We are currently priced for a gap up in the NASDAQ futures after an overnight session that featured normal volume.  The range was also normal.  It started by holding the Wednesday low then a rally up through the entire range resulted in a test above the high, briefly, before price settled back into it.  At 8:30am Initial/Continuing jobless claims data was better than expected.  We also had CPI data out better than expected—the initial reaction is selling.

We have a slew of medium impact events to wade through today.  The Philadelphia Fed puts out their reading at 10am.  We have natural gas storage at 10:30am followed by crude/distillate inventories at 11am.  Then at 3:30pm a Monthly Budget Statement will be issued.

Yesterday we printed a neutral extreme down day.  It started with a range extension lower which took out the overnight low and probed just below last Friday’s low before catching a bid at making a new high on the day.  Said high was only made by 1-tick, a failed auction.  We then travelled back through the entire range to close near session low, earning the day an ‘extreme’ addenda to its neutral nature.

Heading into today, my primary expectation is for chop.  We have option expiration tomorrow and lots of medium impact economic events.  The markets are also digesting several earnings announcements.  Look for sellers to work down into the overnight inventory down.  They will be targeting 4332 but may stall out beforehand.  Then look for two-way trade around the MCVPOC at 4360.

Hypo 2 sellers work down to 4330 and set their sights on a gap fill down to 4326.50.  Look for them to take out overnight low 4323.50 and probe Wednesday’s low 4317.50 before finding responsive buyers and two way trade ensues.

Hypo 3 buyers gap and go higher, target overnight high 4366.75 then set their sights on 4384.25.  Stretch target is 4392.

Levels:

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Let’s see if anyone is paying attention to all the auction logic I’ve been providing.

MULTIPLE CHOICE Once a market establishes value, and barring an external force changing it, what do you do?

A. Buy below value, with intent to sell at/above value

B. Short sell above value, with intent of buying to cover at/below value

C. Eat tacos

D. All of the above

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Lael Brainard, the 53 year old Fed Governor was speaking at a small engagement in Washington this afternoon.  She advises the Fed ‘watch and wait’ until global risks recede.  She also warned again ‘prematurely’ raising rates.

The dovish comments sent NASDAQ futures beyond cash session highs.

I had no idea how smoking hot Mrs. Brainard is.  I don’t write this to objectify her, but merely out of surprise.  Everyone else inside The Fed looks like something I’d scrape off my shoe.

I would gladly take her up on a cup of tea, should she ever be interested.  Maybe she could treat me to some dovish commentary, who knows, I’m optimistic.

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The harder I work, the luckier I get.  I will not discount the element of luck that went into cashing out some Friday Netflix calls a bit earlier.

It all started Wednesday afternoon…

I had the triple intraday confluence to work on the Nasdaq.  Once I was able to scale off some futures I turned my attention to momentum stocks—to see if there was something I could carry overnight.  Netflix had a nice, tight consolidation so I took Friday $110 calls around $1.40.

Thursday morning I had little intention of selling into the morning strength.  I wanted to keep these calls for the FOMC minutes.  As the morning progressed Netflix was hammered and down like 4% on the session.  This rendered the calls I held nearly useless.  I had room to add to the position so I entered a ‘stink bid’ down at $0.15, yep, 15 cents.

No more than 5 minutes later some chatter emerged that Netflix would raise their monthly subscription rate by a paltry dollar, a brilliant tax increase heading into the desolate winter.  The stock went ape shit, reversed its loss, and trended high all day.  I booked some late yesterday and the rest this morning.  The overall gain was about 300%.  The gain on those fifteen cent purchases was about 2500%.

The feeling of being on the right side of a fluke rumor? Priceless.

I want November calls in something now.  Something longer duration.  Maybe at the close.  Maybe next week.  I’m moving slowly today.

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There are reports a gunman attacked Northern Arizona University.  The unofficial tally is one dead and three wounded.

Our country is one of excess.  And if these last 12 months have shown us anything, we have a surplus supply of crazy young adults.  What is the fucking problem here?  Not enough hugs from mom?  Too much pressure from the strict father model?

This is a horrifying landscape for any parent to send their children into.  Kids are like the most expensive thing you can have, and you send them off to campuses where gunmen prey.

Then we have the media vultures swarming freaked out students and exacerbating the situation—look at this shit interaction sequence on Twitter:

Keep the affected families from these last 8 days in your thoughts and prayers.

The market isn’t showing much reaction to the news.  Unfortunately, these horrifying events have become commonplace.  Columbine and Virginia Tech shocked us.  Let’s not get complacent on this madness.  It takes a village to raise a child, not a TV and iPad.

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I am not a big ETF guy.  I would rather let ‘The Fly’ run my growth portfolio via the GARP and hand pick a few low-beta dividend stocks for my value exposure.  This is my preferred passive approach.

However, I have zero desire to personally pick emerging market stocks.  I have no edge in geopolitics and business.  Do you know who does?  Goldman Sachs.

I imagine Goldman Sachs and their league of bankers being like the CIA.  They have an ear in every closed room and an eye on every diplomatic handshake.  I see no other firm being nearly as competent with global investing.

Apparently I’m not alone.

Since the Goldman Sachs Active Beta Emerging Markets Equity ETF (NYSE: GEM) debuted, its assets under management have ballooned from $20 million to over $170 million.  Impressive, especially since it is not even 10 days old.  Sounds like they have a few princes, institutions, and politicians already involved.  Who else moves money like that?

Ticker symbol is GEM.  I might get some.  Like anyone else with sidelined cash, I’m looking for a dip first.

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No one market phase is better than another. What’s important is shifting with the sands and behaving in a manner that will most benefit you given external conditions. This week has been a shift away from overall market volatility.

It can be seen as overlapping ranges on a daily NASDAQ chart. When’s the last time I was able to draw a micro-composite? I can’t remember—it has been at least 5 dog years.

This action right now will forever hold a special place inside me. ATR is still elevated which means I can scalp a nice chunk out of the NASDAQARI without wasting much time. Meanwhile, it’s very methodical and has all the makings of a market controlled by the short and intermediate term participants—fellow citizens operating on my time frame.

And now momentum stocks are working. It may be time to switch gears and start building some longer swings.

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Busy afternoon today but I wanted to touch base post Fed Minutes.

Third reaction analysis yielded the short-term buy signal on the news, and it wasn’t long before we ripped to the other side of balance.

We are neutral now which is something to keep in mind. I’m hesitant to chase this action. Instead I booked some gains into it.

Shortly after the minutes I dumped my Dow short via DXD. Right now the market isn’t mean reverting the standout indices—instead I am seeing instruments gain momentum. Both directions.

Like biotech—it was obliterated for two consecutive weeks and pushing a short against it has been a more effective (but not yet a win) trade. The Dow is leading and has a strong supporting cast with the Russell.

My model got this week wrong. It was on a four-win streak. Such is life. I will still press its edge the next time it comes around.

Barring some kind of event, I expect this afternoon strength to fizzle out but the overall grind to continue higher.

In summary, my only short is BIS and I am otherwise long and directing my eyeballs right at the middle of the sun.

 

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I wanted to provide you guys with a zoomed in picture of our current situation on the NASDAQ because I think you can learn something today.

When we have several days of overlapping prices it suggests the market is accepting prices.  And of course it likes these prices—this is also the major composite high volume node (CHVN).  This is the skin colored bar on the volume profile on the far-right edge of my chart.

Take a look at the below chart.  If you think that balance is going to crack ahead of the Fed Minuets you’re bananas.  Play ping pong until proven wrong.

Also, bear in mind, even if we move lower short term, this type of acceptance sets the stage for a return to these prices.  It’s like a big weak high.  But, short term, when we go exploring away from this region it can result in a decent sized directional move as half the participants are proven wrong.

Such is the logic of balance-discovery-balance, of nature.

Marcus Aurelius said it best:

“Nature’s job: to shift things elsewhere, to transform them, to pick them up and move them here or there.  Constant alteration.  But not to worry: there’s nothing new here.  Everything is familiar. Even the proportions are unchanged.”

…you would think this guy was looking at a volume profile chart when he wrote that.  Real trippy, I know.

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I will be watching how trade progresses today in Neurocrine Biosciences. This morning they reported meeting the primary endpoint of their Phase III Kinect Trial of NBI-98854 (whatever the shit that is).

So far it is getting the fade treatment, the old cash out on the news look.

The biotech industry is still in the hot seat, but also heavily shorted by the retail crowd. I am running with the herd via BIS. Therefore I’m keeping my eyes on the horizon in case we’re all running toward an international border fortified with bouncing betty mines and artillery.

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