The markets auctioned very methodical all week ahead of what is likely to be an interesting Friday.  We tracked the control of sellers which began on Monday and came into question Wednesday with a violent neutral session.  Thursday the market told us it accepted the current prices by balancing out inside of the large neutral day and is waiting for new information before exploring elsewhere.

Overnight the NASDAQ divided itself into three micro sessions by auctioning then breaking a bit higher, auctioning then breaking higher, and finally auctioning as the USA come online.  The action overnight suggests buyers have the early edge.  However they have also pressed us into very short term overbought conditions.

Taking a look at the longer term via value migration, you can see the relative strength of the NASDAQ verses the S&P:

 

Early on we have employment data which may better set the tone for our session, but the following reference points will still be relevant in determining whether the market is breaking out of balance to the upside or the downside:

 

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The overnight markets were relatively solid for most of the session, but as USA comes online we are seeing selling pressure on the tape.  The sell flow started at 7:30am and swiftly brought prices to new overnight lows and back to the bottom end of yesterday’s value area on both the S&P 500 and NASDAQ indices.

As I write, the markets are becoming oversold on a very short term horizon although given the velocity of this selling we may see follow though lower.  The economic calendar is busy today including ADP employment data and International Trade numbers.

Putting all of that aside, we are coming into Wednesday and the sellers continue to retain control of the short-term auction.  They gained control on Monday, showed follow though and initiative action Tuesday, and overnight they are again in control.  This is all taking place in an aged long term auction controlled by buyers.

Focusing on the NASDAQ futures via /NQ, it will be interesting to see if the buyers can come in early on and work though this overnight gap.  Buyers will be targeting a gap fill to 3475.25 and perhaps yesterdays VPOC at 3480.  If buyers can turn momentum around, we have upside targets of 3484.25 (VAH) and 3489.25 (upper most distributions NVPOC).

If sellers continue to build on their momentum, they will look to trade through last Wednesday’s range and target the value area low at 3462.  Not too far below this price is a string of single prints which indicates a strong buyer was present at the levels.  Should that same buyer not present herself on a retest, it would suggest a shift in sentiment and downside action could accelerate.

I have highlighted these levels on the following market profile chart:

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The index futures are lower overnight, with the marquee S&P 500 weaker than the NASDAQ composite.  Early on the momentum favors the short side, especially given the gap below in the NASDAQ.  My expectation is for an early probe lower by sellers into the gap.  I will look for buyers about half way into the gap from 3475 to 3473.75.  Should they not present themselves, I expect trade down to 3472.25 (11/25 high) then 3469.25 (11/25 VAH).

At some point the gap trade higher may come into play, perhaps fueled by shorts in the hole.  The overnight gap higher target is 3483.50.  If the algorithms decide to run stops on any newly minted shorts, my algo upside target is 3489.50.

Long term auction is still in the control of the buyers but is aged.  Yesterday was controlled by the sellers, and overnight the sellers retained control.

I have highlighted the day how I envisioned it above on the following market profile chart:

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On the day timeframe, we saw action that suggests the sellers gained control of the tape.  It started with the open where sellers printed a wick on the top end of our NASDAQ profile.  Looking at the bar chart the print has a smack of euphoria.  From there came several subtle warnings as the tape went mostly flat.  It began to feel like sellers would fail [again] to roll the tape over.  Every time inventory became too short in the futures, a rapid squeeze would develop.  However, they never made new swing highs.  Then after 3pm the sell flow came back in and closed us out near the lows.

It important to keep in mind we are still in an uptrend and tomorrow has a hearty POMO on tap.  However, should that liquidity be absorbed and price continue lower, we may have a swing high in place.

Early on I sold out of AAPL, Z, and BZH.  I did not like how the puzzle pieces representing housing looked during my weekend analysis so I cut.  AAPL had just made its biggest four day move in the last six months and I wanted more cash.  I scaled off a small piece of my GOGO, sub thirty, regretfully, as 30 was my target on the day.  I sold NUGT for obvious reasons (it was getting pulverized) and I sold an old holding in O, because it looked weak.

My only buy today was of WBMD.  I chased a bit, thus I left room to add if need be.

The net of my actions raised cash to 21% after being 100% long into the weekend.  Call it what you will, I want more cash on hand into what may be a challenging month.

CREE started printing an inverse head-and-shoulders reversal pattern while its small cap counterpart RVLT struggled.  OESX took a minor beating too but may begin consolidating which would entice me to finally get long the name.  LEDS looks to have printed a bearish engulfing candle on the daily chart.  Overall, the LED industry is still a mixed /weak basket of securities.

TSLA is getting a little dangerous looking and needs to find some buy flow soon.  It looks to my eye to be setting up for another leg lower.  Elon has a missile launch scheduled for tomorrow.  Perhaps his motor stock will launch also.  TM is promising to bring fuel cell tech to Japan by 2015 and Europe and USA by 2016.  That means Elon has 2 full years to continue disrupting old auto.  Tick tock Elon, keep making moves.

Shippers, you know them, you love them, and you hate them.  This trade has been setting up so slow.  It wants to lull you into a trance so you bail out of boredom then SPLASH, swing highs.  It is still tough to get excited when I view my big shipped position.

Social media continues looking weak and there were reports of heavy put volume in crowd favorite FB.  Overall sentiment continues to be bullish and that never bodes well for higher asset prices.  For now, YELP continues to find buyers at the 99ema.  If TRIP confirms lower tomorrow it sprung a nasty bull trap on speculators.

I would like to see some panic tomorrow, for olde time’s sake.  Wouldn’t it be nice to get our one or two mandatory days of terror out of the way early?  That way we can focus on gluttonous buying for the remainder of the year.

The chicken trade does not appear complete.  I may need to reenter for the great ARISE.

The sellers have won the day.  Two weeks back they won Monday-Wednesday only to get BTC’ed Thursday and Friday.  Take todays win by the sellers in context.

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The NASDAQ continued displaying relative strength verses the S&P 500 overnight, albeit mildly.  The composite index was able to make new swing highs during the overnight session where sellers were quick to greet the move.

As we work into the early hours of USA time, prices have balanced out and are slightly higher than last week’s close.

During today’s session, I am interested to see whether or not the lagging S&P breaks recent lows or instead continues consolidating/grinding higher.  Put quite simply, I will be monitoring the 1800 price level.  Should we sustain trade below 1800 for a prolonged period of time, I may reduce select long exposure.

I do not want to see the NASDAQ (as represented by the /NQ contract) below 3488 for a prolonged period either.

I have highlighted the levels I will be observing on the S&P today on the following market profile chart:

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There was a strong appetite for risk over the holiday trade, which saw prices of the NASDAQ outpacing the performance of the S&P.  The action slowed a bit over these last 8-10 hours and the resulting profile print has a very familiar, uncompleted, shelf footprint.

By vision for today is a completing of the profile via some back-and-fill trade.  However, we are set to gap much higher, which signals the market is well out of balance.  If we fail to hold around the high volume node at 3476 it may signal a rejection of the holiday move by the market.  If this is the case, we may see a swift gap fill back down to 3469.

Conversely, the shelf at 3476 may not breach in which case price will continue to probe higher in search for sellers.

The shelf is an interesting bit of context to bring into today’s trade.  Even the casual observer, hunting black Friday deals can use the price action around the 3481 shelf zone to measure sentiment.

I have highlighted this activity on the following market profile charts:

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There was a bit of chatter afterhours about the spike lower on the indices shortly before the closing bell.  As we drift into a holiday, many will likely dismiss the action and continue preparing a warm home for their families.  However, the spike is a useful bit of context, and we can use it to frame some expectations for the day.

The spike lacked time.  The selling began so late in the day there was no time for us to gauge the momentum of the sellers.  Coming into RTH, we are set to open within the range of the spike on both the S&P and the NASDAQ and our analysis will focus on the Nazzy.

An opening within the spike indicates the market is balancing.  The other two scenarios are an open outside the range of the spike either lower or higher.  An open above the spike range indicates a complete rejection of the move and invalidates it entirely.  An opening below the spike indicates the market accepted the move and is still out of balance and we are likely to continue exploring lower until we reach balance.

Returning to our situation, opening within the spike, our expectation is for two-way trade to ensue as the market balances out.  We can use the range of the spike to estimate today’s daily range.  This will be incredibly important on a light holiday session where less is certainly more.  If we get a solid idea that one range extreme will hold, we have a target in mind for the auction.

I have used the spike to envision a scenario on the following market profile chart.  Remember not to lose sight of the big picture, where bulls have rallied strong all year long and we are heading into the weekend already, ahead of mutual fund Monday.

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We hear the word correction often in the stock market, and as prices become elevated we here more participants expressing their reluctance to increase exposure before a correction occurs.  It is important to keep in mind however that corrections are not only price going down.

There are time corrections.  These are the juicy consolidation patterns we often hunt.  We see price basing out of several periods and we get an established zone to trade within.  We experienced a rare form of correction yesterday when the market profile printed a normal day.

Although the NASDAQ traded higher than last week’s closing prices, when you peer into the structure of the day session you can see the correction taking place.  We had a large gap higher to start the week, and when the RTH bell rang we saw a long initial balance form when reactive sellers began taking profits.  The first hour of trade was dynamic selling.  This was a form of correction.  We did not reenter yesterday’s value, though.  Instead, fresh initiating buys came in and back-and-forth auction ensued.

Overnight the back-and-forth continued and on the bar chart we can see the familiar consolidation pattern we know and love occurring since trade opened Sunday.  We are correcting, even though the prices on the teevee may suggest otherwise.  It is important to monitor the consolidation, and which party can successfully drive price away from it.  You can see the pattern here:

I have split open the RTH profile on the following chart to more easily display the normal day and I have also listed key price levels:

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It turns out the NASDAQ printed what is called a normal day in market profile theory and the fun thing about normal days is they are anything but.  In fact, they are rather rare.

