Stay sharp!  The action today felt like a lull into complacency.  A sort of lullaby to sooth the beast before driving a lance down through the spine.  Of course, we do not trade feelings.  We objectively observe the market and its two pillars—price and volume.

It was unfortunate I was unable to prepare hypothesis before today’s session.  An antivirus update tossed my machine into disarray minutes before the open.  As enticing as this may have been to trigger anxiety or stress given the gap below yesterday’s range and my nearly 100% long book, I simply rebooted my system and brought my systems back online while enjoying my chicken and beans.

The white linen suit I have worn throughout this warm earning’s season was sullied by my decision to hold a runner in GRPN calls.  My angelic beach gown now has a mustard stain on the right breast because I gorged on my hot dog without proper planning.  I feel no shame from such actions, only a push to stick razor tight to my plans going forward.  Every deviation from plans hurts me.  Each action you take should be without impulse and toward a greater purpose.  Act not on whim.

Two times this week a rumor has spiked one of my positions.  Both instances are positions I have earmarked for September, a future so distant I hardly give it much thought in the present.  Both times I have laughed at such rumors, watched my gains fade off, and gone on with the day as if nothing has changed.  I will let you in on something…NIOTHING HAS CHANGED, yet.

Change is a force consistent in nature.  Change is how you came into existence, yesterday a blob of semen, tomorrow embalming fluid, ash.

I will see both Whole Food and internet radio site Pandora to much higher prices.  How high?  $42.25 for the former and $28 for the latter, to start.

This big book is an honor to manage.  Its many moving parts invite the mind to work and decide.  Yet I desire to hit some targets soon, for the weight of it all is impressive.  This too is temporary.

I offer the following serenade to the stock gods, may her soothing voice bring forth the fate of sellers no sooner than is proper:

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Futures are lower overnight on above average volume.  The largest impulse rotation occurred around six AM and futures have since shown little bounce.  The price action was able to take out prior swing lows from August 1^st.  Swing highs and lows are rarely set during the globex market, thus we might expect these overnight lows to be tested once the cash market opens.

The economic calendar is quiet for US trade mostly, however we do have Crude Oil inventory data out around 10:30am.

Prices are currently trading outside of yesterday’s range which suggests participants rejected the aggressive balance formed on Monday and Tuesday.  The question we must be asking ourselves throughout today is, “Is the market done finding buyers?”  If we do not see any strong reaction from buyers today, then the market is likely to continue exploring lower until it finds such a demand.

I have marked up the intermediate term prices on the following volume profile chart.  We are trading down in the thin tail of an intermediate term balance dating back to the start of July.  With prices making news lows early today, the argument can be made for a shift into intermediate term seller control.  However, we should first observe how we open, see below:

Finally, I have marked the short term levels I will be observing on the following market profile chart:

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I just went ahead and bought a small Facebook Yolo to put a cherry on what may go down as the most concentrated bet in Raul’s history.  Many a time I have put myself out on a limb, gathering every social media company into my portfolio only to receive the most devastating drop kick to the gut a man can receive.

This time is different.

The risk cycle has swung in our favor, and I intend to milk all of the most bountiful cows at once.  Bear with me…

I have risk in YELP, P, TWTR, WB, SINA, WUBA, a small GRPN earnings piece, and FB

This cannot and will not last long, mind you, as the logic of the universe will not tolerate such lack of diversification for very long.  In fact, it may only last a scant day.

When you are performing such a feat you must embrace the very inherent risk associated with such a maneuver.  For the duration of this trade I have stopped trading futures.  My focus is on all of these charts next to the Nasdaq and that is too much to actively manage for me.

Be sure to stop by for updates, and please do not try this at home unless you have a solid idea what you are up against.

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The sublime harmony of mathematical precision was your remedy for avoiding Friday capitulation.  It is true, a bounce showed up today without much persuasion, but does it carry enough energy to explore higher in a quest for value?

It seems we have uncovered sellers late in the session, sellers who are rather convinced of their correctness.  However this selling behavior too can be attributed to logic and reason.  Our Nasdaq index as well as the S&P entered neutral territory early this afternoon.  I had a likely expectation for trade to return to the mean (today’s VPOC at 3886.75) before we head elsewhere.  Thus when a certain passion burned in my soul to increase my long exposure this afternoon, I quenched my mind with a much needed nap.  We closed the market down above the midpoint, barely, suggesting a slight upward bias into tomorrow’s trade, but not nearly as vigorous as one would expect if the neutral day had printed a close near the extreme or HOD.

For you Chinese burrito fans, bear in mind their PMI data is coming out just before 10pm.  I will not be watching said news but rest assured I will be keen on the overnight reaction to it come morning considering I hold a flaming hot sack of burritos including:

WUBA, SINA, WB (WB and SINA…oh boy), and VNET

We must too consider how Chinese PMI may affect X, as USA makes the hottest steel on the block, something China buys by the shipload.

If it is my fate to rise in prominence on the financial blogging circuit, then I must be a steward not only to the fine people who visit our halls but also to the public.  It is what that in mind that I have trickled back onto Twitter.  My goal is quality tweets, never wasting a word but providing actionable calls.  Tell your friends about @TwoSmuth, the handle not-so-easily associated with yours truly.  I put out a gem today:

Great spot to buy some $WFM if you missed the post earning's firesale. FD: Long

— Raul (@TwoSmuth) August 4, 2014

If you care to do so, put that timestamp next to an intraday WFM chart.

I couldn’t script the morning’s price action in the /NQ better with a crystal ball. My primary hypothesis played out to near-perfection.  You have no idea the joy this brings me.  This is a methodology working after tens of thousands of hours at work.

Finally, I gave myself time to ride through the lazy month of August when I purchased a position in Pandora.  This is an internet radio station, something that used to hype up my person all sorts of ways in my early blogging.  Now it is simply another attempt to make a few bucks on a little pop.

I BOT more TNA with some sharp timing.  It was a good day.  Let’s stack up a few good days of diligent execution, shall we?

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I have not been day trading the Nasdaq futures today because I have enough on my plate with this big old book of leveraged longs.  Unless we plunge again into the bell, I will continue laying on this bed of nails, staying very still.  There are three primal instincts which might trigger when you body or mind perceive danger—fight, flight, or freeze.  The market can indeed hurt me, financially, but beyond the confines of money it has no power over me.

All we can do is formulate a plan and be grateful to execute said plan with purpose.  Becoming mad at the market or harboring negative emotions toward the way your favorite stock is trading is a recipe for stress which can snowball into anxiety and negativity.  It won’t change anything, your positions certainly will not behave any differently.

I have three things going for me as we wrap up the week:

1.  There are signs of excess at the lows in the Nasdaq.  This is shown as a buying tail
2. The PPT is still oversold (this has already been made public)
3. Mutual Fund Monday – maybe fund managers would prefer to wait out the weekend given the negative news cycle.  That is fair. However, they have money to put to work, I think, and they will begin doing so Sunday night/Monday.

Plus look at this electric car stock ripping–Elon was a stud yesterday evening, fielding one question after another with fluidity.  The best part was when he told everyone they’re not showing all their cards this time.  There will be wonderful progress taking place inside the gigafactory walls and we can only wonder what is in store for the future.  There is still a bid for growth, in short, despite Elon telling Wall Street he is holding back information.

I am still taking Tina out over the weekend, aka TNA, she will be my method of playing this PPT signal.  A few of my options positions have been rendered nearly worthless but others still press on.  I had a read on the open which suggested we would drive higher all session, thus I YOLOd some PCLNs early.  It was a donation to the premium salesfolk.

Stay sharp this weekend, cut drinking and other pollutants off my midnight Saturday to ensure a full recovery for Monday trade.  And shave your face.

I will have some theory up over the weekend for anyone who wants to use their brain.

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My four long term ideas have stood up decently though earnings, and I am coming out the other end of the great uncertainty net positive, for once.  Every position aside from LO, TWTR, TSLA, and GPRO is a trade subject to liquidation prior to earnings.

