Nasdaq futures are down a bit overnight but trading off the overnight lows as the US comes online to start the week.  The overnight session shows a balanced trade with a bulge of activity (volume) near the bottom of our profile.  Overall the globex session auctioned the price zone left behind by the fast afternoon move.  We are currently priced to open inside the thin and fast range which may lead to a choppy open.

On the short term, I am looking for support from 3564 – 3563.25 which marks the value area high of Friday’s primary distribution.  If buyers are not found at these levels we are likely to traverse the entire value region.  Up above our current prices I will be watching the high volume node which formed at 3585.25.  The burst of activity rushing into the market Friday was most transacted at this level.  If sellers are not active around this region then we are likely to continue rotating higher as there is little resistance above Friday’s high of the session 3589.50.  I have highlighted these short term observations on the following market profile:

On the intermediate term timeframe we can see what had me hesitant to buy Thursday’s close.  My authentic swing was setting up, the proverbial thrust-pullback-thrust.  However, buyers showed up right when they needed to and printed a double bottom right on the base of our tightening consolidation/balance region.  This level is important for the week, 3543, because below it we open the door to break balance on the downside.  Prior to last week we were consolidating along very orderly.  However the big gap up into last Monday made the picture a bit sloppier.  Overall the intermediate term continues to remain in balance, although the fast nature of the balancing would inherently favor the sellers.  There is a large overhang of supply left above 3600 after we flushed through the level last week.  I suspect we will struggle to press through this level as we attempt to work off that supply.  See below:

Zooming way out to the forest view, high above in a hot air balloon if you will, you can see the level of indecision in the marketplace.  This environment may seem volatile but in actuality we are balanced after a bout of selling.  The next move is yet to occur.  Until we see a definitive break away from this zone there are likely to be plenty of head fakes and stalled momentum attempts on swing trades:

Comments »

Thinking a bit further about my strategy, I realized most of my morning trades should be complete by lunchtime. Therefore, this week I only viewed the opening swing and the action that took place into the lunch hour. There was a really clean opportunity to short the opening swing on Thursday which would have been an optimal entry for a very weak session. Check it out.

MONDAY:

TUESDAY:

WEDNESDAY:

THURSDAY:

FRIDAY:

 

Comments »

We are coming into Friday with the NASDAQ basically flat on the week after a strong gap-and-go higher Monday.  The overnight session was balanced and our profile print left an interesting shelf up above at 3567.25.  This type of incomplete profile gives us a big clue early on.  The market will most likely spill over the shelf which could take price to some interesting levels early on.  Of course, if the shelf holds, that odd behavior would tell us the market is in the firm grip of seller control on the short term.  See below:

The intermediate term continues to hang on the balance despite a valiant attempt to escape from buyers.  There was a thin market profile print yesterday, a zipper, which price slid right down through.  However, the intermediate term remains balanced.  I have noted only the lowest of low volume nodes to keep the noise level low on this chart.  See below:

Sellers took control on the short term during regular trading hours, despite our shelf action mentioned above.  On the short term, sellers successfully dictated price lower and value followed, pressing and closing the weekly gap we printed Monday and stopping precisely at last Friday’s value area high.  I expected this fat, well established profile to be revisited as these types of profiles exude a strong gravitational pull in times of mean revision.  The key today is whether we can hold yesterday’s low which coincides with the value area high from Friday.  If not, we are likely to trade through the value area.  On the upside, the market can zip right up the thin profile just like it zipped down it yesterday.  The action is thin from 3572 – 3586.  The a break of the shelf mentioned above may take price into this thin region.  I have highlighted these two interesting contextual pieces below on the market profile:

Comments »

Nasdaq futures are a touch lower overnight in a quiet session of trade.  The overnight profile shows a slight selling wick above after a wave of selling came through around 3:30am.  Today is a busy day on the economic calendar and we are currently priced to open inside range and outside of value presenting only a slightly elevated risk environment.

The intermediate term auction is still in balance and buyers responded to the late afternoon selling yesterday.  As frustrated as I was at yesterday’s close with many of my swing positions, conditions favor the longs.  If buyers can hold yesterday’s lows we may be looking at a buy-the-dip opportunity.  Below you can see what I am referring to:

When I zoom in on the short term auction you can see the downside risk.  There is a very thin profile structure below current prices and we could easily slash through these levels.  On the contrary, the profile print yesterday has the potential to show a bias to the buyers.  Value never migrated lower, instead hanging on right at Tuesday’s LVN at 3606.75.  Value also overlapped Tuesday action which suggests we were coming into balance.  The late afternoon selling may have been a shakeout because a responsive buyer came in.  The key to validating the responsive buying tail is two TPO prints which hold the line.  Otherwise, we can slide right down into Monday’s lows and potentially fill the weekly gap we printed Monday morning.  See below:

 

Comments »

Nasdaq futures are currently priced to gap lower about 10 points after a wave of selling took out Tuesday’s opening swing low at 3606.50 around 6am.  The selling accelerated at 8:30 when the PPI numbers were released.  As price currently stands, we are set to open out of value and out of range suggesting the short term is out of balance and the risk environment is high.

Risk of an opening drive is elevated today, especially given the big gap left open from Monday’s open.  The stakes are high because not only are we inside of option expiration week, but we also have prices on the Nasdaq which are attempting to escape intermediate term balance.  Paramount to achieving this is printing a higher low on the intermediate term.  I have roughly chosen 3595 as the price where I want to see signs of responsive buying.  If they do not show up, we could be in for a fast liquidation trade because mean revision will set in and the short term profile structure below us is thin.  Here is a picture of the intermediate term balance with relevant price levels noted:

In the short term auction, yesterday was a neutral print with range extension on both sides of the profile.  These prints tend to occur at or near inflection points.  The profile shows responsive selling coming in soon after we range extended higher and taking out the lows.  The rest of the action was spent printing volume in the bottom half of the profile which made for a saggy look.  My expectation was for price to balance out this profile by trading down to 3595.  I did not however expect to be waking up to these prices.  Buyers continued migrating value higher yesterday which tells me the short term auction was still buyer controlled as of yesterday’s close.  I have annotated the market profile below:

Scenario 1: market tests lower, finds responsive buying between 3595 – 3593.75 and begins rotating back to VAL 3606.50

Scenario 2: market tests lower, takes out 3593.75 and accelerates lower- opening drive down

Scenario 3: market tests higher finds responsive selling at 3606.50, balances out above Monday VPOC 3597.50 and then goes for overnight gap fill to 3608.75 then VAH 3614.75

Comments »

It seems as if each time we see a few progressive up days in the Nasdaq we soon see a session of heavy selling which unwinds all the progress made.  This behavior has conditioned astute swing trades to fade the rips.  The question now is whether we see more of the same or instead the market begins climbing a wall of worry.  You can see a few recent examples of what I am referring to on the following daily Composite chart:

With the long term in balance and a bit of skepticism about joining strength, we have to question intermediate term balance.  I have expanded my intermediate term profile to encompass 26 sessions of trade because price was escaping the shorter 18 session balance.    As you can see below, we are trading up into the thin upper tail of our balance.  This zone is where action can become rather interesting as the pull of mean revision is strong but with enough propulsion (buy flow) we can escape balance and swing higher.  We left a big gap in the chart yesterday which suggests strong buying but also leaves a sloppy chart behind.  I have marked the key levels below which buyers need to defend to keep us on a swing higher ascent:

The short term is buyer controlled.  Although the larger timeframes show balance, on the short term we are out of balance and exploring higher.  Price action and volume were dynamic enough yesterday to press our entire value area above the prior (Friday’s) day’s session.  One cannot predict whether such upward progress will continue, however we can monitor the continuation via some key price levels.  Between the price levels highlighted above, and the ones below, we can determine if buyers are coming in today and initiating into strength by defending these key levels:

 

 

Comments »

The Nasdaq is about to gap up into the week.  Conditions are consolidating and bracketed on the intermediate timeframe and a break away from this zone will require some volume and conviction.  We can see two high volume nodes on the balance with price trading between the two and plenty of unresolved levels inside the toothy profile.  How this resolves will be very telling, although the long term suggests the sellers have a slight edge.  Below you can see the key levels within the intermediate term balance, as well as the bracket extremes:

The short term shows the formation of balance Friday, however we are set to open outside of balance, outside of range which suggests we are opening out of balance.  In this environment the risk of an opening drive in either direction is high.  The gap below should be respected and signs of weakness may suggest the gap fill trade will take hold.  This is even more likely given the fat, high quality distribution below, which we are likely to revisit. See below:

Comments »

As I continue to study the opening swings and the behavior that occurs in-and-around the levels what becomes clear is how important the narrative of the tape is to successfully positioning yourself intraday.  The early action in the market is very telling of how the morning is likely to progress.  Also, how we go into New York lunch hour and how we leave the lunch hour are vital to trading the afternoon well.