And I must say I do not particularly like normal days, at least not up here at swing highs, because they tend to occur at or near inflection points.  A normal day is described as having a very wide initial balance (first hour of trade) which is not breached for the remainder of the session.  It suggests indecision, intraday, mostly signaling directional conviction is low.

That context makes sense if think about gapping higher, in a hot (too hot?) bull trend, into a short holiday week.  Short sellers do not want to get steamrolled in the thin trade, buyers are hesitant to initiate additional exposure at these elevated levels, and current longs are likely mulling taking profits.

Add to that the narrow pockets of market momentum and you have a solid recipe for indecision.

I have my book about 90% long at this indecisive juncture.  AMBA finally went to work, crushing the hopes and dreams of Morgan Stanley analysis hoping to make a name in the technology space.  I like to think this guy who downgraded AMBA will read the Raul blog, so I have a special message for him: this chipset powers the GoPro, it is on the X-mas list of every adventurer.  Short interest, albeit modest, will start to get icy hands as we approach December 5^th earnings.  Then they will start making mistakes.

The chicken trade adhered to the November seasonality statistics, naturally, unlike the unnatural meat produced in PPCs new streamlined robot facilities.  December brings a tad bit more seasonality mojo, and we still have national eat 1-to-3-birds-at-once day Thursday.  I took an obligatory 1/3 scale today, but I like my prospects with the net.

I bought AAPL back right near the closing bell.  If you recall, I was in this trade a few weeks back and bailed with a little 2 percent gain.  It is an easy vehicle for me to lever long exposure up and down, as it consolidates along gently.

I now hold large positions in the following names, listed largest-to-smallest:

GOGO, RVLT, BALT, YELP, and CREE

These are all full size positions.  As you may imagine, this type of book requires attentiveness.  It has the capability of lopping 10% off my person rather effortlessly.

My ¾ size positions are as follows, listed again largest-to-smallest:

AMBA, AAPL, PPC, LO, and TSLA

Note: AMBA was by far my largest position prior to taking a scale near today’s high.  Tesla and their innovative CEO Elon Musk are in the house of pain.  Much like any successful individual, the media will frame Elon with a skeptical eye.  Innovators hunt profit and self-gain after all, which is inherently evil.  The issue most closely watched at TSLA is the battery technology.  If it is to usher in the era of zero emission commuting, it needs to hold up to rigorous scrutiny.  If Telsa intends to roll out a model for the middle class, they need sound battery technology established.  The chart is just basing out, below my favorite moving averages, suggesting acceptance of these lower prices.  What likely comes next is a new exploration lower by price.  This will scare most of you.  But I will be casually observing the action, minding the drawdown to my books, and meticulously selecting an opportunity to ratchet up exposure because I love me some sweet baby Elon.

I have dog and pony positions in the following stocks.  These positions are practically placeholders and some are relics from prior trades:

F, FXY, ONVO, TWTR, MJNA, and O

I thought I would turn a clever trick in MJNA.  Now I am -40% on this stupid, STUPID, holding.  It will enjoy a fake pump service or go to zero otherwise I will continue to hold this dumbness.

ONVO needs to die for a while.  It trades poorly.  I will keep my toe in the water to keep my eyes on the name.

TWTR is another name I will hold until zero.  I use twitter more than any other social media service in the world, why wouldn’t I own it?  One day I will have huge size, but right now there simply is not much to base my risk on.  Therefore I wait.

This post has gone on far too long.  These are my holdings and some reasoning behind them.  Let’s see how they perform this week.

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Last week’s momentum carried over into last night’s globex session where we saw the indices continuing to rise.  The push higher occurred mostly during the first hour of trade Sunday evening, after which we balanced out and accepted the prices.

I find myself stating this bit of context often although it is by no means an effective timing tool but, index markets rarely print swing high outside of regular trading hours.  Thus we can assume the overnight high is vulnerable.

The question this morning is whether the sellers will make an attempt to fill the overnight gap or if we will instead “gap-and-go” which is a distinct possibility given the holiday week context.  Turning our attention to the NASDAQ composite, sellers need to first push through the overnight value area low zone from 3430.50 – 3429.50.  If sellers can breach this zone and press down to 3428.50 we are well on our way to filling the gap.

Should the sellers succeed, downside targets are 3422.50 (Friday high), 3420.75 (VPOC), and ultimately the low volume node at 3418.  This level is of particular interest because it represents the price moment when sentiment suddenly shifted optimistic Friday.  Sustaining trade below 3418 may suggest a shift in sentiment.

To the upside, we are working with measured moves.  I show a buyer target zone from 3437.50 – 3436.75.

I have highlighted the above levels on the following 24-hour Market Profile chart:

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