This evening I will be listening to the Elon Musk speak on his company while I press iron at the local pump station.  His earnings calls are the best, don’t be late because he goes directly into Q&A, none of that monotone reading of financial results bullshit you hear everywhere else.  The man is busy making all of our lives better and knows the idiots on Wall Street have lots of stupid questions to ask so he respects everyone’s time and curiosity and gets right to it.

GPRO is off after hours because they reported fantastic numbers, their product is viral, and everyone who owns their camera is a HERO.  I couldn’t care less about this short term blip, I love how user generated content IS their marketing, pimping the Youtube platform like it’s their own.  How’s that for marketing?  When your child or nephew asks for a Go Pro this X-mas, do everyone a favor and buy the Go Pro.  No one wants to return the god damned knock off you buy instead.  We are very busy, you see?

To pin a rose on this earning season’s nose, I was bestowed a fine gift from the Option Addict via X.  What a pleasure it was today, watching this stock continue to catch a bid while everything around it crumbled. Talk about a confidence boost.

Said confidence was deployed into WFM September calls this morning.  I have wanted to buy back into this grocer for many quarters, they are a winner, and I consider the post-earnings impulse sale a deal for the ages.  The calls I purchased were up well over 100% at one point today.  Something tells me I caught the tiger by the tail on this one.

Finally, I was net down on the day, as some of my internet ridiculousness and China stocks retraced their initial gains.  I agree that tomorrow, the first of the month, is important.  I suspect many mutual funds with be tasked with the boring duty of allocating new funds to equities.  They would rather be enjoying their August in Europe and the Hamptons, yes?  Why not just throw it all in Tomorrow and Monday and spend the rest of the month on a golf course or boat?  Think about it and take your mind out of the news flow and away from the charts for a cotton picking minute.  These industrious folk need vacations, not “work”.  Friday being the start of the new month is very odd.  Nevertheless, I put on a Texas hedge and BAWT some TNA this afternoon.  I cannot say I am thrilled with how it closed, right down at LOD on VOLUME, but I will see it through until tomorrow at least.

Eat well, make love to your wife, for tomorrow we do battle with sloshing liquidity.

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I have been working the kinks out of my futures trading game for a month now, trading the old 1 lot.  I never achieved the win rate I desire, but something curious is peeking out from the stats.  Over 70% of my trades achieve a 3 point MFE.  Today was even more pronounced, where my trades were earnings over 20 ticks in MFE.  The problem lies in the hypothesis.  I can read auction action better than the average bear but I am still learning.  I expected more from my trades today and when they flew back on me super duper fast (the mark of OTF activity, the very activity I have been tracking) I was forced to take scratches or worse small losses on otherwise quality trades.  With a bit of trade management via scaling profits, these were winning trades.

The overtrading dilemma of weeks past too—thinking like a 1 lot chump.  I have been coming into consolidations with a position, closing it out, and then chopping myself to bits trying to time an entry inside the consolidation.  What if instead I could take my scale and then watch the consolidation already in the money.  Much better.

Thus the conclusion—I am close to feeling prepared to increase to a two lot.  According to my stats I should be able to capture a scale which would then allow me to manage the other piece.  This is the only logical progression I see after cultivating the patience to only take high quality entries.

I am not so trigger happy anymore because I have seen how much it infuriated me and ruined otherwise normal days in the life of Raul.  I am generally a happy guy, but not when I start thinking, “this looks like a good spot for a try” without any preplanned hypothesis.  The hypothesis is the answer to overtrading.  I am prepared to be wrong on a hypo trade.  This gives me tons of information about the auction which then helps me direct my stock swing trades.  The entire process is very informative and makes me be better overall trader.  I like this.

A commenter once opined that they could not watch this car wreck any longer, this endeavor to day trade index futures.  They said they tried the same thing, clearing one hurtle only to find the next and the next.  I am not singling you out like you are a jerk, it was an honest and appreciated comment.  However this process is the way you achieve something, how we perceive the obstacle.  The obstacle is the way and I am fully prepared to be wrong.  Anyhow, here’s today’s trades, some beauties if only for some scaling:

In other news, TWTR traded a bit aloof today but found a bid.  I watched X with steel in my heart, and I am anticipating some follow through tomorrow.  My only trade today was closing out some UNXL and buying some FEYE calls.  It felt like the FEYE calls had some SPLK move priced into them, is that possible?  I would appreciate any thoughts from the more seasoned options guys.

GRPN is still dead money and I am still in some August calls, SINA worked from the rip yesterday but sitting in these China calls is a bit sketchy, especially with WUBA in tote too (from lower).  I have some DDD calls I expected to be out of ahead of earnings but are nearly worthless thus will roll through, and an AMZN yolo.  In short, I am leveraged to the hilt amidst a tumultuous Nasdaq tape.

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Twitter is up after hours on solid top line numbers, an EPS beat, and a 24% gain in users year over year to 271 million.  I just want to nuzzle Twitter’s little nose.

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I like the way we opened for trade this morning in the Nasdaq, as of this writing (past results are not indicative of future returns, etc.) buyers have rejected away from yesterday’s range and held prices up near the highs.  I shuffled my book about a bit, selling my TSLA weeklies, and buying some AMZN weeklies, some SINA next weeklies, and I small earning’s gambol in X.

The current HOD in /NQ_F is so poor it has grocery bags for shoes.

LEVERAGE-D and preparing some meat trays for tonight’s earnings announcements.

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Midway through the morning session I was taken out of the action when one of my PCs went haywire.  Funny how a touch screen monitor reacts to a calculator being thrown at it, but I digress.  There is something very exciting about the market of stocks right now, something almost intoxicating.  The intermediate term participants are jockeying for position and creating a great degree of uncertainty.  From uncertainty opportunity is born.  The obstacle is aversion and keeping yourself away from its deep dark corridors.

I am down two monitors on the day, from four, as a result my screen real estate has become twice as valuable and I have to simplify my operations.  This is an excellent opportunity to carefully clear some clutter off my screens.

We are approaching a key turning point in the market place—earnings season is time to gird your loins.  If your price action swing trade never bared fruit, you must dig up said tree and bury it.  If you have a long term commitment to a stock, you must prepare for failure and ineptitude which is completely out of your company’s control.  It is the whimsical nature of the market participants who will ultimately determine your short-term fate.  Do not fight it, simply embrace the uncertainty and make sure you are in bed with your vision.

I have long term commitments to four companies—I am a bit of a polygamist.  LO executed the most impressive land grab I have ever seen with regard to eCigarettes.  Their Blu™ device swarmed party stores and gas stations like the early German Blitzkriegs of World War II.  I put my long term faith in a company that executes and disrupts with that much speed and tenacity.  Disruption is always at the core of my long term investments, thus my other three investments should come as no surprise.

Tesla Motors is coming up the flank, and will devastate old TBTF auto industries and their gasoline infrastructure.  Their counter offensives have been impractical and unaccepted by the people who matter.  Elon Musk is a visionary and one of the greatest leaders of our generation.

Go Pro is the camera on everyone’s wish list.  It is durable, simple, and high definition.

Twitter is the ultimate disruptor of the most powerful force on our plant, media.  The pen has conquered and build nations for 100s of years.  He who controls the media controls the minds of the masses.  Twitter is a way of turning the control over to the user, the consumer.  It is a scary thought, but a generational disruption nonetheless.  Every day someone debates making a stupid, fuck you money, offer for this company.  What is it truly worth?  What is the collective, real time conscience of the world worth?

All of my other positions are tactical and short term.  WUBA is bringing the doom hammer down on China doubters.  Next shorts to die are VNET.  BIDU doubters are dead.  The beatings are scheduled to continue on a daily basis as we approach the coming of the Great One, ALI-BA-BA!!!!!! (extra Indiana Jones caveman)

I will have 4 screens in a few weeks, but until then I may reduce down to my core holdings.  TBD.

Doomsday approaches for WUBA shorts

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