You Boys Ready for Some Speed?

On tap: week 2 of 2016.

What has the market done?  Printed the worst first week in the history of the God forsaken Dow Jones Industrial Average.

What is the market trying to do?  So hard, the market is trying to find buyers.  It is offering deep discounts.

How good of a job is it doing finding buyers?  A few times last week the market discovered big buyers.  It is doing an okay job, but the auction still persists lower.

What is the market likely to do from here?  Stay fast.  At least for one more week I expect fast action.  The economic calendar is light, therefore the moves will be natural or based on unscheduled news.  The best markets out there.

Exodus Members:  I parsed the data of last week into concise sessions.  Every week I seek to answer the above questions (the big 4 from ‘Mind over Markets’) with a bit more detail and objective reasoning.  The track record of my model and Exodus are included in every report–for the sake of full disclosure and strengthening the iBankCoin Republic.  Check it out!

Off to pump steel.

Well, we enjoyed a few weeks of respite to end 2015 before being thrust headlong right back into the shit.  The first week of the year has been absolutely horrendous.  Do you know what is worse than a huge gap down?  A huge gap up that reverses and closes on the lows.  The suck level is even higher when it happens into the weekend.

Six months ago you could hope China would manipulate us on a Saturday and next week would open and rip higher.  However China can no longer stimulate.  They broke their stock market.  Idiots are now on a crash course.  We are on our own to sort this out.  Meanwhile The Fed is completely detached from the financial markets and only interested in working borrowing rates higher.

That means this downside action is likely to carry into Monday.  Auction theory context calls for it, so does Macke.

If there is one positive occurrence during this latest market rout, it is the gap fill we saw on the PHLX Semiconductor index.  Its never good to leave a gap behind and that is exactly what we did back on October 2nd.  Well, we filled it today, so there’s one less thing to worry about:

If you are invested in Weight Watchers right now you are invested in Oprah.  It is similar to investing in Tesla.  You want a piece of Elon–TSLA.  You want a piece of the O empire–WTW.  I thought I wanted a piece of the Oprah empire after her latest Weight Watchers promo video.  I think she actually squeezes out a few tears during the stunt:

I took a long the day she dropped this vid, and the next day I was up a cool 15 percent.  I was full on loving Oprah and her movie.  Now the position has gone 18% against me and I want to punch her in the face.

Oprah needs to hit the street and entertain woman aged 29-50 ASAP.  This stock needs to show signs, any signs, of life otherwise I will cut the loss ahead of the weekend and eat 2 quarts of iced cream whist buying wares from QVC.

NASDAQ futures are priced for a pro gap up after a globex session featuring extreme range and volume.  Price spent most of the session balanced after a strong thrust higher early in the evening.  The action managed to take out the low printed yesterday, briefly, before buyers stepped in.  Swing low is rarely formed during globex, we have some bearish context left behind.  At 8:30am Nonfarm payroll data come out better than expected and 3rd reaction analysis yielded the buy.

Also on the economic calendar today we have Wholesale Inventories at 10am, Baker Hughes rig count at 1pm, and Consumer Credit at 3pm.

Yesterday price opened pro gap down and after buyers pushed a half-gap fill price rolled over.  The selling accelerated through the afternoon pushing us into a neutral print.  A few attempts at the short squeeze failed and we ultimately closed near session low earning the day a neutral extreme designation.

Heading into today my primary expectation is for sellers to work into the overnight inventory and trade down to 4328.50.  Look for responsive buyers here then a push to take out overnight high 4370.  Look for buyers to keep pushing and test above Thursday high 4395.75.  Expect responsive sellers just above Thursday high, around 4398.75, and two way trade ensues.

Hypo 2 sellers push down through 4328.50 setting up a move to target the 4300 century mark.  Buyers show up here but are ultimately overrun and we do a full gap fill down to 4287.50.  This sets up a move to take out overnight low 4281.  Look for responsive buyers at 4274.25 and two way trade ensues.

Hypo 3 sellers accelerate after filling overnight gap, trade down through 4274.25 to set up a move to fill the open gap down at 4261.75.

Levels:

I just got off the phone with a good friend who is at CES in Las Vegas.  He was out to dinner with the owners of his company, Chinese fellows, and he told a story worth passing on.

My friend, a large Romanian, and his two Chinese bosses sat down for dinner at 6:30pm Vegas.  The time is important to the story.  More on that in a minute.  The Chinese do not do many things right, but meals are a place where they excel.  They never shy away from a dinner and usually usher in 5-6 courses.  They order per the usual,  but one of them is not eating today. The food arrived at 7pm, aka 10am in Shanghai, aka right about when their market tripped the -7% circuit breaker.  One of the Chinese fellas is looking rather glum, let’s call him Kevin.  Kevin was being consoled in mandarin by his partner while they looked at his phone.  Confused by Kevin’s lack of appetite, the Romanian asks them, “What gives with Kevin?”

“Kevin lost big money in stock market” the other guy responds.

My friend thinks little of it because he notices that Kevin’s entire phone screen is green, so he thought Kevin’s luck had turned for the better.  Yet Kevin ate nothing.

It turns out in China they use green to denote stocks going lower, and red for higher.  Tell me this right now–how?  How can we expect these people to run a proper market if they can’t even get the colors right?

We are all in for a big serving of udon noodles this evening.  My best advice, ignore everything that happens tonight.  Eat well.  Make love to your wife.  Start tomorrow early and rested and take it from there.

There is something you need to understand about the people of China.  They are not free thinkers like you and me.  Instead, they take orders from their leaders and follow them vehemently.  Any downtime is spent pacing, smoking, and hoping for the next order of business.  For a minute, it almost looked like the Chinese economy had footing and that businesses could exist to serve their domestic consumers.  However their consumer is weak, their cities are empty, and their poorly manipulated stock market is in shambles.  This is great news for Walmart.  They can now go back to demanding shiploads of useless wares from the strapped nation for pennies on the dollar.  Walmart wins when China stumbles.

Pretty much everything sold inside Walmart is made in China.  From electronics to food and furniture, you are looking at tier one China manufacturing.

Walmart is a good leader.  They are big and strong.  Do you want a wolf leading a pack of sheep?  Or a sheep leading a pack of wolves?  Order has been restored.

Several retailers are doing well today, but I get a strong sense of patriotism seeing Walmart power thrusting.  It helps I am long of WMT, in US dollar terms.  I have zero intention of selling either.  They are my retail fix from back when getting a retail fix was not cool.

NASDAQ futures spent most of the overnight session trending lower after a series of events rocked the world.  There are rumors of at least 50 dead in a bombing in Libya, Police in Paris shot a man potentially wearing a fake bomb vest (poor fashion choice), and the Chinese stock market was halted for a second time this week after triggering a circuit breaker around -7%.  Both range and volume are extreme, volume is about as high as it gets.  Price pushed into the 4300 century mark which is a zone that was also resistance for several weeks back in late September, early October.  At 8:30am Initial/Continuing jobless claims came in worst that expected.

The economic calendar is otherwise open today.  Energy traders will be watching the 10:30am EIA Natural Gas storage reports.  Also remember we have Non-farm payroll tomorrow morning.

Yesterday we printed a normal variation up day.  Price started out pro gap down and buyers mounted an open drive higher.  After going range extension up by lunch, price faded back down near the session midpoint ahead of the FOMC minutes.  3rd reaction off the minutes was a buy, and after a small attempt higher price again rolled over but held the lows.  Late in the session we rallied back up into the upper quadrant of the day’s range.

Heading into today my primary expectation is for buyers to push into the overnight inventory and work price higher to target 4379.  From here look for supply to come in and two way trade to ensue.

Hypo 2 sellers drive off the open, working to target overnight low 4297.25.  From there look for a push down to target 4274.25 before two way trade ensues.  Stretch target to the downside is the open gap down at 4261.75.

Hypo 3 strong responsive buy surge takes price up through 4380 and sustains trade above it setting up a move to target 4400.  Look for sellers to reject price away from yesterday low 4400.75 and two way trade ensues.  Stretch target is a full gap fill up to 4447.

Levels:

Every month I try and unplug from the charlatans at Comcast, and every hour-long conversation ends with stipends and another month of my obedience.  Yet I never consider cancelling Netflix.  It is just so reasonable, and good.  So while the rest of my life teeters on the brink of destruction via a calamitous stocked market, I have a beacon of hope in Netflix.

The stock was up 9.10% today, TODAY–a day when breadth was stank and churn was the best outcome.  Look at the January seasonality on these guys.  The weather goes south, and NFLX goes north:

Quarter after quarter these guys grow their revenues, like clockwork:

Propelling the shares higher today was news out of the Consumer Electronics Show that the website is now streaming to over 130 countries, including India.  India is freaking huge, let’s all be clear about that.

This is great news for America.  We are exporting our greatest industry, movies, worldwide via the internet.  Gone are the days where spools of film were flown about the globe.  Also, despite easily accessible piracy channels, Netflix remains supreme.  Celebration!

NASDAQ futures traded more than a 100 point range overnight (60 points is 3rd sigma) on extremely high volume.  The duration of globex was spent trending lower, pushing price down to levels not seen since late October of last year.  At 8:15am ADP Employment change came in at 257k vs 192k expectation, stronger than expectations, the initial reaction is buying.

There are several economic events scheduled for today.  At 10am the ISM Non-Manufacturing Composite will be released followed by 10:30am crude and distillate inventories.  The main news comes at 2pm, when The Fed releases minutes from their December meeting.

Yesterday we printed a normal variation down.  Price opened with a small gap up and was quickly sold lower.  In the early afternoon buyers put in a low, but a weak one, and we ended the day trading near the midpoint of the session.

Heading into today my primary expectation is for buyers to work into the overnight inventory a bit.  We are working with a pro gap, currently 86 points wide.  The half gap mark is around 4441.  Look for buyers to make an attempt into the Monday range at 4429.75 and responsive sellers to step in and reject the range around 4440.  From there look for price to trade lower but form 2-way balance ahead of the FOMC minutes.

Hypo 2 gap and drive lower.  Sellers take out overnight low 4386 early on setting up a move to target 4367.7.  Responsive buyers here are overrun as sellers target 4357.  Stretch target is the open gap at 4326.50 from 10/14.

Hypo 3 take out overnight low 4386 and find responsive buyers just below it setting up a tight-choppy range ahead of the minutes.

Hypo 4 V-shaped bounce.  Strong responsive buying off the open recaptures Monday’s range and sustains trade above 4432 setting up a secondary leg to target 4484.25.

Levels:

Trading the NASDAQ is sort of like trading Apple with some outside noise.  The company is such a huge piece of the index that a bump in APPL stock sends ripples into the futures.  Therefore when rumor of a 30% production cut on the iPhone 6 and 6+ hit the streets (so cliché, so gay) sellers piled in.  There are a few factors that make the whispers seem legit.

Andriod phones have gotten really nice.  Over the holiday I saw several of the new Samsung phones, including the S6 Edge and was blown away by the quality.  If a person can stomach abandoning years of spending inside the App Store and iTunes, they can buy phones with better cameras that are new and sexy.  They can be used to fly drones also.

Apple is probably going to launch the iPhone 7 soon.  God knows they need another hit phone.  The pro tablet is only being maximized by Jeff Macke.  People who cannot grasp the utility of the pen prefer to remind everyone that Apple must have “blew it” if they are selling a stylus (Steve’s words, not mine).  The watch, nobody wants a tech watch.  Look at what Fitbit did today when they moronically released a damned Apple watch knockoff at the Vegas Consumer Electronics Show…down 18 BIG ONES.  Smart watches are toxic.  I have fully digressed.  Why keep making iPhone 6 when 7 is coming in hot?

China.  The Chinese spent last year using iPhones as currency.  These lunatics, lemmings void of independent reasoning, must have stock piles of iPhones.  Soon an iPhone 6 may not even buy a week’s worth of groceries.

Sometimes a rumor makes sense.  When it does, it is considered fact.  So while the news came from Nikkei Asian Review (Lolz) Apple is guilty until proven innocent.

Aside: I never check the futures after hours.  There are enough hours during cash and I feel like its bad for the soul.  Big ups to the after hours traders.  Be on the lookout for more Apple talk hitting the tape this week.  Also, remember, FOMC minutes tomorrow afternoon–major key driver of overall market direction through Friday morning (when they drop NFP).

Stay loose for now, so when it comes time you can be sharp.  Want to see how I stay loose?  Follow me on snapchat for closeups of me stretching and pumping iron: Vcali.