NASDAQ futures are heading into the first full week of the March contract gap up after an overnight session featuring elevated range and volume. Price was gap up Sunday evening when the Globex markets opened for trade. The buying continued for three minutes before sellers assumed control of the tape until about midnight New York. Said sellers were unable to return price back to the Friday range. Instead we formed a tight balance above the Friday range for much of the session and even briefly probed up beyond the Thursday high. As we approach cash open, price is hovering in the upper quadrant of Thursday’s range.

On the economic calendar today we have 3- and 6-month T-bill auctions at 11:30am.

Last week U.S. equity markets saw a rally through early Wednesday morning, then hard selling Wednesday. Some consolidation selling during the rest of the week but no real follow-through. Divergent strength from the Russell 2000 suggests risk tolerance remains strong. The last week performance of each major index is shown below:

On Friday the NASDAQ printed a neutral extreme up. The day began with a gap down into the lower quadrant of Thursday’s range. Sellers drove lower for 15 minutes after a brief open two-way auction. Then buyers surged price back up above the Thursday midpoint, briefly. Buyers could not reclaim a logical resistance level there and sellers were able to press range extension down into lunchtime. Said sellers were unable to show much follow thru, not even able to take out the Thursday low. That set up a rally for the rest of the session, eventually leading to a close on high of day.

Neutral extreme up.

Heading into today my primary expectation is for a gap-and-go higher. Look for buyers to take out overnight high 12,453.50 early on, setting up a run to 12,500 before two way trade ensues.

Hypo 2 stronger buyers tag 12,531.75 before two way trade ensues.

Hypo 3 sellers work into the overnight inventory and take out overnight w 12,388 on their way to closing the overnight gap down at 12,366.25.

Levels:

Volume profiles, gaps and measured moves:

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NASDAQ futures are coming into the final day of the first full week of December gap down after an overnight session featuring extreme range on elevated volume. Price worked lower overnight, unidrectionally rotating lower until catching a bid around 6:30am New York. As we approach cash open price is hovering just below the Thursday midpoint.

On the economic calendar today we have consumer sentiment at 10am.

Yesterday we printed a normal variation up. The day began with a gap down outside of Wednesday’s range. After an open two-way auction sellers made a sharp move lower, briefly trading down into the December 1st range before a sharp excess low formed. From then until about 11:40am price rallied hard, trading back up into the Wednesday range a checking back to the fast liquidation zone. Sellers defended their recently claimed territory, and we spent the rest of the session chopping along the upper quadrant of range.

Heading into today my primary expectation is for buyers to work into the overnight inventory and close the gap up to 12,384.75. From there buyers continue a bit higher, tagging 12,400 before two way trade ensues.

Hypo 2 stronger buyers tag 12,425 before two way trade ensues.

Hypo 3 continuation selling. Sellers take out overnight low 12,263.25 setting up a move down to 12,200. Stretch targets if we begin to liquidate are 12,100 then 12,016.

Levels:

Volume profiles, gaps and measured moves:

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NASDAQ futures are coming into Wednesday with a slight gap down after an overnight session featuring normal range and volume. Price was balanced overnight, balancing along the Tuesday high after exceeding it for a few hours. As we approach cash open, price is hovering in the upper quadrant of Tuesday range.

On the economic calendar today we have JOLTS jobs openings at 10am, crude oil inventories at 10:30am and a 10-year note auction at 1pm.

We also have major tech component ADBE reporting earnings after the bell.

Yesterday we printed double distribution trend up. The day began with a slight gap down and after a brief open spike higher sellers stepped in and drove price lower, trading down through the Monday low before forming a sharp excess low. The rest of the session was spent auctioning higher, making new record highs and shifting value up near the high.

Heading into today my primary expectation is for buyers to work into the overnight inventory and close the gap up to 12,641. From here buyers continue higher, trading up through overnight high (all-time high) 12,675. Look for sellers up at 12,700 and for two way trade to ensue.

Hypo 2 stronger buyers sustain trade above 12,700 setting up a run to 12,750.

Hypo 3 sellers press down through overnight low 12,615.50 and tag 12,592.25 before two way trade ensues.

