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.

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.

We saw an interesting session yesterday.  After gapping out of a multiday range and opening higher we immediately saw selling on the open.   The sellers drove price lower for the first half hour of trade and we had ourselves a weak morning gap being faded.  The buyers seemed to watch the morning activity play out and after letting the sellers bring price in they went back to work bidding up price.  They stayed active throughout the rest of the session.  It would only be ten handles higher when sellers were able to react and overpower the upward momentum.  We closed the session higher than the open and above the day’s midpoint.  Bulls won.

At this point the sellers have much work to do before regaining any semblance of control.  Given the progress higher, there is much room below for buyers to put in a higher low and remain in control.

For today’s session, I’m sticking with the bull and will be hesitant to cut names unless we lose yesterday’s value area low at 1474.  Keep in mind only my weakest would be cut below here.  Any new long trades would be trades only and mostly of the short squeeze variety.  I don’t intend to initiate any intermediate-term swings at these levels.

Top two picks going into today: PPC & DNKN (chicken & donuts)

http://youtu.be/deghL8o0qHM

The buyers continue to show conviction, and with the powerful numbers out of Goldman, and Jamie Dimon taking a pay cut to save face for having degenerate traders in his ranks I can understand their conviction.  The financials are getting their act together.  And the semiconductors are seeing buyers rotation.

The characteristics of yesterday’s profile suggest shorts were put into a squeeze.  You can see the “P” shaped profile suggesting the rally higher yesterday was drive by old business like shorts buying to cover their position.  This also suggests that the rally struggled to encourage new participants to enter into the market.  Should that theme carry into today, we could expect the market to auction lower, filling in the lower half of yesterday’s profile.

The other scenario is a break higher.  As over extended as we are this is still a real possibility.  No need to get fancy trying to spot the rally, just look for price to take out yesterday’s value area high and how we behave as we approach the high of the day at 1469.

It seems like the market was trying for lower yesterday but the pesky buyers were not having it.  The market gapped lower and a fresh batch of buyers stepped in and auctioned price higher all day.  Morning buyers had it easy.  They spent the morning targeting a gap fill and the afternoon featured a little dip after the FaceBook noise where eager side liners could grab the wave.  They were rewarded too as the index pushed to new highs before eventually settling near the value area high from Monday.

The profiles are overlapping, building potential energy.

That behavior into the close does signal resistance however.  Looking closely at the auction above 1466 yesterday we can glean insight.  Late day chasers, perhaps swing traders positioning for an overnight play were punished for their lack of discipline. Or it was a little short squeeze.  Either way, it created excess above and we closed within yesterday’s range.  That is why yesterday’s closing print at 1465.50 is our key resistance next time we go for a new pump.

The globex session has mostly glided lower, but Goldman just crushed estimates.  As of 8am 1460 has been support.  This level also is in confluence with the single TPO prints yesterday.  If this level can’t hold the market will begin exploring lower.

One of the first things I looked at this morning was a zoomed back chart of all the 2013 daily auctions.  I then traced the progression of the high volume nodes to shine light onto the intermediate term auction.

The trip thus far has been a very orderly auction, with the first pullback tagging the high volume node (not leaving it naked) and the pump following the pullback achieving new highs.  When trading momentum this is exactly the type of behavior you want to see.

The last three days have seen the progression of value slowing and beginning to tightly overlap, with our prior two sessions actually sharing a point of control at 1464.25.  The behavior around these levels the next time they trade will be a key piece to the overall picture.

As of this writing the globex session is making fresh lows and we could be starting our second pullback.  However I’m hesitant to call direction with the several macro events occurring today.  Instead my plan is to give more weight to the afternoon session and simply manage my existing positions.

Should we trade lower we will look for signs of buyers at the 01/09 VPOC at 1455.75 then the same day’s value area low at 1454.  If those levels can’t hold the sellers will target the 01/08 value area.