NASDAQ futures printed a low volatility balance session last night that traded inside of the range set yesterday. At 8:30am Durable Goods data came out slightly better on the top line read, and slightly below expectations ex-transportation.

Today is a busy day on the economic calendar which is likely to produce some chop. We have S&P/Case-Shiller Composite-20 at 9am, the Markit Composite/Service PMI stat at 9:45am, and Consumer Confidence at 10am. However all of these economic events will likely carry less impact on NASDAQ futures than Apple earnings, set for release after market close.

Yesterday we printed a normal variation up day and an inside day, meaning, we trade within the range printed last Friday. This suggests balance and waiting.

Heading into today, my primary expectation is for more of the same. More chop, more waiting. Look for buyers to push into the overnight inventory and work higher to take out overnight high 4619.75 then make a move to probe above value around 4630 before responsive selling is found. Then balanced trade north of 4600.

Hypo 2 a bit more selling pressure, take out overnight low 4601.25 then set our sights on 4580 before responsive buying and two-way trade.

Hypo 3 buyers become initiative, perhaps after 10am, and work higher to target the gap Apple left behind last quarter up at 4668.25 before two way trade ensues.

Hypo 4 selling accelerates, down through 4580 to test 4565 before two way trade ensues.

Levels:

You guys ask me all the time what I think about oil and I usually lack any clarity on the commodity.  I do not like oil as an instrument because it is a fundamental product.  That means its action is predominantly driven by macro events.  It also means anyone hip to those macro events will have an edge over me.

However, there is a technical setup going on here that I have become intimately familiar with–the old falling wedge.  This pattern is a vicious bastard, one that many times severed my head until I threw out the book that stated it was a bullish pattern and looked at it as an auction.

What happens in a descending wedge?

a. price goes lower

b. volatility compresses

c. higher highs, higher lows

d. lower highs, lower lows

I will answer that one in a while, after you’ve had the chance.

Here’s what I expect oil to do over the next week or so.  First, a big fast and nasty flush lower out of the descending wedge.  It will likely test below $43 and maybe even $42.  It is very likely to be a gut wrench.  Then, over the course of several weeks a return to the wedge and blast higher up through it.

I am not providing a chart.  You all have charts, yes?  Pull it up.  We have tested above this major consolidation and found responsive sellers.  They are walking price lower.  What’s next?  We test the other side of this well-established consolidation.

The special kicker is it comes on the heels of a descending wedge.  Hide your pets.  This move will crave pets and brains.

Futures on the NASDAQ are coming into the week flat after a globex session featuring normal range and volume. Price worked lower for most of the session but managed to hold Friday’s range before turning up and into balance.

The economic calendar starts the week slow with only New Home Sales at 10am and Dallas Fed at 10:30am. As we progress through the week many more events are scheduled including an FOMC Rate Decision Wednesday afternoon.

Last week price traded sideways with a slight downward drift until opening gap up Thursday and trending higher through the day. After the bell Thursday we saw a surge to the upside fueled by earnings from Amazon, Alphabet, and Microsoft. Then Friday opened with a big gap up on news that China cut their borrowing rate by 25bps.

Friday printed a neutral day. After setting initial balance two attempts were made to explore lower prices. Each was met with strong responsive buys which eventually led to making a new session high before settling back into the mid to end the day. Price managed to briefly exceed the 7/22 high before turning lower.

Heading into today, my primary expectation is for sellers to working into the market and target the overnight low 4592.75 because the structure on the low looks weak. Look for responsive buyers at 4580 to set up balanced, two way trade. Otherwise continue lower to test 4564.50 before two way trade ensues.

Hypo 2 buyers press through the slightly short overnight inventory and close the gap up to 4611.75 then target the overnight high 4614. Buyer make a go at taking out Friday’s high 4637.50 but stall out ahead of it and two way trade ensues north of 4600.

Hypo 3 buyers are strong off early on, take out overnight high 4614 and sustain trade above 4620. From there look to take out Fridays high 4637.50 and run the gap fill up to the July 21^st Apple earnings reaction up at 4668.25.

Levels:

NASDAQ futures are set to open significantly higher than yesterday’s close. Just after closing bell yesterday we heard earning reports from Amazon, Google, and Microsoft. All three were better than expectations and futures soared during settlement period. Then we had a surprise 25 bps rate cut by the Chinese Central bank. The overnight range and volume are extreme. Price has managed to press up against the 08/05 session high before settling into balance ahead of the open.