Levels:

Volume profiles, gaps and measured moves:

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NASDAQ futures are coming into Tuesday gap down after an overnight session featuring normal range and volume. Price was balanced overnight, balancing along the lower half of Monday’s range. As we approach cash open, price is hovering about 10 points below the Monday mid.

On the economic calendar today we have a 3-year note auction at 1pm.

Yesterday we printed a normal variation up. The day began with a slight gap up and open drive higher. Buyers drove to a record high, flagged for a bit, then pressed to range extension up, pressing about 12 points beyond the 12,600 century mark before discovering a responsive offer. Said sellers rotated price back down to the midpoint and briefly down through it. Sellers could not however defend the mid and we ended the day with a little ramp up off the mid and back into the upper quadrant to end the session.

Heading into today my primary expectation is for buyers to work into the overnight inventory and close the gap up to 12,593. From there buyers continue higher, up beyond overnight high 12,602.75 before two way trade ensues.

Hypo 2 stronger buyers trade up to 12,656.75 before two way trade ensues.

Hypo 3 sellers press a gap-and-go lower, trading down through overnight low 12,527.50. Look for buyers down at 12,509.50 and for two way trade to ensue.

Levels:

Volume profiles, gaps and measured moves:

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NASDAQ futures are coming into the first full week of December with a slight gap up after an overnight session featuring elevated range and volume. Price was balanced overnight. First-off it ran up to a new record high print, then after about 20 minutes of being open price fell back into the Friday range. That sell rotation carried clean through to 3:45am New York, when buyers stepped in near Friday’s midpoint. Since then we’ve slowly drifted higher and as we approach cash open price is hovering near the Friday high.

On the economic calendar today we have 3- and 6-month T-bill auctions at 11:30am followed by consumer credit at 3pm.

Last week kicked off with some strong selling early Monday that discovered a strong responsive bid. The rest of the week is spent rallying then holding along the highs. The last week performance of each major index is shown below:

On Friday the NASDAQ printed a normal variation down. The day began with a slight gap down and after an open two-way auction buyers stepped in. Resolved the gap and continued higher, trudging along at the highs for several hours before checking back to the midpoint around 2:45pm. Sellers couldn’t quite tag the mid before buyers defended and eventually rallied back to the daily high.

Heading into today my primary expectation is for buyers to work up through 12,541.50 early on and sustain trade above it, setting up a run up through overnight high 12,572.50 before two way trade ensues.

Hypo 2 stronger buyers tag 12,600 before two way trade ensues.

Hypo 3 sellers work into the overnight inventory and close the gap down to 12.507.75 then continue lower, down through overnight low 12,474.75. Look for buyers down at 12,450 and for two way trade to ensue.

Levels:

Volume profiles, gaps and measured moves:

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NASDAQ futures are coming into Thursday with a slight gap up after an overnight session featuring normal range and volume. Price was balanced overnight, balancing along the high print of Wednesday trade. Jobless claims data came out better than expected at 8:30am, and as we approach cash open price is hovering at the Wednesday high.

Also on the economic calendar today we have ISM services index at 10am followed by 4- and 8-week T-bill auctions at 11:30am.

Yesterday we printed a double distribution trend up. The day began with a gap down and open drive lower. The drive down probed briefly below the Tuesday low but was unable to resolve the gap left behind early Tuesday morning (December 1st). Instead responsive buyers were on the scene within the first 15 minutes of action and turned the auction around. The rest of the session was spent campaigning higher, eventually closing the overnight gap and ending on the high of the day, up inside the upper quadrant of Tuesday’s range.

Heading into today my primary expectation is for sellers to work into the overnight inventory and close the gap down to 12,469.75. From here sellers continue lower, tagging 12,407.75 before two way trade ensues.

Hypo 2 buyers reject a move back into Wednesday high 12,472 setting up a probe beyond all-time high 12,512.25. Look for sellers around 12,550 and for two way trade to ensue.

Hypo 3 stronger buyers probe up into open air and rally up to 12,600.

Levels:

Volume profiles, gaps and measured moves:

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NASDAQ futures are coming into the second day of December gap down after an overnight session featuring elevated range and volume. Price was balanced overnight, chopping along the middle of Monday’s range. At 9:15am ADP employment data came out worse than expected and as we approach cash open price is hovering below the Monday midpoint.

Also on the economic calendar today we have Fed Chairman Powell speaking at 10am, crude oil inventories at 10:30am and the Fed beige book at 2pm.

Yesterday we printed a double distribution trend up. The day began with a breakaway gap. Buyers drove higher after an open two-way auction probing up near all-time high before falling back to the midpoint by mid morning. Buyers defended the mid setting up a rally that pressed higher through 2:30pm, making a new all-time high and setting the VPOC up near the highs before falling back to the midpoint late in the session. Buyers defended the mid again and we ended the day in the upper quadrant of range.

Heading into today my primary expectation is for buyers to work into the overnight inventory and close the gap up to 12,464.25. From here buyers continue higher, trading up through overnight high 12,473.50. Look for sellers up at 12,497.25 and for two way trade to ensue.

Hypo 2 stronger buyers probe up through all-time high 12,512.25, tagging 12,550 before two way trade ensues.

Hypo 3 sellers press don to 12,351.75 before two way trade ensues.

Levels:

Volume profiles, gaps and measured moves:

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NASDAQ futures are coming into the final month of 2020 up a quick +100 after an overnight session featuring elevated volume and extreme range. Price drove higher overnight, rallying steadily until about midnight. Then, about 50 points below record high sellers stepped in. Since then we have been in a tight flag along the highs and as we approach cash open, price is hovering up near the all-time high print.

On the economic calendar today we have lots to digest at 10am—ISM manufacturing, construction spending plus some talk out of Fed Chairman Powell. There is a 52-week T-bill auction at 11:30am.

Yesterday we printed a neutral extreme up. The day began about flat and after a choppy open two-way auction sellers stepped in and drove price lower, printing a sharp unidirectional sell-off down into last Wednesday’s range. Buyers stepped in near the lower quadrant of Wednesday’s range and began working price higher. Sellers defended the daily midpoint the first time around, but a second thrust pressed through it. The rest of the session was spent rallying, reversing the early selling and eventually pressing into a neutral print right at settlement. Closing on the high.

Neutral extreme up.

Heading into today my primary expectation is for buyers to gap-and-go higher, trading up through overnight high 12,401.75 and closing the open gap at 12,411.50 before two way trade ensues.

Hypo 2 stronger buyers take out all-time high 12,436. Look for sellers up at 12,448 and for two way trade to ensue.

Hypo 3 sellers work into the overnight inventory and close the gap down to 12,296.75 then continue lower, down through overnight low 12,292.25. Look for buyers down at 12,223.50 and for two way trade to ensue.

Levels:

Volume profiles, gaps and measured moves:

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NASDAQ futures are coming into the final trading session of November with a slight gap up after an overnight session featuring extreme range and volume. Price was choppy overnight, first taking out last week’s high, then steadily rotating lower until taking out Friday’s low before eventually working back to the middle of Friday’s range. As we approach cash open, price is hovering at Thursday’s midpoint.

On the economic calendar today we have Chicago PMI at 9:45am, pending home sales at 10am and 3- and 6-month T-bill auctions at 11:30am.

Last week featured sellers early Monday discover a strong responsive bid. The rest of the holiday week was spent rallying. The last week performance of each major index is shown below:

On Friday the NASDAQ printed a normal variation up. The day began with a gap up beyond the prior day’s range and after a brief two-way auction buyers ramped price higher. The auction continued higher for a bit more than an hour, going range extension up and trading into levels unseen since September 2nd before falling back to the mid. The truncated session wrapped up around 1:15pm with price just above the  mid.

Heading into today my primary expectation is for sellers to work into the overnight inventory and close the gap down to 12,272.25. Then we press up through overnight high 12,337.25 before two way trade ensues.

Hypo 2 gap-and-go higher, working up to 12,400 before two way trade ensues.

Hypo 3 stronger sellers close overnight gap 12.272.25 then continue lower, down through overnight low 12,193.50. Look for buyers down at 12,178 and for two way trade to ensue.

Levels:

Volume profiles, gaps and measured moves:

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Sitting here, on my velvet throne, I do my best to check my privilege.

My emotions were all over the place this morning. Been thinking about death all week. Not in a fatalistic sense. More as a way of putting a sway on the human psyche. We have a hard time letting go.

Renunciation, as the eastern mystics call it. There is a sect of Buddhism who specialize in mastering death. It’s a three step process. First you renunciate all worldly desires and attachments. All of them. Easier said than done. The female nipples, for example, exact a strong pull on salacious lads like yours truly. Boddichita is next. I feel like an ass even presenting these concepts in this setting—a blog whose sole directive is extracting fiat american dollars from the global equity complex—but let us continue . Boddichita is compassion for all living beings. Even murderers. Even viruses. Even your parents. Even total strangers you pass by once and never see again. This step is important because these mystics gain much strength from their training and if that energy is not channeled into working towards the common good, it can destroy the practitioner. Finally, non-duality. This is the dying part. There is an elaborate psychotechnology where the meditator works through all the phases of death, visualizing dying in the proverbial third eye of the mind, until the sense of me, of existence, is no more than an orb of light that is totally interconnected with everything.

Okay that was my crash course in hatha, trantra, rassayana.

Moving on.

Death. To meditate on it can seem depressing but it doesn’t have to be. It can put an urgency in your day. What would we do differently if we knew we only had a few days to live? Some people think they’d seek out some orgy but that is not the point of the exercise. The stoics liken it more to a soldier readying for deployment. Knowing they may never return. The point of taking the mind so close to death, as far as I can tell, it to de clutter the mind and find some clarity around your thoughts.

I’ve been taking a deep dive into the culture and politics that seemed to gel around San Fransisco in the mid ’60s. Reading fiction and non-fiction, watching the films, listening to the music, following the campaign trails, doing my best to understand what the magic was. How we seemed to set a high water mark for american living in that moment, and how it somehow gave birth to the internet, Big Tech and all these other institutions we almost take for granted today.

You’d be a complete dope to ignore all the LSD that was floating around…but my mind keeps wondering how many novel corona viruses were floating around the city back then. I’d guess at least six.

I am not a fucking conspiracy theory person. That is a rabbit hole that sucks in the weak minded. The folks who already feel somehow cheated by their fellow man, beast or fate. It fits their framework for why they were dealt a lousy hand.

Again, I need to check my privilege if this is to be a useful entry…

I have lived an extremely fortunate life. Born to an Italian immigrant who married a big tall American blonde, I popped out the womb in the summer, on my due date, at 6am. Born in the finest hospital in Detroit. In a private room with big windows overlooking the river. Treated to the finest Mediterranean diet, my foreign relatives insisted on bringing the family (the whole family) together every Sunday for dinners. Huge. We didn’t need church as an excuse to gather. It was a bunch of people in a foreign land doing their best to survive. At dinner I was exposed to the immigrant hustle. My street smarts grew exponentially thanks to wheeling and dealings of dear Uncle Raul, a fearless lad with swag that would make most rappers blush. Dearly compassionate Aunt Rauls taught me the traditions of southern Italy. If I didn’t kiss all my uncles and aunts Elder Raul would whip me with a poolstick.

Put big dinners aside. I was brought up in the finest private educational institutions money could buy. My friends come from the wealthiest families in the area.

Tight family. Good food. Solid education. Rich friends. Absurdly good looking.

I understand my perspective is from a position of privilege. Of course I don’t give much credit to conspiracy theories. Still, Bill Gates publishes his pandemic research in 2019 and all the sudden the whole world is taking a dry run at pandemic defense.

Fine. But fuck you if you cannot take information in an objective manner. You certainly won’t last long in the world of speculative finance. Maybe your skill set is more suited for accountancy or general labor. Heck, go be a lackey for some goddam republican, they live in a fantasy world so far from Occam’s Razor their heads bob like balloons on the ceiling.

Deaths. Viruses. Their existence before 2020. The greediness of man to think themselves immortal. Spending millions for a few more dicey hours of “life” inside an ICU. I get it. It is hard to let go. Of everything. Especially if your work isn’t done, but everything is going to be fine.

Markets, trees, societies, all here long before us. The same today. The same after we’re gone.

Rant. Over.

Raul Santos, November 29th 2020

And now, the 314th edition of Strategy Session. Enjoy.

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Exodus Strategy Session: 11/30/20 – 12/04/20

I. Executive Summary

Raul’s bias score 3.43, medium bull. Strong Monday. A bit of continuation into Tuesday, then look for remarks from Fed Chairman Powell Tuesday morning to introduce some selling into the tape. Price is choppy through the rest of the week, chopping along as it digests several earnings reports. Then look for NFP Friday morning to provide direction into the weekend.

II. RECAP OF THE ACTION

Sellers early Monday discover a strong responsive bid. The rest of the holiday week is spent rallying.

The last week performance of each major index is shown below:

Rotational Report:

Energy really strong again and continuing to trade on its own planet—way out in front for a second week. Flanked by sketchy Financials. However, strength was broad and Utilities lagged.

slightly bullish

For the week, the performance of each sector can be seen below:

Concentrated Money Flows:

Industry flows muted skewed heavily to the buy side of the ledger.

bullish

Here are this week’s results:

III. Stocklabs ACADEMY

Pressing the whole signal

Last week we took a close look at the statistics behind the bullish hybrid overbought signal. Now in hindsight, we can see the data-driven analysis worked out well. This is not always going to be the case. Just because something has historically happened with a statistically significant probability does not mean it will happen again.

If you’ve hung around the world of speculative finance for any amount of time then you’ve certainly read or heard someone say, “past performance is not indicative of future results,” usually it is some brokerage covering their ass.

But the phrase is important, to understand, viscerally.

Anyhow the hybrid overbought signal extends through Monday, close of business. Therefore our bias remains bullish through Monday.

Note: The next two sections are auction theory.

What is The Market Trying To Do?

Week ended searching for sellers.

IV. THE WEEK AHEAD

What is The Market Likely To Do from Here?

Weekly forecast:

Strong Monday. A bit of continuation into Tuesday, then look for remarks from Fed Chairman Powell Tuesday morning to introduce some selling into the tape. Price is choppy through the rest of the week, chopping along as it digests several earnings reports. Then look for NFP Friday morning to provide direction into the weekend.

Bias Book:

Here are the bias trades and price levels for this week:

Here are last week’s bias trade results:

Bias Book Performance [11/17/2014-Present]:

Semiconductors forms a wedge, potential failed auction in Transports

Markets fluctuate between two states—balance and discovery.  Discovery is an explosive directional move and can last for months.  In theory, the longer the compression leading up to a break, the more order flow energy to push the discovery phase.

We are monitoring two instruments, the Nasdaq Transportation Index and the PHLX Semiconductor Index.

Transports took out their old swing high in grand fashion last Tuesday only to display a bit of vulnerability a few short days later Friday. Bear in mind this index was closed Thursday in observation of Thanksgiving. The Friday candle print is therefore not carrying as much weight as we’d normally assign. However, when we look back at this chart in a few months, that nuance will not be apparent. It will just look like another price pattern where we make a new swing.

This breakout needs to be monitored closely. Bulls will want to see buyers step in soon and sustain this breakout. Otherwise we could see a swift reversal back down into that old range,

See below:

Semiconductors are working higher after the fourth major thrust of the most recent bull run dating back to May 2020. The manner in which the rally continues deserves to be monitored closely. We are in a steep ascent, the kind which occasionally mark peaks. For now discovery up continues and we remain bullish. But if this wedge breaks, the correction could be swift in the opposite direction.

We don’t know.

See below:

V. INDEX MODEL

Bias model is neutral for a third consecutive week. No bias.

VI. Stocklabs HYBRID OVERBOUGHT

On Monday, November 16^th Stocklabs signaled hybrid overbought. This is a bullish cycle that runs through Tuesday, December 1^st, end-of-day. Here is the performance of each major index so far:

VII. QUOTE OF THE WEEK:

“It’s not a bad way to live once you let go of the idea that you deserve more.” – J.J. Abrams

Trade simple, live simple

 

 

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