Mon Dec 31, 2012 8:30am ESTComments Off on Commence The Celebrations
The closing hour of Friday featured as adult a temper tantrum as you will ever see, sending the futures spiraling lower like wily coyote falling off a cliff, POOF!
The meat of the sale happened during TPO letter R or GYARRRR in pirate. That TRO represents the 15 minutes after the cash market closed on Friday where futures remain open.
So when you’re seeing futures any shade of green, it’s green in relation to this mess, which wasn’t priced into stocks.
Today’s open is very likely the only fireworks I will see this New Year’s Eve. Would anyone like a glass of champagne? Perhaps a mimosa?
Fri Dec 28, 2012 8:20am ESTComments Off on Watching for Stabilization
Sellers dominated the auction yesterday up until the late afternoon where we saw a vicious short squeeze. The resulting candles for many charts look impressive, showing a long tail which suggests very aggressive responsive buying. What is now vital for a constructive bull case is for the market to stabilize and work to build value higher. This would involve initiative buying which is more confident than the gnarly reactionary buying we saw yesterday afternoon.
Although the buyers pulled off a heroic bout of buying, the market was successful in moving value significantly below where the markets traded last week. The overnight market has a very large range and we’re set to gap lower as of 8:30am.
I consider 1399.50 on the e-mini S&P critical for the bull case today. Losing that area could result in a quick revisit to yesterday’s lows. Above I’ve boxed a low volume zone where price saw significant rejection by the market several times yesterday. Should we see the market trade higher, seeing how the market behaves from 1408 – 1410.50 (also yesterday’s close) will be telling of the overall tenor of the tape.
When the market is trending lower, one of the characteristics of the profile to monitor is whether the TPOs can recapture the high of the previous half hour. Alas we’ve officially seen the first TPO to accomplish the task at the one o’clock hour. It’s a start toward stabilization:
Thu Dec 27, 2012 9:09am ESTComments Off on Long Liquidation Christmas Hangover
What first catches my eye when viewing yesterday’s profile is its shape. It nearly resembles a lowercase letter b. The shape of the profile indicates sellers overwhelming the tape early in the session only to find interested buyers down below. It’s often referred to as long liquidation which is the opposite of a short squeeze. Once the temporary excess of supply from top tickers and chasers ends the market stabilizes. Often times the occurrence of a long liquidation can mark the low of a trough. However, I’ve noted a bias line where I want to see trade sustained above to be constructive on long positions. The level also acted as resistance during the overnight session on three occurrences also before we blasted through it around 7am. Watch trade in and around 1415:
Wed Dec 26, 2012 9:24am ESTComments Off on Merge For a Clearer Picture
Sometimes when a session like Monday occurs with very little movement in price and trade entirely contained within the prior session’s range, I will merge the profiles into one, to get a better sense of the overall trading range and relevant guideposts it can present.
By merging Friday and Monday sessions together, we get the below profile. Interesting note, the volume price of control at 1423 (also Monday high) has been tested three times overnight. Going into the open we’re priced to open right on the level. For all these reasons, I consider the range from 1422 to 1423 my pivot line.
Above resistance is the confluence of the profiles value area high and last Tuesday’s session low at 1425. The next interesting area above is last Friday’s high. Trading above 1428.50 would demonstrate buyer strength.
Very important support below is the confluence of last Monday’s VPOC and the profiles value area low from 1418.50 to 1419.
The early AM has seen prices in the S&P gently levitate after gapping down Sunday evening. After finding support near Friday’s low near 1418 the market has lifted over five handles and as of 9:15 AM is pricing an open within yesterday’s value area.
Key levels from Friday’s balance are the volume price of control at 1422.75 and the value area high and low at 1426.75 and 1416.25 respectively. Below Friday’s low the next key area is last Monday’s value area low at 1415.75 and below there we want to see bulls holding last Monday’s low, otherwise they risk a quick blow to their confidence on this shortened trading day. Taking out Monday’s lows, the lows of last week could set the tone for the week.
Keep an eye on the key levels from Friday for a cue on who make their way to market this Christmas eve:
Strong bounce thus far this morning in the S&P, pumping hard off of a key support level. Financials continue to behave very bullish although the session is still early. We’re into the back-and-fill range I highlighted this morning after getting a telegraphed bounce off of Monday’s value area high:
Although I’m down over 1.5% today and counting, I used this morning’s pop to clean out all the degenerate positions from my portfolio. All except one, BGMD. I can’t let this position go unless it gets seriously weak. It flagged hybrid oversold yesterday with an impressive dataset and look at this chart:
I woke up this morning to the first sight of snow on the ground. It’s just a light dusting, mind you, but even the slightest glimpse has me in a better mood than last night. Let it snow, let it snow, let it snow.
I got all bulled up yesterday afternoonafter seeing the S&P thoroughly auction the EXACT price range I had laid out in the morning yesterday and then break higher. Typically, this is a very bullish event. It says to me, the buyers and the sellers came to the town square, exchanged their paper while wearing top hats, the sellers were quite pleased with the amount they had sold and went home for the day, but more buyers were left around in the afternoon, possibly drunk on eggnog, and they were still interested in buying. Only the sellers were gone so their teased them back into the square by throwing snow balls at their windows.
Little did they know the world was ending today, and they would wake a giant laser beam armed algo who would melt all the snow and leave only a bottomless pit where the buyers once stood.
And here we are today, still alive after the attack. Take a look at where we’re set to open, around 1422, not as bad as it looks on the freaky overnight tape:
We’re set to open right around Monday’s value area high, an area we snapped through and never looked back. Well here we are, throwing back to the scene of the crime where this week’s breakout started. Chess mentioned in his special fiscal cliff video last night that even though it appears we could see extreme volatility today given the overnight action, the busy news headlines, and option expiration it’s quite possible to be a quiet day given the light holiday trading action.
A mild session favors the bulls going into next week, and if they can hold the key levels of support I’ve outlined in the above profile, I we can stay constructive on the market. Keep your head on the open.
Update: Futures took another cliff jump down to 1418 as soon as I published. Be prepared for anyting, including a flush. Key off of the support levels highlighted.
Tuesday’s trend day higher left some interesting price levels behind as we moon shot higher. Often times, when a price level is not thoroughly auctioned, the market will return to those levels. It’s quite possible that is how we will spend today’s trading session.
Although yesterday was an inside day, where price consolidated within the range of Tuesday, we did see price fall lower toward the closing bell, pushing price down below both yesterday’s and Tuesday’s value area. As of 8am the globex session seems to have bumped its head on the value area low zone I’ve highlighted below:
Trading today in the non-auctioned price zone I’ve highlighted would be constructive and we can expect high quality charts to still provide high probability trades. Globex lows coincide with the low of the orange box above. Should we sustain trade below 1428 that’s our cue to cut laggards and consider scaling profits in winners.
Above 1434-1436 we can consider getting more aggressive into the close of the week.
Tue Dec 18, 2012 8:48am ESTComments Off on Markets in Rip Mode
Going into 8:30 the S&P futures were above recent swing highs. We set a Globex high at 1434.25 and we are pricing an open right near yesterday’s close. I noted early yesterday that a Santa rally may be short lived and I wanted early involvement. Yesterday was the spark that lit a massive pile of paper aflame, whether we get the soaked logs ignited is another story.
I expect to see some early back-and-fill action. Key price areas include last Wednesday’s Fed reaction around 1430 then possible support at yesterday’s high/close which coincides with last Wednesday’s value area high at 1428. The next level of key support is yesterday’s value area high at 1422. Should we sustain trade below that level I would expect a quick trade down to the value area low of yesterday down to 1416:
My plan is to cut any early weakness out of my portfolio if necessary, to make room for better charts. Stocks of interest going into today are CERN, HEK, FTK, REGN, SHLD, and SKS.
For the sake of redundancy of an important concept, should we sustain trade below 1422, we could get a quick flush. I may cut some longs and see how things pan out.
Update: S&P making a new overnight low into the open. Looks like participants want to re-auction the thin rip from yesterday’s close to ensure buyers are still present from 1422-1425. Not quite rip mode!