The key is objectivity in your analysis and that comes from keeping a clear and calm mind. Shifting my swing portfolio to less hands on positions like ETFs and dividend stocks is also key, because even on a quiet day of chop in the Nasdaq, having a position down 12% is a distraction.

There were some very interesting opening swings and tight congestion points this week.  The daily action makes sense given our intermediate term balance.  Below you will see a picture of the intermediate term balance followed by annotated daily auctions.  Enjoy!

INTERMEDIATE TERM BALANCE:

MONDAY:

TUESDAY:

WEDNESDAY:

THURSDAY:

FRIDAY:

 

Comments »

Another week in the books, and another week where I feel like gyro meat in the marketplace—slowly being shaven by a hairy armed Greek.  Many of you know 95% of my positioning this year has been in explosive growth stocks.  You should also know by now that these very stocks have fallen victim to rotation free knife drops, relentless in every way possible.  I very rarely sell into weakness, instead waiting for a bounce to cut my losses.  Well, I would not be so fortunate this time around.

My losses stand at -20.13% year-to-date and 28.9% off of my high water mark which seems so very distant from here.  That’s how downward price actions works, six months of gains can be wiped out in one short week.  Never one to dwell in the past, my sights are set on my next meal.  My next opportunity continues to ripen but if I do not act soon it may spoil.  I must begin taking my trades in the Nasdaq futures.

I have done extensive research into this product and feel I understand its behavior more than any financial instrument traded.  I like the large daily ranges of late and see them as a tremendous opportunity to day trade.  I also like how the long term auction has come into balance.  Take a look at the following monthly chart of the E-MINI NASDAQ 100:

Some people find intraday chop to be maddening because they are constantly seeking swing trades.  They seesaw nature of balancing nauseates participants until they puke out and exit the market.  But if one is aware of the conditions they can either choose to sit them out or stick to one side of the tape and carefully pick where they want to do business.  I was aware the Nasdaq would potentially enter these conditions in 2014, however I had no idea all of my momentum stocks would plummet.  Thus here I am, very red on the year and still in simulation on my day trade strategy.

Alas, I must move my strategy live.  My algos have been optimized and walked forward over 10 years of data and have performed well on live data.  They are effective at determining action points, even if they result in a stop out which can be equally as telling as the original entry.  The final barrier is taking the leap into live trading.  This should never be taken lightly as the leverage used is greater in futures than any other instrument I trade.  You need to plan every step of your method until your muscle memory is fortified like steel.

My book is about 70% cash.  I have long term positions in TWTR and LO and intermediate term positions in FB and AIXG.  I have a small side bet in GRNH and some dying options in RGLD and ANGI.  I looked at about 500 charts last night and could not find one I wanted to buy.  Thus here I am, needing a new dance to find my way back on top, back to internet glory.  Get it while it’s here, boy.

See you over the weekend with more Nasdaq charts, cheers!

Comments »

Although we spend most of our time seeking the early stages of trends in either direction, trends we can ride for profit, we must accept that more than half the time the markets simply balance inside of bracketed ranges.  Right now is one of these times in the Nasdaq, where price has come into balance on the long term timeframe.

Making the picture even more interesting today is how our intermediate term is also in balance.  See below:

The best strategy until this balance resolves is to ride out any current positions, and sit on your hands unless you have an enticing setup you simply cannot resist.  If you do enter a position, it is best to stick to one side of the trade (long or short) and use the bracket extremes to gauge the correctness of your trade.  Thus, risk skews in your favor if you can enter a long position below the midpoint of balance or above the mid for a short.

The short term timeframe is nuanced.  Buyers pressed value higher yesterday, but the afternoon fade had a sharp velocity and certainly punished almost any new long positions initiated intraday.  The buyers controlled yesterday on the net by range extending higher, printing a buying tail, and pressing value higher.  However much like a movie, we tend to remember the ending the most, which in the markets case was weak.

Since we have printed more than three TPOs (time price opportunities, the blocks that form market profile) inside of Wednesday’s range, my goal is to find a clean short entry intraday to ride a rotation through Wednesday’s value while targeting scales at the curious low volume node at 3520.50 and the value area low at 3507.50.  Since I know my targets, all I need to find is an entry intraday with risk less then ½ or 1/3 my desired profit.  This is risk management.  I have highlighted these observations and more on the following market profile charts:

 

UPDATE: The trade played out mostly as anticipated, here’s the look:

 

 

Comments »