I’ve awoke to a lovely snow of the arctic variety.  I trade best in these situations.

A strong overnight session has pushed the S&P futures nearly ten handles higher and is currently making new highs as we enter Friday’s cash session.  We’re slated to open around 1510.  Yesterday I highlighted what I see to be a poorly auctioned area spanning from 1512-1504.  Early on I’m looking for reactive selling to drive price lower, targeting Wednesday’s low at 1506.25.  Then I’m looking for buyers to reenter and balance trade, giving us an auction in this zone for the remainder of the day.

If we should see buying at the open, a breach of 1511.50 could give us a quick ramp back to 1517.75.  The thin profile above suggests aggressive behavior by the sellers.  Should we not see a sharp rejection of these prices, but instead acceptance with volume, price can quickly revert to the value above.

Simple and sweet, let’s close this week out well.

Yesterday’s liquidation break took out nine days worth of auctions.  Going into 9am, we are set to open lower, suggesting a rejection of the entire upper range.  The globex session appears to have put in its lows after selling off sharply during the European market.  Asian markets were weak too, thus I expect my Japan stocks to gap lower.

Overnight, the market found buyers around 1501.50.  I had to stretch my profile chart back to 02/07 (two Thursday’s back) to find reference points.  The first thing that catches my eye is the naked VPOC from 02/07 at 1498.  Since we’re down here, there’s a strong proclivity for sellers to target this level.  Should the selling continue through the value area, I’m going to be looking for buyers at the value area low of 1495.75.  If they decide not to show up at these levels, I will drastically reduce exposure.

Talking upside and near-term range, there hasn’t been a health auction between the 1510 – 1504 region.  We’re set to open near these levels.  If I see balanced trade occurring (a nice, Gaussian bell) within these levels, I consider that constructive.  I’m looking for a balanced session and a compressed range before I get back my “buy the dip” mentality.

The market has certainly been worse to bulls than this.  But respect the action and get out of the way if everyone starts running for the door.  Should we stabilize, keep your head clear, look for signs of buyers initiating trades, and go and do likewise where quality chart setups present themselves. 

Yesterday the market pushed higher from a long sideways churn.  Prior moves this year that broke out from the sideways consolidation carried a big punch. Yesterday’s move was certainly impressive, moving nearly ten handles from the low, but certainly less explosive then the moves earlier this year.

However, as has been the case since the year started, going with the flow and riding the tape higher has been the best course of action.  When riding the action, you want to know where price has been and how it’s behaved. Given the confluence of many value area lows around 1515.75 last week, I can see the buyers were hard at work at these levels.  Should they not show up to defend them in the future, it would suggest their behavior has changed and a possible sentiment shift has occurred.  It would also place many newly initiated longs underwater.

Given the age of the rally and its proclivity to chop around as indecision mounts, I’m giving my bias line more room to the downside then I have in the past.

The market is set to open near the highs of last week after a healthy overnight rotation began around 3am. If the bulls are serious about inflicting pain, I’m looking for them to capture 1520 early on and sustain it. That is the land grab required to take this tape on an exploration higher.

I kept my bias lines a bit tight last week to the downside. I gave a general area I wanted to see hold and when we got down to those levels, a bear flag below my bias line had me cutting a few names. In retrospect, and given the tenacity of this Bull Run, I cut the names too early. MOS in particular, I was caught in the rough chop. The trade is not dead. Therefore I’m highlighting a specific level, 1510.50, that I want to see the market close above. If going into the close, we cannot sustain this level, I will reduce long exposure further.

My brain got in the way of me trading yesterday.  I’ll go into further detail this weekend.  But first we must take our places for the finale of this week’s market.

Since gapping higher last Friday, the market has done very little exploration, however there is little occuring to make us bearish.  We had a methodical seller Wednesday, but no follow through. We’re above the midpoint for the week and value has progressed higher (albeit at a slow rate) the entire week.  I’ve highlighted the value progression in orange.

1514 was the floor during the globex session and has been a price that finds buyers all week.  Losing this level today could signal the buyers active this week are removing risk going into the weekend.  However, if the S&P closes above 1514 bets are being pressed.

The Nikkei was off over 1% overnight and our futures couldn’t press through this level.  Don’t you want this market?

BOTTOM LINE: WATCH 1514 on the /ES

Happy Valentine’s Day ladies,

Gentleman, buy something, anything for your girl.  I don’t care if you think the holiday is fake.

Like I mentioned yesterday, we found real sellers working yesterday.  They left their footprint on the profile, where we see the market making three rotations lower.  What impresses me about the action taken by the sellers is how methodical they were.  This was the clever work of an expert or her robot I’m sure of it. Check it out:

As of this writing, we’re trading below Monday’s pump range around 1514.  Turns out the level didn’t give us much pump in the S&P, although it allowed individual equities to rip higher.  Given yesterday’s profile and the selloff during the globex session, I’m turning my attention to a downside scenario today.  The overnight low sits at 1510 which is right where things get slippery.  Should we lose that level intraday, I’ve boxed the area I want to see price sustain to keep me constructive on my solid long positions.  Should we begin trading into this area, I may scale profits in extended names and cut small losses before they morph into large ones.

Below 1504 today, and a major sentiment shift has occurred.

Tight range overnight, and considering we had a State of the Union address and I was expecting a binary reaction I’m rather thrilled with the quiet globex session.  That’s what’s up!

The president didn’t throw any major curveballs.  He’s just as stoked as we are that the market is ripping.  It was one of his first talking points.  Here’s my health of the country bellwether: where’s the Dow and how much can I sell my house for? Both are up, so USA #1.

As I pen this piece the S&P future is drifting slightly higher but 1520 is looking like a key upside level today.  Down below I want to see buyers resurface at 1514.  They handled that level with a calm and collected pomp yesterday.  Should they lose it things could get slippery.  You can reference yesterday’s post to see the slippery zone I’m still observing below.

That’s it.  Riding the rally is simple, until it isn’t.  Protect your necks.

Happy Fat Tuesday ladies and gents, seeing as resident trader extraordinaire RaginCajun has taken to the streets of New Orleans to partake in booze and debauchery, and rightfully so, I hope you find your way over to this humble blog.  I love how MCD has always been hip the Christian crowd during lent, offering the double patty fish fillet for all of the righteous gluttons needs.  Let’s get right to the profile and see what the participants are thinking, shall we?

The trading action into the close of last week was no doubt spectacular for longs, as buyers continued gobbling up equity prices like they were on fire sale.  Sellers simply could not keep up with demand without raising prices.  Then Friday came, we had a big storm coming, and all the market managed to do was squeeze some shorts in the AM then pretty much trade flat into the weekend.  Monday the index churned along, in balance, while allowing solar stocks to set up really well and a few social stocks rip rocket higher.

Last night the Japanese ministry reaffirmed their goal to inflate equity prices, and all the excitement led the S&P future contract to put in a very wide overnight range from 1508 to around 1514 as of this writing.

The profiles give us insight into the daily candles being formed.  The two most significant observations I offer you are the thinly traded range below, which could see a retest, and the level where I think we continue to pump higher.  Anything in between can be interpreted as balanced trade, which favors allowing individual equities with quality chart setups to rip.  So you have two scenarios leading to ripping stocks, and one that may give pause.  Decent odds.

I’m impressed with the roster of musicians I saw at last night’s Grammy awards.  I often get stuck in the mentality that the best music has already been made, and for many listeners’ ears that’s true.  But there’s always more in store in this short life.

Well here we are, mid-February, making new highs in the S&P.  As I’ve continually expressed during this up move, and perhaps the advice I’m trying to hammer into my own mind, is to not over think the trend.  Keep your picks simple, you want stocks that participate in the strength of the market.  I sashayed out of Goldman last week, why?  No reason.  Look at its chart, side-by-side with S&P, they’ve been mirror images this year, except GS is like the levered version, check it out:

Instead we should focus on key price levels that would tell us overall sentiment has changed and sellers have grabbed the reigns.  Taking to the market profile, let’s pay close attention to Friday’s session since it will provide the most immediate feedback as we progress through today.

Friday formed a tight letter P.  The P-shaped profile has appeared often this year, and as we’ve discussed it suggests a temporary phenomenon has occurred known as a short squeeze.  It suggests the sellers were forced out of their positions, but once they were forced to buy out no new orders entered the market.  In a downward trending market, this can be a good opportunity to short.  In an up trending market, we take the action with a grain of salt and look at other contextual pieces.  What was going on Friday?

There was strength in the morning and then the east coast was freaking out over some snow.  Perhaps that explains the benign action of Friday after lunch.  They all left.  Regardless, we need to see buyers hold off the single prints starting at 1511, if that level is lost, batten down the hatches and prepare for a rotation to 1508 then 1504.  If trading back to those levels doesn’t bother you, hold tight and consider the real fight to occur down at 1498.  That level is everything.  It’s bigger than the 1500 century mark.

Otherwise, if we continue higher keep playing your pumpers if you’re a momo guy and playing your event trades if you’re an event guy.  If you’re a value guy, do your thing player.  Get on the good foot!

http://youtu.be/1N5jY00z_Sk?t=20s

And now I patiently await tomorrow’s trading session.  I didn’t do much today: watched some surfing videos, put some finishing touches on a gnarly excursion, stared out the window, stared at a few tickers, and you get the point.  I was keeping myself busy to prevent buying everything.  I see setups emerging all over the place, but none quite triggered.  So I sit, enforcing discipline.

The good news is the S&P finally put in a quality auction encompassing 1498-1502.  I thought it may never happen.  Shedding my TZA clown shoes near the LOD may have been prudent, but I remain shoed up into Friday’s trade.  The fact of the matter is we finally put in an auction at these levels and now we can put them to rest.  If the bulls show up tomorrow they can drive a stake straight into the hearts of the flailing shorts.  I was 100% long into last weekend, and I may go back to that exposure into the weekend.  My broker loves me.

I sold out of BBY today.  It was my Super Bowl play and their commercial was a non-event.  They’re store is a non-event.  I remember when going to Best Buy was the thing to do.  Now if anyone offers me the opportunity to tag along I kindly refuse.  EVER HEARD OF NAPSTER BRAH?  It’s all there and elsewhere on the internets.

Completely aside:  You don’t realize how small your desk is until there’s a stack of work three feet high next to you.  I couldn’t care less.  I may actually outsource this brainless task.

BOTTOM LINE:  (There’s always a bottom line) We traded a range that has been a cock fight for weeks.  The bulls came out the victors and clawed back to unch (pronounced “OOO-N-CH”) after getting shot out of circus cannons this morning.  Follow through tomorrow equals clown bones everywhere for the victorious bull and I will buy more stocks.