The correction lower showed early signs of stabilization overnight by balancing out amidst weak Asian markets. The sellers however still hold the upper hand in the current environment, especially given the pace with which we distributed lower. Less active participants who bought the #NoTaper headline may be considering trying to reduce exposure on any upward move which makes them whole.
As the USA comes online, I am already seeing a bit of sell flow creep onto the tape. It will be interesting to see if early selling is enough to press through the overnight low at 1689.50. Thus far they have not been able to breach this level, which was also the low of yesterday’s cash session. A break could trigger sell stops and enough order flow to push to 1687 and if price accelerates 1684.25. I am suggesting that the order flow from taking out the lows could be a temporary phenomena and a buying opportunity. However if these levels do not hold we need to be very keen on 1681.50 which is a huge value area high dating back to 09/11 before the gap up.
On the upside, price needs to sustain above 1693.50 to show acceptance of yesterday’s value instead of value continuing to migrate lower in search of balance. That would be the first accomplishment. Next would be trading above 1698.50 which could trigger a squeeze.
I’ve highlighted most of these levels and drawn on some scenarios on the following market profile charts:
Mon Sep 23, 2013 8:11am ESTComments Off on Weakness Carries Over Into Early Monday Morning
The S&P is on the move still. The weak Friday action is continuing as US markets come online this frosty Monday morning.
The futures gapped higher a bit Sunday evening and methodically rotated the gap off before initially holding the Friday lows. Around 5am price took out the overnight highs and was met by sharp-reactive selling which makes 1707.50 an interesting level to monitor today.
The selling is accelerating as a write, and it has effectively erased all of the gains from the no Taper Fed announcement. Therefore, the broad index will have an overhang of supply as we start the week.
After a fairly long period of quiet consolidation both before and after the Fed last Wednesday, the S&P certainly seems out of balances which could increase intraday opportunities for the astute trader.
I have highlighted key price zones to measure sentiment upon today, and also a few profile scenarios on the following market profile charts:
We could get together around a campfire and complain about the stock assassins and their research. We could heat up a pot of baked beans while we jeer about the move in precious metals in the fifteen minutes leading up to the #NoTaper Fed announcement Wednesday. Then we could sleep next to each other on the dirt staring up at the cosmos and cursing algorithms.
But that’s all loser talk, and I only like small doses of nature.
Instead, let us focus directly on what we can do. Solutions if you will.
We can manage risk. MHR is a different approach to entering stocks, I bought weakness. Normally I enter alongside strength. Traditionally I would have MHR on my watch list like it was, but I would wait for pricing greater than the last two days to show strength and momentum. Then it would stall out like it did today and I would sit through a drawdown. That method still works for me, but I’m working on anticipating the move a step earlier. I could have already taken a profit in the name, but I am moving purposely slower on these stocks.
Zillow caught me off guard. I saw it break my range, but I prefer to give stocks the benefit of the doubt meaning let’s see where it closes. The volume profile below was very thin, we cut right through it. I did not cut my loss. Perhaps I will regret this but the stock behaved constructively after the panic abated. I have managed myself out of uglier head fakes, and I have fumbled losing trades. That experience helps. As it stands, I am -6.43 % on a 10% position size. Oh the humanity.
Zillow and CLF did however knock me off my high water mark. CLF has not done me wrong yet. Is the trade wrong? No, it is only taking heat. I will take my loss when it is wrong. I lost my vision on this trade for a bit, but RaginCajun reaffirmed my vision.
There is gap supply coming into CREE. You have to imagine all of those underwater folks are eager to cash in now that they are being made (partially) whole. I put some trading capital into this name that needs to be separately managed from my investment.
A trade like RBCN makes up for 3 or 4 losers, this has been a forgiving market for longs.
I was green trading the ES this week, holding my own through some big waves. This is the most exciting part of my week. I cannot wait to build upon it next week and also to review my trades over the weekend.
I shut El Roi off before the Fed and have not turned him back on since. I would imagine he is chomping at the bit to get his grubby algo hands back on the tape but first I must go through the ceremonial revamp of optimizing and chanting and such.
Overall I am just happy to be here, banking coin alongside some of the most insightful minds in trading. If you have any tickers of interest or general trading/algo questions ga’head, ask me…I will answer them as best I can.
Fri Sep 20, 2013 8:00am ESTComments Off on Tranquility Ahead of Quadruple Witching
Overnight the markets were very tranquil, perhaps even complacent on an international scale after yesterday’s consolidation tape. If you look back to 09/18 and the volume profile it produced, you can see how we settled the unfinished business of filling in the volume cavern.
What is important now is which way we break from yesterday’s value. We may even see a head fake. But I will be looking for an hour or more of trade above or below yesterday’s value as acceptance away from the value and a cue going into the weekend.
I have highlighted the value area high and low on the second volume profile chart. The prices below 1712 are very slippery due to the thin profile.
Thu Sep 19, 2013 7:15am ESTComments Off on Baking a Contextual Cake
The overnight session featured follow through strength in the S&P, creating a contextual piece of unfinished business. Making swing highs/lows outside of regular trading hours is a very uncommon occurrence, thus we can build an expectation into our trading mindset today that the overnight high is vulnerable.
The velocity of the order flow at 2pm yesterday left some unfinished business below too in the form of a cavernous, toothy profile. These types of volume voids tend to behave as magnets because nature abhors a vacuum. However, much like pressing two magnets with the same polarity together, you can find these caves initially behaving as hot plate-esque support.
The overnight profile suggests a lack of balance with two well defined distributions and a low volume node separating them. It suggests other time frame (OTF) traders were active overnight, and the buy orders continued to flow at a greater force then could be abated by selling until 6am.
Therefore we have an out of balance market, two pieces of context above and below to measure buyer/seller context against, and we are looking at how the USA handles this information as we come online. I have highlighted a few scenarios and opportunistic price levels on the following market profile charts:
As per the usual modus operandi (extra redundancy) I navigated today’s trade without media outlets like the teevee and with very little twitter exposure. Instead the news came through the filter of a well curated group of elite traders in the 12631 trading room. “No taper” they said, the exploding /ES and /6E charts told me the rest—risk rush on.
Reacting is a dangerous beast unless your reactions are decisions contemplated hours and days in advance from the war room (home office). I took SKF off first, as I rehearsed in my mind last night. Then I took a wish list of stocks and picked two: CLF and Z. Zillow was an obvious buy because I love the company and housing will quickly become the catch up play as we dash to Xmas. CLF was a pure chart buy that could play catch up. Then I dove back into the big wave riding competition in the green lit halls of globex. Futures good friends, I held my own with the big kahunas.
I’ve had 2k days on sessions like this. Today was much more modest, but much less stressful and a hell of a lot more precise. When November rolls around and I’m trading the size I want to deploy my scaling system, these will be 2k days again. I ran before walking, fell quite a bit, decided to start walking, and soon I will run again.
6 trades: 5 long – 1 short, 6 winners.
Seeing as RBCN was my largest position going into today’s tape, yes, I did have a good day…thank you. What would have made it only better but without it I still high watermarked would have been holding onto EXK which I regretfully cut this morning. Regrets, I’ve had a few as Sinatra says. It ripped the tits off and looks ready to continue ripping the tits off this week. Now I feel like I am missing the action, therefore I am. I will revisit the miners this weekend.
Oddly yet amusingly enough, RVLT paired up with IMMR, smoked entirely too much MJNA and enrolled in Clown College. Due to their heavy course load, 7 credit hours, they will be too busy to participate in this ramp up. They will instead focus on balloon animals, banana cream pies, and terrifying children.
The question that should be at the front of each of your minds is, “Is this euphoria?” Because, I can tell you I feel a bit euphoric. I will be breaking down the days leading up to this moment, all the blogs, all the behind the scenes homework, and psychoanalyzing this win ship to find repeatable strengths.
The work load only increases when you are winning, you must love the process as much (if not more) than the outcome.
Get some rest and come back early tomorrow, for today is only Wednesday.
My journal work these last two weeks brought attention the fact that I had been nailing my entries, but getting stuck in trades, losing interest, and then just managing to scratch them and lose a few bucks. I think this behavior was a byproduct of our coiling markets ahead of the Fed.
What worked really well this morning was taking smaller profits. Thus far I have taken three wins in the futures: two in the spooz and one in the 6E. I would still be in two of these trades, contemplating scratching them for losses, had I not lowered my profit expectations by one to two ticks.
This is adapting, this is surviving. You must be one with the flow, one with your environment. I strongly believe once the market gets some visibility (after the reaction to the Fed reaction) we will return to an environment where I can push my profit expectations back to their planned levels.
I cut EXK, no other portfolio adjustments.
Be amorphous, like water. And stay calm if the market gets wiry around 2pm. Perhaps listen to The Buena Vista Social Club:
Wed Sep 18, 2013 8:13am ESTComments Off on Holding The High Water Mark
The overnight session in the S&P was again quiet, setting a range only 3.75 handles wide. The interesting observation is where the small range took place—at and above yesterday’s high. The market is hanging high into the Fed today after poorly rotating lower during yesterday’s session. This did two things—it made shorting very difficult and a losing venture, and left the dip buyers on the sidelines.
Therefore, my expectation is for early dips to be bought through the natural demand of underwater shorts being made whole (perhaps partially whole) and eager buyers putting fresh money to work. Given the implications of the Fed meeting today however, we must also be aware of a rug pull scenario where we slash through levels of support as the market attempts to digest the announcement.
I’ve highlighted a few scenarios for today which may be rendered ineffective if we begin trending, but still are context to keep in mind, and key price levels on the following market profile charts:
Pull up daily and 30 minute charts of EGLE, GMCR, ACTV, and END and you will see beautiful charts, tightly coiled and ready to make explosive moves. I want you to note I bought none of them.
I did however buy CREE and MHR taking my long exposure up to 75 percent. I have another 10 percent in SKF, leaving me 15 percent cash to navigate tomorrows FED day. That’s essentially why I did not buy anything else today. I like the stocks I mentioned in paragraph one. Any one of those could produce a big gainer.
Interestingly enough, after today’s CREE buy and pooling in RBCN, 40 percent of my book is committed to LED technology. RBCN has some action off the new iPhone home button too, but their sapphire is an important material in LED production. This is my very concentrated bet. Parts of it aren’t doing too well. Take RVLT for instance—the chart looks hellish, yep…technical term. And I’m -30% on the name. Don’t care. I mean, I care very much, but the stock is a long term speculative hold. AIXG cannot and will not break out of its consolidation range. My cost basis is the only thing keeping me in this play because if it wasn’t near the bottom of this range I would have a harder time stomaching these waves.
I took one trade in the /6E today. After /6e pushed lower, it pulled back to a place I could enter. The trade went in my favor, all the way to my target, but did not fill. This happens often, and it used to cause a great deal of anguish and regret. I would be like, “I put my target out too far, now I will be getting the fuck.” Now I don’t sweat the action, but instead manage that which I can control at this point. The /6E very well could have put in another thrust lower, and it still may, but it didn’t. Instead it put my position below water and then just held it there. Around noon I took a step back, had a stretch, and asked the following questions:
What has the /6E done?
What is the /6E trying to do?
How good of a job is the /6E doing on the try?
It’s helpful. I pulled my chart out a bit, noticed the /6e has gone very quiet, something I noted this morning. The market open introduced a strong thrust lower, but not to fresh swing lows. We’re making lower highs, but also higher lows: it’s coiling! That’s what it has done.
To my eye, the Euro is trying to do two things: the bulls are trying to work out of a range bound trade that lasted an entire year. They are not doing a great job so far. The bears are trying to reject range highs. They’re doing a decent job, but have been smacked about quite a bit these last 8-10 trading days. As a result, the /6E is marking time until an unknown factor causes order flow out of this consolidation.
It’s doing a pretty damn good job consolidating as the EMAs I track had gone completely flat on top of the VPOC.
So then, what’s it likely to do? It was likely to chop the consolidation range, the short trade was dead. Instead of just clicking the buy to cover and taking a 0.00012 loss, I was lucky to catch a bit of movement in my favor and only lose 0.0006. I didn’t want to be in a coin toss situation any more. I covered. My entry was good so I really have no complaints with the trade. It just as easily could have continued rotating lower.
And now you have read though my entire lunchtime /6E perspective and my subsequent introspective. Have a great one!
Tue Sep 17, 2013 8:04am ESTComments Off on Gentle Rejection Overnight
The overnight session was quiet, and the first thing to catch my eye is the way price kept bouncing off yesterday’s low at 1688. There were four instances overnight where we saw buyers reject attempts to break this level.
As a result of all that time being spent near the lows, we have formed a very lopsided market profile overnight. This gives us some interesting context clues as we trade today.
Many other markets are quiet too. Take for instance, the Euro currency future via the /6e. There has been strength but not enough to break yesterday’s highs. Instead the Euro marking time with a gentle sine wave. If however the Euro cannot strengthen this week, it could still be stuck in a bracketed range dating back to the beginning of 2013.
Returning to the /ESZ3 or $SPX December future, our key upside level of resistance is close at 1693.50. When we broke down yesterday to commence gap fading we left a sharp low volume node at this price. It can’t be seen as clearly on the below market profile charts as it is on a pure volume profile, but you will notice a split in the profile at this point and a value area low. I’ve highlighted this level, other key areas of opportunity, and a few scenarios for today on the following market profile charts:
