Playing The Clarinet

squid

My biggest goal in these fast times markets is to trade as little as possible.  I was reading through my archived works today, for example, to look at past follies.  The biggest gorilla has always been excess action.  I am a busy body, a hyperbola, one heavily influenced by watching teevee whilst gaming and talking smack in AOL chat rooms.  I have always surrounded myself with multiple screens which pump information at my person.

It all screams DO SOMETHING, if you are not careful you will do anything because you’re bored.  I find these conditions to be anything but boring.  They are more like watching a theatrical performance from the orchestra pit.  I have front row seats at the market where I can closely observe the action on the stage and the audience reaction.  Occasionally I toot out a few notes on my little clarinet, little pieces of sound that compliment the grande display.

This morning was all about the turnaround.  Actually first it was about smashing out some sell orders into the early market demand.  Remember, someone is liquidating when they can, not when it is ideal.  Some big ass exodus where you need demand to sell into.  Can you imagine how challenging it must be to find reasonable demand to sell into?  This morning’s gap was perfect.  Sold.  Next, it was turnaround Tuesday time.  It was that simple, our protagonist stepped forth and unsheathed her sword for all to see.  It was long and swung with confidence, a buyer.  ‘Toot toot’ buy something.  Here comes lunch ‘toot too’ sell it.  Late day neutral print then CRICKETS, oh the suspense, FADE IT ‘toot toot’.

And so the day went.  It was a good day.  This is the duration I am working at right now.  I can’t trust these things for more than a few hours, sometimes minutes or even dastard seconds.  Speed is the name of the game and if you are too slow you are drinking mist.  Are you able to rush and go slow at the same time?  If not, then it is even more simple, stand aside for now because these are fast times.  It will slow about soon enough and you will need good capital to operate at during the next phase.

All I did today was buy some short term AMZN and sell it, keeping a small runner piece for tomorrow.

Looking For Something Drastic

Nasdaq futures worked higher during the globex session, with the bulk of the move occurring after 7:30am when we started hearing about earnings from a few banks as well as JNJ.  The economic news from the UK and Europe was all soft overnight but the market appears more reactive to the earnings environment today.

The market worked back to an area of prior liquidity yesterday after failing to sustain trade at the prior high volume zone around 3890.  The thin pocket we fell into offered prices little opportunity to sustain themselves.  However, just below yesterday’s low was a spike of volume left behind when sellers previously defended this zone with rigor before ultimately giving way to higher prices.  These are the places where we look for signs of demand—places where sellers previously played defense.   Converting resistance into support is a characteristic the market often demonstrates. I have noted this level as well as the air pocket below it on the following daily bar chart:

10142014_daily_NQ

The issue bulls have to contend with is the motivated manner by which the market is trading.  Volume on the Nasdaq futures during the last three down days has been at the highest seen since around 2011.  The market is a mechanism designed to facilitate as much trade as possible between as many parties as exist.  Since the 9/19 failed auction high we have seen a clear pattern of lower highs and lows emerge on the intermediate term timeframe.  At some point this selling exhausts itself, and perhaps this morning’s strong gap up is an early sign of exhaustion.  However it would take something drastic to turn the course of our current intermediate term direction.  I have noted key price levels I will be observing including a price level I consider “drastic” and also noted the granular detail of the HVN zone we are trading down into (see prior chart) on the following intermediate term profile:

10142014_intterm_NQ

FAKE RALLY

If you are long any high beta growth stock which is green today, rest assured, that number is a fake and you soon will return to your regularly scheduled bloodletting.  The gods are agitated, mere mortals.  You were given sufficient reparations for your dutiful market participation these last two years.  But you demand more.  The moon was painted red multiple times as a clear message to humble your ego.  Yet there you were, nibbling incessantly from the forbidden giblets of our most holy tree without keeping an eye on your arse, your risk.

Now you have been fixed to a proper boiling chair in the furnaces of hell and Beelzebub is your only friend.  He has advice like, “cut that flap of skin between your pointer and middle finger” and “channel your rage into moar trades”.

Your soul now resides inside the third ring of middle earth and it’s your job to retrieve it.  Fortunately these stories of ghouls are as fake as the ‘value’ transfixed to four letter acronyms across the financial complex.  Real work, adding value in a palatable and tangible way, continues to thrive.  Know this, the market could head into another crisis (GMAFB, fake) and there will be virtuous men and women who emerge from the ashes as brilliant innovators.  Are you going to do what it takes, risking everything you have to produce the next note in our grande symphony?  Or will you try paying someone else to do it for you?

The dead days of the summer were a swell time to check yourself, an offseason of sorts in the warm southern breeze.  Now it is cold, the days are short, and the rain is heavy.  Have you built your hut?  Your mind?  Use it now, at this very moment, to be objective in your judgment.

That sack of skin you inhabit, or those old fermented grapes you cherish, see them right now.  The market is no more complex, nor any commenter less bullshit then a sommelier.  See it for how simply it truly is.

Then observe how a farmer sells two train cars full of cantaloupe.  Now we can begin to talk about the movement of price.

When a market moves lower it is seeking information.  It wants to know where it needs to advertise price to entice a motivated reaction from buyers.  Once it does so we see an abnormal rotation.  Something like today’s in the Nasdaq.  However, the evidence suggests we have not done enough to thwart off the tide of supply.  Rallies are suspect and to be observed for signs of liquidation.  Until buying demand creates an event that sickens the lot of yous, the bigger punches are being landed by the sellers.

I side with the heaviest and most consistent puncher.  I sit on their back and hold the reigns as they buck and thrash.  Such is the life of following order flow.

 

Let Us Have Another Go at This Market

Traders are coming into the week with the Nasdaq futures up a bit on this Columbus Day session.  The globex market opened Sunday evening and showed some continuation on Friday’s weakness which made sense considering how we closed on the low tick of the session Friday afternoon.  Prices began to recover their losses a bit around the time European markets opened up.  The economic calendar is a bit slower this week and back loaded, with the highest impact announcements coming Wednesday (Advanced Retail Sales, Fed Beige Book) and Friday (U of Michigan Confidence).

Turning first to the daily chart, we can see just how weak the market has been since the Alibaba IPO.  Correlation does not indicate causation, however, we also printed a failed Nasdaq auction on the day BABA came public.  Since then we cannot find a sustained bidder in the market.  Instead we continue exploring lower, like Columbus, in search of buyers.  I have noted the activity below:

10132014_daily_NQ

Becoming a bit more granular and observing the 15-minute chart, we can see how balance began to form at the start of October despite the failed auction and inability to string together two up days.  It was a violent form of balance dating from Oct 1 – last Thursday.  Friday we opened on the lower range of the micro-balance and rejected it, starting anew the discovery process.  I noted in purple how the market made a strong bounce and ‘rechecked’ the scene of the rejection where if verified seller control.  I have noted this as well as the key price levels below (dating back to June) and above:

10132014_intterm_NQ

I am in development of a new market profile chart this week, thus I will primarily focus on the intermediate term chart these first few days of the week.  I am also allowing Xfinity a second chance as I start the week after their linesmen and women demonstrated some of the highest customer service I have seen over the weekend.  Thus, I will be a bit hands off until the systems prove stable.

Pain

The Nasdaq is busting through the floorboards as we head into the weekend and as I type the final round of margin calls are hitting the tape.  There are a few stocks left in the hot boys encampment but the majority are dead.

The only joy I have today is not buying anything. The only other joy I have is taking 3 scalps in the morning on the Nasdaq to earn a few bucks before the severity of the market decline became too much of a distraction to continue.  Trading is a brute force endeavor.  If you are not mentally ripped then prepare to be torn to shreds.  When statistics became way out of whack and this week’s drawdown on my portfolio set in there was a bit too much distraction to continue ‘chipping away’ at the futures.  So I began checking in every half hour on my positions and stopping out when my levels were hit.

YELP died on me again.  And ZU died.  A piece of my never expected ZU to work.  I was tasked with managing this position longer than I originally anticipated.  When my illiquid weekly option could not be sold for fair value, I took delivery of the shares.  It was like being on spring break and getting fresh with a nice lady at the club only to later find out she’s staying at your hotel.  Now you have a vacation girlfriend.

In other news they’re beating Twitter down today.  It managed to sidestep the bulk of this downdraft before deciding today was as good a day as any to ‘catch up’ to the demented herd.  Alas, who am I to call the herd demented?  After all, they are trampling over my limp corpse into the weekend.

Assets are dead, you need all your money allocated to the value of volatility for this extra VXX Halloween.  I am short on advice today folks.  It is my only short position.  I will be scrutinizing the market and my trades and my very methodology this weekend.  Fortunately, through risk control, I live to fight another day.  I hope you can too.

PS – bless you AT&T, you have been my shoulder to lean on as Xfinity fails into the sleepless weekend.

Keeping Matters in Perspective

Nasdaq futures are lower this morning on heavy volume and an above average range.  The selling started not long after cash markets closed in the USA and it made an aggressive rotation between 3-5am.  The economic calendar is quiet as we head into the weekend with the most significant events being various Fed members speaking at 9am, 1pm, 2pm, and 3pm.

The Nasdaq is the weakest index this morning, but before we get too far ahead of ourselves, let’s have a look at the monthly volume profile chart to have an idea of where we are trading.  Imagine you were driving from New York to Las Vegas.  Being a resident of New York you are familiar with the roads you need to take to reach the major interstate.  Once on the highway you can use a national map to guide your course.  Once you enter the state of Nevada you would switch to a state map and once inside the city a city map and once inside your casino perhaps a casino map.  The monthly volume profile is your national map.  As you can see below, we are still trading above the largest volume distribution of August.  When we went for a rally in August we left behind a poor structure which the market is now retesting.  The current pocket we are trading in had decent price memory in July, but just above us (the two yellow lines) there was little-to-no history until this month.  This is settling unfinished business.  Price could still head lower but at the least we know we are coming into some solid structure:

10102014_monthlyVP_NQ

Turning to our state map, the intermediate term timeframe, we can see that the last time we traded down at these levels was back in early August and when we did, the region just below our current swing low was traversed rapidly.  The initial surge out of August swing low left a gap behind.  The gap-and-go was strong support when it happened.  We had conviction in the long at the time because of it.  Now we are back here, and the area becomes a candidate for retest.  This does not mean it must happen, however we have an expectation it will and if instead the market cannot then we can see the other side, or buyers, emerging.  I have highlighted this gap and other key price levels on the following volume profile chart:

10102014_intterm_NQ

We are currently priced to gap below yesterday’s range.  Any time the market opens outside of the prior day’s range we know prices are out of balance.  For a moment yesterday we thought balance may be forming however this open suggests we are still discovering value.  Pulling up the city map, I have highlighted the short term levels I will be observing on the following market profile chart:

10102014_marketprofile_NQ

2014 Breath Holding Contest

David-Blaine

Fight, flight, and freeze.  These are the three primal responses which can be triggered when you feel threatened.  They are formulated by the limbic system of our brain.  It is much more powerful that your logical mind and is the force that can drive an otherwise normal person to smash a villain’s skull into pieces if they were to perhaps threaten your child or favorite territory.  Ordinary people are capable of extraordinary and sometimes disturbing feats when put under threat.

Somehow, the market, a mechanism of pricing commodities and other assets has the profound ability to activate our limbic system.  We are all here to make money.  There is no question about it.  Nobody is managing their accounts for the thrill of it.  If you are, then goodness, may I suggest auto racing or biking?  The problem is, money provides security and other luxuries.  If you take a trade knowing you are right, then when it does not work in your favor it causes a threat to your ego.  This is very much a force in trading.  Now your ego is theatened because you knew you were right and maybe your were even a bit of a brag about it. Perhaps you start having a conversation or two with the voices in your head, your limbic system is engaged and you are in the back seat. Said another way, you are like a small man pulling on the reigns of a giant elephant.  This is how sometimes you can look back on a trade and say, “how did I do that?  Was that even me?”  Trust me, I can recall this feeling very personally, I have lost 10s of thousands of dollars in profits this way.

Here’s what I know—I will always have an emotional response to the outcome of my trade.  I must put risk in place before entering any position and stick to it.  Once the trade is on I know it will take most of my energy to keep myself in check and let the market prove my hypothesis.  You need to work on this more than you need to work on your technical trading skills.  90% of this game is mental.

I set up all of my trades well in advance of this fast market.  I took no action today.  Yesterday’s only action was buying YELP.  Should I have sold YELP today?  Absolutely not, it has done nothing wrong even while the markets take another beating.  AMZN, I am still with it.  It looks fairly close to being wrong, but is it wrong yet bro-sis?  No.

The PPT Breadth, one of my cold, dead data points on the market, had its lowest reading of the year today.  Nasdaq cumulative delta (net of trades executed at offer– trades executed at bid) was red, but it was worse on Monday.  I have little data snippets which suggest we might see some sort of reflexive-type bounce soon.  Therefore, I wait these suckers out, one false breakout after another, waiting for my proper goddamned moment to clean up my book, for fuckedsake.

A good bull market never pulls back to let dippers in or shorts out.  Flip that idea on its head and you have our market since the day Alibaba started trading.  Take out a 30 minute chart of the Nasdaq and compare it to BABA and you will see what is killing this market.  We are being liquidated upon, broad scale, bulls.  This is not the time to be heroic and averaging down down down.  Steady you mind and breath.  If you must capitulate then make the market work to take you out.  Do not simply folly out because of fear.  And don’t be a hero either.  Just let the wave take you and spit you out.  Then start swimming.

Final thought-if you decide to switch your internet service provider midweek, keep your old service running.  If I did not have the mother ship wired up with ATT and Xfinity I would currently be Xfinifucked.

Expectations Verses Reality

Trade volume is high overnight in the Nasdaq futures after we printed a 3rd standard deviation range during yesterday’s session.  The session range overnight is within the realm of normal even under the high volume circumstances.  Prices managed to take out yesterday’s high of the session before finding sellers and the selling accelerated just before we heard from the Bank of England who released in-line Asset Purchases and Target Rate Decision.  Initial and Continuing claims were released at 8:30am the claims were lower than expected suggesting the labor market is improving.  The initial reaction to the jobs data is a slight bounce.  Mario Dragi is set to speak at 11am which has the ability to move markets.

Yesterday’s move was large enough to consider returning the intermediate term timeframe to balance.  Thus I have added a profile to the left of the chart which encompasses the range of recent balance and also gives us a good view of the auction taking place.  I have noted the key price levels on the following chart:

10092014_intterm_NQ

On the short term we can see how elongated the market profile became during yesterday’s large move.  This type of structure suggests buyers sharply rejected lowers prices with a strong response.  Whether they have the conviction to defend their progress today will be key because the expectation is they will, at least for a day or two.  I have noted the key price levels I will be observing on the following market profile chart:

10092014_marketprofile_NQ

Speed Mode

One must be brief as they are coming to change my internet over to speeds unknown to residents in the history of mankind.  One truly is impressed with how far infrastructure has come.  The reversal today was strong and with it moved several momentum darlings like NFLX AMZN TWTR and YELP.  They call me crazy when they see TWTR swell to nearly 20% of my book. There was also a big rotation into old man utilities.  Basically the Fed backed off the idea of raising rates and the market found a bid.

Truth be told, this market was looking for any reason to have a bid.  The depths the Nasdaq traveled before finding a buyer sort of negates the opportunity to call this a higher low.  This makes me think we see some range bound chop in the near term.  What I want to see is whether these conditions lead to range compression and individual stocks decoupling from the broad market.  If not, I will increase the attention and resources allocated to intraday future scalping.

I made one move today, buying back my YELP position in the November duration.  This chart looks splendid to my eye, and I have no shame in reentering a still-valid setup.

Making only one move may seem simple and trite, but you know what I didn’t do?  Capitulate on my longs down in the trough.  Instead I took a long bike ride across the windy Michigan terrace.  The gusts were so strong I managed to hit 37 MHP on flat ground!  The wind helped, as did 3 weeks of training LEGS ONLY at the gym.

As hard as it may seem, the market printed anther neutral extreme.  Yesterday’s pointed to lower prices this AM.  Today’s points to higher prices tomorrow AM. I suppose many of you cannot afford to take this game one day at a time.  But my best advice is to take this game one day at a time.  You are small, use it, like a fast boat on big choppy waters.

FOMC Day Expectations

Nasdaq futures chopped about in an active session of trade overnight after yesterday printed a directional distribution-type day.  The primary expectation after yesterday’s distribution is chop with a downward bias.  The wildcard today comes in the afternoon, where the market will receive minutes from the September FOMC meeting.

Yesterday the market went neutral early.  Prices wasted little time range extending higher in the morning and pressed into Friday’s range where we found responsive sellers who pressed us through the initial balance and out the other side.  We were in a neutral print before noon.  When buyers made a second attempt higher they could not and choppiness gave way to afternoon selling.  The neutral extreme type print carries strong directional conviction by the sellers, second only to the trend day.

Below current prices we have the strong buyer reaction from last Thursday.  Whether buyers carry the same conviction today will likely be tested.  If not, then price is likely to continue discovering lower in an attempt to find a buyer.  Below last Thursday’s low we might begin to explore the 8/12 price range where an open gap and naked VPOC exist.  Have a look at the cumulative delta on the bottom of the chart as well which emphasizes the strength of the selling pressure yesterday.  I have noted these prices and other observations on the following intermediate term volume profile:

10082014_intterm_NQ

I have noted the short term price levels I will be observing on the following market profile chart:

10082014_marketprofile_NQ

Playing The Clarinet

squid

My biggest goal in these fast times markets is to trade as little as possible.  I was reading through my archived works today, for example, to look at past follies.  The biggest gorilla has always been excess action.  I am a busy body, a hyperbola, one heavily influenced by watching teevee whilst gaming and talking smack in AOL chat rooms.  I have always surrounded myself with multiple screens which pump information at my person.

It all screams DO SOMETHING, if you are not careful you will do anything because you’re bored.  I find these conditions to be anything but boring.  They are more like watching a theatrical performance from the orchestra pit.  I have front row seats at the market where I can closely observe the action on the stage and the audience reaction.  Occasionally I toot out a few notes on my little clarinet, little pieces of sound that compliment the grande display.

This morning was all about the turnaround.  Actually first it was about smashing out some sell orders into the early market demand.  Remember, someone is liquidating when they can, not when it is ideal.  Some big ass exodus where you need demand to sell into.  Can you imagine how challenging it must be to find reasonable demand to sell into?  This morning’s gap was perfect.  Sold.  Next, it was turnaround Tuesday time.  It was that simple, our protagonist stepped forth and unsheathed her sword for all to see.  It was long and swung with confidence, a buyer.  ‘Toot toot’ buy something.  Here comes lunch ‘toot too’ sell it.  Late day neutral print then CRICKETS, oh the suspense, FADE IT ‘toot toot’.

And so the day went.  It was a good day.  This is the duration I am working at right now.  I can’t trust these things for more than a few hours, sometimes minutes or even dastard seconds.  Speed is the name of the game and if you are too slow you are drinking mist.  Are you able to rush and go slow at the same time?  If not, then it is even more simple, stand aside for now because these are fast times.  It will slow about soon enough and you will need good capital to operate at during the next phase.

All I did today was buy some short term AMZN and sell it, keeping a small runner piece for tomorrow.

Looking For Something Drastic

Nasdaq futures worked higher during the globex session, with the bulk of the move occurring after 7:30am when we started hearing about earnings from a few banks as well as JNJ.  The economic news from the UK and Europe was all soft overnight but the market appears more reactive to the earnings environment today.

The market worked back to an area of prior liquidity yesterday after failing to sustain trade at the prior high volume zone around 3890.  The thin pocket we fell into offered prices little opportunity to sustain themselves.  However, just below yesterday’s low was a spike of volume left behind when sellers previously defended this zone with rigor before ultimately giving way to higher prices.  These are the places where we look for signs of demand—places where sellers previously played defense.   Converting resistance into support is a characteristic the market often demonstrates. I have noted this level as well as the air pocket below it on the following daily bar chart:

10142014_daily_NQ

The issue bulls have to contend with is the motivated manner by which the market is trading.  Volume on the Nasdaq futures during the last three down days has been at the highest seen since around 2011.  The market is a mechanism designed to facilitate as much trade as possible between as many parties as exist.  Since the 9/19 failed auction high we have seen a clear pattern of lower highs and lows emerge on the intermediate term timeframe.  At some point this selling exhausts itself, and perhaps this morning’s strong gap up is an early sign of exhaustion.  However it would take something drastic to turn the course of our current intermediate term direction.  I have noted key price levels I will be observing including a price level I consider “drastic” and also noted the granular detail of the HVN zone we are trading down into (see prior chart) on the following intermediate term profile:

10142014_intterm_NQ

FAKE RALLY

If you are long any high beta growth stock which is green today, rest assured, that number is a fake and you soon will return to your regularly scheduled bloodletting.  The gods are agitated, mere mortals.  You were given sufficient reparations for your dutiful market participation these last two years.  But you demand more.  The moon was painted red multiple times as a clear message to humble your ego.  Yet there you were, nibbling incessantly from the forbidden giblets of our most holy tree without keeping an eye on your arse, your risk.

Now you have been fixed to a proper boiling chair in the furnaces of hell and Beelzebub is your only friend.  He has advice like, “cut that flap of skin between your pointer and middle finger” and “channel your rage into moar trades”.

Your soul now resides inside the third ring of middle earth and it’s your job to retrieve it.  Fortunately these stories of ghouls are as fake as the ‘value’ transfixed to four letter acronyms across the financial complex.  Real work, adding value in a palatable and tangible way, continues to thrive.  Know this, the market could head into another crisis (GMAFB, fake) and there will be virtuous men and women who emerge from the ashes as brilliant innovators.  Are you going to do what it takes, risking everything you have to produce the next note in our grande symphony?  Or will you try paying someone else to do it for you?

The dead days of the summer were a swell time to check yourself, an offseason of sorts in the warm southern breeze.  Now it is cold, the days are short, and the rain is heavy.  Have you built your hut?  Your mind?  Use it now, at this very moment, to be objective in your judgment.

That sack of skin you inhabit, or those old fermented grapes you cherish, see them right now.  The market is no more complex, nor any commenter less bullshit then a sommelier.  See it for how simply it truly is.

Then observe how a farmer sells two train cars full of cantaloupe.  Now we can begin to talk about the movement of price.

When a market moves lower it is seeking information.  It wants to know where it needs to advertise price to entice a motivated reaction from buyers.  Once it does so we see an abnormal rotation.  Something like today’s in the Nasdaq.  However, the evidence suggests we have not done enough to thwart off the tide of supply.  Rallies are suspect and to be observed for signs of liquidation.  Until buying demand creates an event that sickens the lot of yous, the bigger punches are being landed by the sellers.

I side with the heaviest and most consistent puncher.  I sit on their back and hold the reigns as they buck and thrash.  Such is the life of following order flow.

 

Let Us Have Another Go at This Market

Traders are coming into the week with the Nasdaq futures up a bit on this Columbus Day session.  The globex market opened Sunday evening and showed some continuation on Friday’s weakness which made sense considering how we closed on the low tick of the session Friday afternoon.  Prices began to recover their losses a bit around the time European markets opened up.  The economic calendar is a bit slower this week and back loaded, with the highest impact announcements coming Wednesday (Advanced Retail Sales, Fed Beige Book) and Friday (U of Michigan Confidence).

Turning first to the daily chart, we can see just how weak the market has been since the Alibaba IPO.  Correlation does not indicate causation, however, we also printed a failed Nasdaq auction on the day BABA came public.  Since then we cannot find a sustained bidder in the market.  Instead we continue exploring lower, like Columbus, in search of buyers.  I have noted the activity below:

10132014_daily_NQ

Becoming a bit more granular and observing the 15-minute chart, we can see how balance began to form at the start of October despite the failed auction and inability to string together two up days.  It was a violent form of balance dating from Oct 1 – last Thursday.  Friday we opened on the lower range of the micro-balance and rejected it, starting anew the discovery process.  I noted in purple how the market made a strong bounce and ‘rechecked’ the scene of the rejection where if verified seller control.  I have noted this as well as the key price levels below (dating back to June) and above:

10132014_intterm_NQ

I am in development of a new market profile chart this week, thus I will primarily focus on the intermediate term chart these first few days of the week.  I am also allowing Xfinity a second chance as I start the week after their linesmen and women demonstrated some of the highest customer service I have seen over the weekend.  Thus, I will be a bit hands off until the systems prove stable.

Pain

The Nasdaq is busting through the floorboards as we head into the weekend and as I type the final round of margin calls are hitting the tape.  There are a few stocks left in the hot boys encampment but the majority are dead.

The only joy I have today is not buying anything. The only other joy I have is taking 3 scalps in the morning on the Nasdaq to earn a few bucks before the severity of the market decline became too much of a distraction to continue.  Trading is a brute force endeavor.  If you are not mentally ripped then prepare to be torn to shreds.  When statistics became way out of whack and this week’s drawdown on my portfolio set in there was a bit too much distraction to continue ‘chipping away’ at the futures.  So I began checking in every half hour on my positions and stopping out when my levels were hit.

YELP died on me again.  And ZU died.  A piece of my never expected ZU to work.  I was tasked with managing this position longer than I originally anticipated.  When my illiquid weekly option could not be sold for fair value, I took delivery of the shares.  It was like being on spring break and getting fresh with a nice lady at the club only to later find out she’s staying at your hotel.  Now you have a vacation girlfriend.

In other news they’re beating Twitter down today.  It managed to sidestep the bulk of this downdraft before deciding today was as good a day as any to ‘catch up’ to the demented herd.  Alas, who am I to call the herd demented?  After all, they are trampling over my limp corpse into the weekend.

Assets are dead, you need all your money allocated to the value of volatility for this extra VXX Halloween.  I am short on advice today folks.  It is my only short position.  I will be scrutinizing the market and my trades and my very methodology this weekend.  Fortunately, through risk control, I live to fight another day.  I hope you can too.

PS – bless you AT&T, you have been my shoulder to lean on as Xfinity fails into the sleepless weekend.

Keeping Matters in Perspective

Nasdaq futures are lower this morning on heavy volume and an above average range.  The selling started not long after cash markets closed in the USA and it made an aggressive rotation between 3-5am.  The economic calendar is quiet as we head into the weekend with the most significant events being various Fed members speaking at 9am, 1pm, 2pm, and 3pm.

The Nasdaq is the weakest index this morning, but before we get too far ahead of ourselves, let’s have a look at the monthly volume profile chart to have an idea of where we are trading.  Imagine you were driving from New York to Las Vegas.  Being a resident of New York you are familiar with the roads you need to take to reach the major interstate.  Once on the highway you can use a national map to guide your course.  Once you enter the state of Nevada you would switch to a state map and once inside the city a city map and once inside your casino perhaps a casino map.  The monthly volume profile is your national map.  As you can see below, we are still trading above the largest volume distribution of August.  When we went for a rally in August we left behind a poor structure which the market is now retesting.  The current pocket we are trading in had decent price memory in July, but just above us (the two yellow lines) there was little-to-no history until this month.  This is settling unfinished business.  Price could still head lower but at the least we know we are coming into some solid structure:

10102014_monthlyVP_NQ

Turning to our state map, the intermediate term timeframe, we can see that the last time we traded down at these levels was back in early August and when we did, the region just below our current swing low was traversed rapidly.  The initial surge out of August swing low left a gap behind.  The gap-and-go was strong support when it happened.  We had conviction in the long at the time because of it.  Now we are back here, and the area becomes a candidate for retest.  This does not mean it must happen, however we have an expectation it will and if instead the market cannot then we can see the other side, or buyers, emerging.  I have highlighted this gap and other key price levels on the following volume profile chart:

10102014_intterm_NQ

We are currently priced to gap below yesterday’s range.  Any time the market opens outside of the prior day’s range we know prices are out of balance.  For a moment yesterday we thought balance may be forming however this open suggests we are still discovering value.  Pulling up the city map, I have highlighted the short term levels I will be observing on the following market profile chart:

10102014_marketprofile_NQ

2014 Breath Holding Contest

David-Blaine

Fight, flight, and freeze.  These are the three primal responses which can be triggered when you feel threatened.  They are formulated by the limbic system of our brain.  It is much more powerful that your logical mind and is the force that can drive an otherwise normal person to smash a villain’s skull into pieces if they were to perhaps threaten your child or favorite territory.  Ordinary people are capable of extraordinary and sometimes disturbing feats when put under threat.

Somehow, the market, a mechanism of pricing commodities and other assets has the profound ability to activate our limbic system.  We are all here to make money.  There is no question about it.  Nobody is managing their accounts for the thrill of it.  If you are, then goodness, may I suggest auto racing or biking?  The problem is, money provides security and other luxuries.  If you take a trade knowing you are right, then when it does not work in your favor it causes a threat to your ego.  This is very much a force in trading.  Now your ego is theatened because you knew you were right and maybe your were even a bit of a brag about it. Perhaps you start having a conversation or two with the voices in your head, your limbic system is engaged and you are in the back seat. Said another way, you are like a small man pulling on the reigns of a giant elephant.  This is how sometimes you can look back on a trade and say, “how did I do that?  Was that even me?”  Trust me, I can recall this feeling very personally, I have lost 10s of thousands of dollars in profits this way.

Here’s what I know—I will always have an emotional response to the outcome of my trade.  I must put risk in place before entering any position and stick to it.  Once the trade is on I know it will take most of my energy to keep myself in check and let the market prove my hypothesis.  You need to work on this more than you need to work on your technical trading skills.  90% of this game is mental.

I set up all of my trades well in advance of this fast market.  I took no action today.  Yesterday’s only action was buying YELP.  Should I have sold YELP today?  Absolutely not, it has done nothing wrong even while the markets take another beating.  AMZN, I am still with it.  It looks fairly close to being wrong, but is it wrong yet bro-sis?  No.

The PPT Breadth, one of my cold, dead data points on the market, had its lowest reading of the year today.  Nasdaq cumulative delta (net of trades executed at offer– trades executed at bid) was red, but it was worse on Monday.  I have little data snippets which suggest we might see some sort of reflexive-type bounce soon.  Therefore, I wait these suckers out, one false breakout after another, waiting for my proper goddamned moment to clean up my book, for fuckedsake.

A good bull market never pulls back to let dippers in or shorts out.  Flip that idea on its head and you have our market since the day Alibaba started trading.  Take out a 30 minute chart of the Nasdaq and compare it to BABA and you will see what is killing this market.  We are being liquidated upon, broad scale, bulls.  This is not the time to be heroic and averaging down down down.  Steady you mind and breath.  If you must capitulate then make the market work to take you out.  Do not simply folly out because of fear.  And don’t be a hero either.  Just let the wave take you and spit you out.  Then start swimming.

Final thought-if you decide to switch your internet service provider midweek, keep your old service running.  If I did not have the mother ship wired up with ATT and Xfinity I would currently be Xfinifucked.

Expectations Verses Reality

Trade volume is high overnight in the Nasdaq futures after we printed a 3rd standard deviation range during yesterday’s session.  The session range overnight is within the realm of normal even under the high volume circumstances.  Prices managed to take out yesterday’s high of the session before finding sellers and the selling accelerated just before we heard from the Bank of England who released in-line Asset Purchases and Target Rate Decision.  Initial and Continuing claims were released at 8:30am the claims were lower than expected suggesting the labor market is improving.  The initial reaction to the jobs data is a slight bounce.  Mario Dragi is set to speak at 11am which has the ability to move markets.

Yesterday’s move was large enough to consider returning the intermediate term timeframe to balance.  Thus I have added a profile to the left of the chart which encompasses the range of recent balance and also gives us a good view of the auction taking place.  I have noted the key price levels on the following chart:

10092014_intterm_NQ

On the short term we can see how elongated the market profile became during yesterday’s large move.  This type of structure suggests buyers sharply rejected lowers prices with a strong response.  Whether they have the conviction to defend their progress today will be key because the expectation is they will, at least for a day or two.  I have noted the key price levels I will be observing on the following market profile chart:

10092014_marketprofile_NQ

Speed Mode

One must be brief as they are coming to change my internet over to speeds unknown to residents in the history of mankind.  One truly is impressed with how far infrastructure has come.  The reversal today was strong and with it moved several momentum darlings like NFLX AMZN TWTR and YELP.  They call me crazy when they see TWTR swell to nearly 20% of my book. There was also a big rotation into old man utilities.  Basically the Fed backed off the idea of raising rates and the market found a bid.

Truth be told, this market was looking for any reason to have a bid.  The depths the Nasdaq traveled before finding a buyer sort of negates the opportunity to call this a higher low.  This makes me think we see some range bound chop in the near term.  What I want to see is whether these conditions lead to range compression and individual stocks decoupling from the broad market.  If not, I will increase the attention and resources allocated to intraday future scalping.

I made one move today, buying back my YELP position in the November duration.  This chart looks splendid to my eye, and I have no shame in reentering a still-valid setup.

Making only one move may seem simple and trite, but you know what I didn’t do?  Capitulate on my longs down in the trough.  Instead I took a long bike ride across the windy Michigan terrace.  The gusts were so strong I managed to hit 37 MHP on flat ground!  The wind helped, as did 3 weeks of training LEGS ONLY at the gym.

As hard as it may seem, the market printed anther neutral extreme.  Yesterday’s pointed to lower prices this AM.  Today’s points to higher prices tomorrow AM. I suppose many of you cannot afford to take this game one day at a time.  But my best advice is to take this game one day at a time.  You are small, use it, like a fast boat on big choppy waters.

FOMC Day Expectations

Nasdaq futures chopped about in an active session of trade overnight after yesterday printed a directional distribution-type day.  The primary expectation after yesterday’s distribution is chop with a downward bias.  The wildcard today comes in the afternoon, where the market will receive minutes from the September FOMC meeting.

Yesterday the market went neutral early.  Prices wasted little time range extending higher in the morning and pressed into Friday’s range where we found responsive sellers who pressed us through the initial balance and out the other side.  We were in a neutral print before noon.  When buyers made a second attempt higher they could not and choppiness gave way to afternoon selling.  The neutral extreme type print carries strong directional conviction by the sellers, second only to the trend day.

Below current prices we have the strong buyer reaction from last Thursday.  Whether buyers carry the same conviction today will likely be tested.  If not, then price is likely to continue discovering lower in an attempt to find a buyer.  Below last Thursday’s low we might begin to explore the 8/12 price range where an open gap and naked VPOC exist.  Have a look at the cumulative delta on the bottom of the chart as well which emphasizes the strength of the selling pressure yesterday.  I have noted these prices and other observations on the following intermediate term volume profile:

10082014_intterm_NQ

I have noted the short term price levels I will be observing on the following market profile chart:

10082014_marketprofile_NQ