma. And if you’ve stuck with me through my worst, we must be like some kind of homies. Thank you all for your time.

Regarding markets—every model and system built to tell me which side of the tape is likely to be controlled is telling me the last week of April is setting up to be a bull run. That being said, we have pretty much every company that actually matters in 2020 set to report earnings:

• Google parent Alphabet, INC report Tuesday after-market-close (AMC)
• Microsoft, Tesla and Facebook Wednesday AMC
• Apple and Amazon Thursday AMC

If you opened a Robin Hood account and bought just those names with the intention of holding them for 10 years, I would pat you on the back and set you on your way, knowing you’ll be better for it. Add other institutions of the new millennium like Costco Walmart and Square and I’d be like, damn son have you been stalking me?

I still have a massive Twitter position. It remains my second largest holding after Jack managed to strike a deal with the perverted old kooks running Silver Lake and Elliott management, two firms who used hostility to grab several chairs on the Twitter board of directors. I do not know why I’ve held Twitter for so many years, but as long as Jack is in charge I shall remain.

I invest primarily in jockeys, not horses.

I invest in jockeys and also horses that resemble the mythological gods of ancient civilizations. Like Alphabet, Inc. They are omnipotent, benevolent, merciful and forgiving, like Jesus. Costco is like Seshat, the ancient Egyptian goddess of wisdom, knowledge and writing because the entire eidos of Costco was created by a bunch of accountants. Cost+12% margin. That’s it. Simple and irresistible, like a goddess.

I invest in Facebook hesitantly, because I like the idea of Mark Zuckerberg being able to issue Libra coins to people for good social media behavior. This may help cure the internet of it’s psychopathic streak, or at least push this twisted psyche out of the core social platforms. Keep the crazies down in the 8chan dungeon with the rest of those friggin’ defects. Let us progressive and compassionate thinkers inherit the promised land.

Welp, I’ve about tapped out on that tangent.

Models are bullish, lots of wildcards on deck. There is a FOMC rate decision on Wednesday afternoon. The gambling halls down in Chicago give it a 0% chance of being a live meeting, meaning rates are entirely predicted to stay unchanged at 0%. And having already opened the spigots wide open on direct bond buying, the Fed seems to be out of major moves. That being said, how the market reacts Wednesday afternoon after the Fed Chair conference is likely to dictate direction into the second half of the week.

I will be pressing longs only until then, working to capture handles in the NASDAQ 100 whist letting my swings and long-term investments run.

Cheers to your month-end lads, may be be strong and gainful,

Raul Santos, April 26th 2020

Exodus members, the 283rd edition of Strategy Session is live, go check it out!

NASDAQ futures are coming into Friday gap up +50 after an overnight session featuring extreme range and volume. Price continued lower Thursday evening after an afternoon bout of selling continued into Globex. Said selling saw price briefly trade below the Wednesday low before responsive buyers stepped in. Said buyers reversed the evening selling and more, reclaiming Thursday’s range. At 8:30am durable goods orders came out weaker than expected. As we approach cash open, price is hovering below Thursday’s midpoint.

Intel reported stronger than expected earnings after the bell Thursday but investors received the guidance poorly. Shares of the chip maker are about -5% lower in pre market trade.

Also on the economic calendar today we have U. of Michigan’s final April reading of sentiment at 10am.

Yesterday we printed a neutral extreme down. The day began with a gap up and drive higher, with price tagging the NVPOC at 8743.25 before pausing a bit then continuing higher. The auction stalled out around Monday’s midpoint. Then sellers stepped in and reversed the entire morning move. After a few chops along the bottom side of the daily midpoint, sellers drove lower into the close, closing near session low.

Neutral extreme down.

Heading into today my primary expectation is for buyers to gap-and-go higher, trading up to 8684 before two way trade ensues.

Hypo 2 stronger buyers trade up to 8796.75 and potentially tag the naked VPOC at 8820 before two way trade ensues.

Hypo 3 sellers work into the overnight inventory and close the gap down to 8600.50. From here they continue lower, down through overnight low 8498.25 before two way trade ensues.

Levels:

Volume profiles, gaps and measured moves:

NASDAQ futures are coming into Thursday gap up after an overnight session featuring extreme range and volume. Price was balanced overnight, chopping along the top side of Wednesday’s midpoint for the most part until the 8:30am initial/continuing jobless claims data. That data came out in-line with expectations (albeit really troubling). Since then NASDAQ futures have risen about 30 handles. As we approach cash open, price is hovering near yesterday’s high.

Also on the economic calendar today we have Markit composit/manufacturing/services PMI data at 9:45am, new home sales at 10am, 4- and 8-week T-bill auctions at 11:30am and a 5-year TIPS auction at 1pm.

Be aware we also have our first major earnings event of this quarter after the bell, with Intel set to report.

Yesterday we printed a double distribution trend up. The day began with a gap up and after a brief two way auctions buyers stepped in and began a steady campaign higher, eventually closing the 04/20 gap left behind early Tuesday. Some sellers pressed us back down near the midpoint at end-of-day.

Heading into today my primary expectation is for buyers to gap-and-go higher, trading up to 8743.5. Look for sellers up at 8797.75 and two way trade to ensue.

Hypo 2 stronger buyers trade up through 8800 and sustain trade above it, setting up a run to close the open gap at 8892.50.

Hypo 3 sellers work into the overnight inventory and close the gap down to 8635.50. Sellers continue lower, down through overnight low 8580.50. Look for buyers down at 8532.50 and two way trade to ensue.

Levels:

Volume profiles, gaps and measured moves:

NASDAQ futures are coming into Wednesday gap up after an overnight session featuring extreme range and volume. Price was balanced overnight, chopping along the bottom-side of Tuesday’s midpoint until about 2am when buyers stepped in and initiated higher prices. As we approach cash open, price is hovering about 60 point above the Tuesday mid.

On the economic calendar today we have crude oil inventories at 10:30am. Investors are likely to be keen on this data after seeing front month oil futures briefly trade negative on Monday.

Yesterday we printed a double distribution trend down. The day began with a pro gap down below the Friday and Monday range. Sellers drove lower off the open, trading down to the lower weekly ATR band where price paused for a moment before making a more significant leg lower. This second leg saw price trading down near the open gap left behind on 04/13 but not quite filling it. Instead responsive buyers defended a conviction buy zone they created from 04/13 at 11:21 am until 04/14 at 3:50pm. This led to a strong spike, all the way back up to the daily midpoint. we ended the day chopping along the lower quadrant of range.

Heading into today my primary expectation is for buyers to gap-and-go higher, trading up to 8666 before two way trade ensues.

Hypo 2 stronger buyers close the Monday gap up at 8690.75. Look for sellers up at 8798.25 and two way trade to ensue.

Hypo 3 sellers press into the overnight inventory and close the gap down to 8431.25. Sellers continue lower, down through overnight low 8400. Look for buyers just below at 8388 and for two way trade to ensue.

Levels:

Volume profiles, gaps and measured moves: