http://youtu.be/zQDaGLe2qk4

Yesterday’s auction was successful in cleaning up the toothy lower ends of the prior two day’s profiles.  The price range from 1500-1495 has been very balanced and building pressure.  We’ve seen aggressive entry into the tape by both buyers and sellers at the extremes of this range which is healthy behavior for a balanced auction.

The sellers did manage to push value to its lowest level since entering this new range, down to 1494.75.  There were three shifts in the VPOC yesterday which is another sign of a balanced auction.  The VPOC was resting higher most of the session but as we entered the last fifteen minutes of trading a massive block of orders came through and lifted price higher.  Before the price was lifted the activity shifted value lower.

Honing in on yesterday’s value area, notice the entire value area is below the prior days.  This is a victory for the sellers as they have been able to slow value at best for most of this year.

Being the first of the month and a Friday, I’m expecting lots of trickery and traps.  I will again be placing most of my attention on the afternoon activity and the value placement.

As a trader, your job is not to impose your ideas on the market.  Your job is to research ideas and see if the market agrees.  Losses are part of the process. – FuturesTrader71

Often times we make assumptions in the market using the data at our disposal.  I personally feel that probabilities are the best tool available to a trader or investor.  I’ve built many probabilities into my trading style, and am fortunate to get a glimpse into The PPT which is a treasure chest of probabilities I can add to my stock picking.

Taking a loss does not mean you’re wrong if the process is right.

Taking to the profile we’re seeing some weakness carrying into the AM globex session.  The S&P futures have hit their head three times on 1496 and at 8:25 the level has been rejected in a rather stern manner by the sellers. Should we see trade continue to rotate lower today, I’m looking for buyers to step in at the naked VPOC from 01/24 at 1490.50.  I will be looking for buyers to stabilize price here.  Should they not show up to the party, I must consider cutting weak names from my portfolio to raise cash.

For the sake of keeping things simple I’ve highlighted the two price zones that I consider significant in the short-term for the S&P future.  The scene of the breakout yesterday is interesting.  It’s the confluence of the prior two day’s value areas.  The subtle cue that the balance may break to the upside was the slight uptick in the value area.  Yesterday the breakout produced single prints.  Single prints signal aggressive activity that resulted in a violent movement in price.  How we treat this level for the remainder of the week can be very telling.

Above I’ve highlighted the level where I expect to see sellers enter the tape.  If they can’t show up and defend these levels, it’s pump time.

Today it’s all eyes on Facebook as expectations have been set high by wall street (why?) and they need to deliver. The GDP numbers are rattling the markets a bit, if the bulls actually hold on today they have serious sand.

The ball is still firmly in the bull’s court.  Seeing a day of liquidation with price discovery lower to find buyers would be constructive and welcomed by many participants who are sidelined or underexposed.  The question becomes at what level do the eager buyers step back in?  Buyers have spent the last six sessions buying value area lows and VPOCs from prior days.  They haven’t allowed price to trade below the prior day’s high.  If that trend changes, we can consider it an opportunity to test the true mettle of this year’s bulls.

Yesterday the developed profile overlapped Friday’s which signals a form of balance.  Buyers managed to push the VPOC only two ticks higher verses Friday and value high crept one tick higher also.  It appears the market is still trying to go higher but was contained by sellers.  The opening’s push lower by the sellers set the range for the day.  That was a minor victory for the sellers.

Clearly 1491 will be a key level today.  There are multiple levels in confluence here as of 8:30am the globex low was set here.  Should that break look for signs of buyers at 1487 where the low was set on 01/24 and is in confluence with the VPOC from last week Tuesday.

Chartpin link to market profile: https://chartpin.com/#chart/1151

As each session goes by, building value higher daily, it’s important to keep in mind the possibility of a pullback in the S&P future contract.  The first thing sellers are going to have to do is stop the advancement.  We have yet to meet a selling force of equal or greater value to the intermediate term buyer.  They want in and they’re willing to initiate trades at higher levels each progressing day.

This week I’m hunting for signs of the seller.  Tell tale characteristics of a seller are value pushing lower as measured by the VPOC, a wide range distribution day with broad based selling that takes out prior day value areas, and fast rotations to the downside.  Giving the markets current levels, action of this nature should not come as a surprise.  Rather we should prepare ourselves mentally for such market behavior and have a plan for addressing the downdraft.

My focus is on locking in profit in names I currently hold should we see the above signs play out this week.  I still plan to play the short term with potential short squeeze plays like GTAT.  I’m also going to stick around and ride a correction out if needed in my intermediate term holds like GS and CREE.

Taking to the profile, I’ve merged and chopped the sessions from the beginning of last week to get a better idea of the distributions.  I’ve split open last Thursday’s profile to give you a look at the “P” shaped profile that signifies a short squeeze occurred.  Notice the hard drop out of this area when 1494 was lost.  I want to continue to monitor this level as critical.  Next key support is 1486.25 where we saw a strong buyer reaction twice.  Should they not show up to defend these levels a third time it could signal a change in the market’s tenor.

If we keep levitating press your winners.  If a name comes into a big resistance level FOR THE LOVE OF WINNING take some profits.

One of the recurring characteristics in the S&P future contract is buyers showing up at the value area low of the prior session.  They defended the key level again today, stopping sellers at the VPOC from yesterday just above the value area low.  We are certainly experiencing aggressive appreciation in many equities.  While I continue to note levels that could signify a change in sentiment, the bulls are continuing their march into the weekend once again.

A close near the high of today’s session could signal increased conviction by the buyers.  As we approach three PM (show time) I want to clarify what I want to see to stay constructive on my longs.

I key off the S&P and if we near the close trading above 1494 and better yet the VPOC at 1495.50 I’m keeping all my exposure.  I may consider cutting one of my weaker names should we lose these levels, but everything else will stay in place unless we take out the low of today.  Taking out today’s low would put many new longs into question going into the weekend.  2013 is the year of certainty we don’t have time for weakness.

Aside: Listening to Icahn last night and his tangent on the reverse-Darwinian nature of CEO succession stirs up the little voice in the back of my head.  I’ve never fancied myself a corporate type, what with the schmoozing and the stupid luncheons and the hierarchy.  I spend much of my life here and for what?  A salary I make bi-monthly on my own?  I may have to take the leap hear soon folks (no suicide, yes full entrepreneurship).  Oh the humanity of losing dental and health.  I really only need the catastrophic coverage as my body age is 18.  I’ve stood at the lip of this crevasse for nearly a year, contemplating the leap.  Eight out of ten say don’t do it.  Developing…

The market continued its bull run yesterday with an aggressive morning pump.  The rest of the session played out first with the formation of a “P” profile which suggests the action to be temporary phenomena in the market known as a short squeeze.  I’ve split the TPOs from yesterday’s session and split them to the right for you to see.

Notice the letter J TPO which fell out of the developed P and the subsequent auction that occurred afterwards.  We tested the lower extremes of the sessions and the buyers bought the dip, we tried to reenter the upper distribution afterwards (the meat of the P-shaped profile) on to see rejection.

All of that unique auction action at 1494 is why we need to closely monitor how we trade relative to that level, that is where I will decide if I need to reduce cash from 40% to something less into the weekend.

Otherwise I may cut additional weakness and lock in gains to increase cash.

Names I’m watching should I need to add: FLT, CSE, TWGP, HTHT, GTAT, and BTN.

Trade’em well ladies and gents.

Good morning traders,

My first order of business is to sell my MLNX shares.  Their earnings were a nonevent until their dropped horrid guidance on the street.  Shares are down about 20% premarket.  The key here is to sell and move on/continue to monitor what this market is telling us.

The session yesterday was thorough and into the bell the bulls had the edge, closing near the highs.  However, the overnight session saw futures lower, especially with the weak action from AAPL. I’ve highlighted the overnight range in blue on the below chart.  The range was wide and we have an 82% probability of breaking either the high or low from this overnight session. To my eye it seems a break of the low end is more likely.

I’ve also highlighted in orange an area that is lacking thorough auction.  Seeing the market produce a thorough auction of these levels as opposed to a swift move lower would tell me this market is still very constructive.

I’ve marked up the profile chart to get a picture of what I’m seeing.  There are several interesting reference points on the auction charts.  I merged the “unorthodox pump” potion of the Friday session into yesterday’s session because it better fit into the auction that occurred yesterday and gave a clearer picture of the distribution of trades.

The resulting profile shows value at new highs, but still within the range of last week.  Just above the normal distribution is a low volume node then the trending action from yesterday.  Halfway through the session I commented the auction was very methodical.  I was referencing the fact that buyers sat back and watched the open, allowed price to tag our bias line (prior day VPOC) exactly as we highlighted then stepped in with their buy orders.

It still would not be a major blow to the bulls to see some retracement, and more and more traders want this to occur.  Therefore I’ve highlighted below levels that you may want to consider cutting weak longs or adding on hedges.

This one takes the chrome off a bumper (abrasive):

Friday price action was almost entirely contained within the range from Thursday.  The buyers managed to pierce the prior day highs with an unorthodox short squeeze into the close.  The very fact buyers were able to pull off such an aggressive feat suggests the sellers were fatigued going into the close last week after watching a stretched and gapped tape continue to defy gravity.  As impressive as the move was, the auction on Friday did manage to set value lower, moving value almost four handles lower to 1473.50.

I’ve highlighted my bias zone intraday in a lovely shade of blue.  This level is the confluence of the Thursday VPOC and Friday value area high.  It was also the scene of a swift V-shaped reaction this morning during the globex session.  It’s signaled its importance several times.  How the market treats this price level this week will be telling of the overall tenor of market participants.

Sellers will look to push us back below the Friday value area low which could lead to a swift back-and-fill of the gap left behind by Thursday’s gap higher.  The primary target for sellers is the VPOC from Wednesday with its high placement within the value area.  I expect to see buyers reacting at those levels.  Bulls have been eager this year to sweep up perceived bargains this year.  I remain constructive on my longs down to this level.  Below I will reconsider my intermediate-term stance.