We have two economic events today. The Markit Manufacturing PMI at 9:45am and the Baker Hughes Rig Count at 1pm.

Yesterday we printed a normal variation up day. The profile that formed was skewed to the upside which suggested the market was not done exploring higher prices as the session expired. You might even make the case for yesterday being a double distribution trend day.

Heading into today, the market will attempt to re-balance itself. This means the higher time frame will be active. Look for sellers to push into the overnight inventory and find responsive buying at 4605. This level comes from the template day, 08/05 and was a key resistance on that day. Look for it to transform into support and buyer to push higher to target overnight high 4628 before two way trade ensues.

Hypo 2 gap-and-go up. Take out overnight high early and sustain trade above 4633 setting up a move to target the open gap up at 4668.25 which we left behind on disappointing Apple earnings July 21^st.

Hypo 3 heavy selling comes in, pushes down through 4600 and targets 4572 before two way trade ensues.

NOTE: I will not be trading today’s session because I am traveling to New York for the second annual iBankCoin Investor Conference. Last I heard there are one or two tickets left. You should come. Worst case, you can have my chair—I sit all day.

Levels:

NASDAQ futures are higher overnight after a session featuring normal range and volume. Price managed to hold Wednesday’s low before working up into yesterday’s midpoint which also aligns with a key MCLVN at 4424.50. At 8:30am Initial/Continuing claims data was slightly better than expectations. The initial reaction is buying.

We have a few more economic events scheduled. Today is the busiest day this week with House Price Index at 9am, Existing Home Sales and Leading Indicators at 10am, and Natural Gas Storage at 10:30am.

Yesterday we printed a normal variation down—the second consecutive day where initiative sellers stepped in. However, much like Tuesday, the market did a good job of finding responsive bids on its probes lower. Sellers did manage however to close the day near session low. Before turning lower we had a failed auction. Price closed the tiny gap left behind Monday at 4454.50 and made new swing high before sharply reversing lower.

Occasionally a mega balance forms on the market profile. Despite my best efforts to split the profile into smaller pieces, it doesn’t make sense. Therefore we have a large distribution covering several days. That is exactly what we have now (see colorful chart below).

Heading into today, my primary expectation is for buyers to gap and go up. The market likes the 4433 levels and we may spend some time here before working up and testing the VAH at 4446. Then two way trade ensues.

Hypo 2 sellers work into the overnight inventory and close the gap down to 4399. This sets up a move below overnight low 4398 and puts the market in a slippery spot to break ‘mega balance’ and cause liquidation. If this occurs look to target 4374 before looking for signs of responsive buying.

Hypo 3 strong buying takes us up through VAH 4446 setting up a secondary leg to target 4467.50.

Hypo 4 sellers push down into overnight inventory but stall out north of 4402 before two way trade ensues in and around overnight high 4424.50.

Levels:

NASDAQ futures are heading into Wednesday priced for a gap up. The overnight session featured an elevated range on normal volume. Price managed to hold inside of Tuesday’s range while experiencing big rotations in both directions. At 7am MBA Mortgage Applications came in way above expectations.

The only other economic events scheduled for today is the Crude/Gas inventory data which may see more attention than usually as the OPEC meeting is also taking place in Vienna today.

Yesterday we printed a normal variation down day. Before heading lower price spent time consolidating near the high. All the time spent up at those prices meant lots of volume was transacted at the high, and as a result, we formed a blunt, deformed-looking profile. This is often referred to as a weak high and one that we are likely to revisit.

Heading into today, my primary expectation is for buyers to push up through the weak high to target 4471.75. From there look for responsive sellers and two way trade to ensue. Look for buyers to defend north of the key 4444 level during the balance.

Hypo 2 sellers work down into the overnight inventory but struggle to close the gap down to 4424.75. Instead buyers show up and work up back up above overnight high and target 4467.75 before two way trade ensues.

Hypo 3 full gap fill to 4424.75 then a move to target overnight low 4415. Look for sellers to continue lower to test below Monday’s low 4411. Look for responsive buyers around 4408.

Hypo 4 strong gap-and-go, buyers take out 4470 early and sustain trade above setting up a secondary, initiative leg up to 4488.25.

Levels:

I had a nice stat to work going into today. It’s the probability of the NASDAQ going RE down after 3 consecutive up days. It’s around 90%

I also came into the week with a short bias, via the Rose Colored Sunglasses (RCS) model.

This is one of those esoteric posts I only write for the hard core trader/stat nerds. You are my ilk, no more a citizen then the average reader, but likely a better trader, thinker, and manager of the goblins.

Whenever I can line up a bunch of statistical advantages I do. This is my edge, just like the triple intraday confluence and other abnormal happenings I have my team of robots managing.

The short bias is working this week, indexwise, I have been working the right side of the tape so far. This is great, because the prior two weeks were an exercise in futility Monday-Wednesday, trying to short, and RCS was being called into question.

My only misstep was not reentering BIS today. I was distracted—getting my mullet trimmed off before the iBankCoin investor conference.  I had a tier-one hipster mullet, a perfect styling for trailblazing the Warrior-like streets of Detroit, but it had no place inside the Yale Club.

Sellers won today. They might win this week after two consecutive losses. Or, and more likely, we drift. Drift is good. It causes weak hands to waffle out, leaving real men to capitalize on the backs of an appreciating stocked market.

The NASDAQ printed a normal and balanced globex session, where price managed to hold the upper half of yesterday’s range on normal volume. Price also exceeded yesterday’s high, albeit briefly, and as we approach cash open buyers are working back toward this high mark. At 8:30am Housing Starts data came out way above expectations while Building Permits were well below expectations.

There are no other economic events on the calendar today.

Yesterday we started the week with a gap down which buyers quickly ate up. They continued their buying through much of the morning and lunch before responsive sellers stepped in, about 6 handles above overnight high. Sellers made a push just beyond the mid but could not push the profile neutral. Instead they found responsive buyers (responsive relative to the mid, initiative relative to the open) who then worked price back up to the high by closing bell.

Heading into today, my primary expectation is for buyers to work into the overnight inventory and close the gap up to 4454.50. From there look for a run at overnight high 4456. Look for buyers to stall out at 4467.75 and price to traverse the whole range and take out overnight low 4438.25 before two-way trade ensues.

Hypo 2 sellers push down off the open and take out overnight low 4438.25. Some time is spent at 4433 before another leg of selling washes in and pushers us down to 4408. Look for responsive buyers here and two way trade.

Hypo 3 ferocious buying. Take out overnight high 4456 early and overtake and sustain trade above 4470. Look for a leg up to target 4488.50.

Levels:

Even with a short bias, I can still make money on an up day like this. I just have to be patient and have low expectations.

That’s the play as index behavior slows down. I worked within the confines of this morning’s primary hypothesis:

Heading into today my primary expectation is for buyers to push into the overnight inventory and close the weekend gap up to 4434.25, from there look for buyers to continue higher to target the overnight high 4444. This is where it becomes interesting because there is no real resistance until 4467.50. However, my primary expectation is for buyers to stall out just beyond overnight high and two-way trade ensues.

I took one futures trade today, a short, and reluctantly, but well within the confines of my hypothesis. The lines you see on the top of my chart appeared out of nowhere. Apparently they were left behind by a past market rout. So abandoned they were, that they were lost in the clouds of time. Have a look:

The only thing I need to consider is if the market is truly changing character. And if it is, and if I can continue to keep my emotions in check, then I ought to increase my position size to compensate me for the decrease in volatility.

I’ve stumbled at this juncture before, increasing the number of contracts I trade, and if it is my fate to stumble again so be it. I will reformulate my plan and make another attempt at crossing this river.

My day otherwise consisted of watching finance porn aka my positions fluctuate.

The week is kicking off with a gap down on the NASDAQ exchange after a normal session of trade. Price managed to hold the upper half of Friday’s range before heading higher and briefly exceeding the prior swing high, set back on September 17^th.

The economic calendar is quiet all week as earnings season heats up. The only economic data point out today is NAHB Housing Market Index at 10m.

Last week we set balance from Monday-to-Wednesday then closed out the week exploring higher prices. Friday we printed a neutral extreme up day after exceeding both side of the initial balance and traversing the entire range three times.

Heading into today my primary expectation is for buyers to push into the overnight inventory and close the weekend gap up to 4434.25, from there look for buyers to continue higher to target the overnight high 4444. This is where it becomes interesting because there is no real resistance until 4467.50. However, my primary expectation is for buyers to stall out just beyond overnight high and two-way trade ensues.

Hypo 2 sellers take out overnight low 4418.50 and set their sights on 4411.50. Look for responsive buyers around 4408.25 and two way trade ensues, perhaps closing the gap up to 4434.25.

Hypo 3 buyers accelerate up through overnight high 4444 and make a push up to 4467.50 before finding responsive sellers and two way trade.

Hypo 4 sellers take out 4407 and test below Friday’s low 4396. Look for responsive buyers around 4390.

Levels: