MY WORK HERE IS DONE

I don’t fuss around with the futures too much on Friday.  I have reams of stats that show me plundering away my own gains on Friday afternoons.  It takes some color out of the weekend, and who likes that?

Anyhow, I worked the primary hypo from this morning’s report, see below:

Heading into today, my primary expectation is for a slow tape.  Look for sellers to work into the overnight inventory and close the gap down to 4345.  Look for buyers to defend north of 4330 then make a move to target overnight high 4357.75.  This sets up the gap fill up to 4366.25.  Stretch target is 4370.

I can’t really envision any better than that.

I will take my stipend and focus my energy elsewhere.  What’s on your radar heading into next week?  Should I buy some small bombs because the Russell is a beast? Or should I buy the new Goldman Sachs emerging market ETF and chill?

Either way, I’ll be listening to this album cover-to-cover:

NASDAQ futures are priced to start Friday with a small gap up after a globex session that featured normal range and volume.  Price managed to exceed Thursday’s high overnight and formed a weak/vulnerable high up at 4357.75.

On the economic calendar today we have Wholesale Inventories and Wholesale Trade Sales at 10am.  The Baker Hughes Rig Count is the only other scheduled event and will be released at 1pm.

Yesterday we printed a neutral extreme up day.  After a gap down sellers pushed lower for most of the morning.  Sellers probed below Wednesday’s low briefly before the auction reversed.  At 2pm the FOMC minutes produced a buy on third reaction.  Price went up and closed the overnight gap then continued to close the open gap at 4341.25 dating back to 09/21. Price closed near session highs earning the ‘neutral extreme’ moniker.

Heading into today, my primary expectation is for a slow tape.  Look for sellers to work into the overnight inventory and close the gap down to 4345.  Look for buyers to defend north of 4330 then make a move to target overnight high 4357.75.  This sets up the gap fill up to 4366.25.  Stretch target is 4370.

Hypo 2 buyers run higher off the gap, close the 4366.25 gap then stall around 4370 and turn lower to close the overnight gap down to 4345 then target overnight low 4324.25.  Look for responsive buyers at 4311 and two-way trade to ensue.

Hypo 3 strong buying early, take out 4370, churn, then continue higher to 4378.50.  Stretch target is 4392.

Hypo 4 sellers accelerate the tape, we take out 4310 and work down to the 4300 century mark.

Levels:

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.

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.

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.

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.

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.

Futures are priced for a slight gap lower in the NASDAQ this morning after a balanced Globex session. Price was contained within yesterday’s range on normal volume overnight. At 8:30am Initial/Continuing Jobless claims data came out mixed. The initial reaction is a small amount of buying.

Today at 2pm The Fed releases Minutes from their September 16-17 FOMC meeting. Also, throughout the day several Fed cast members will be speaking at various engagements.

Yesterday we printed a normal variation down balance day. This was the second consecutive day where sellers managed to press a range extension lower. However, they have accomplished little else. Instead the week has seen price drift slightly higher. Wednesday closed near session high.

If you look at the below volume profile chart, you will see I added a red/green volume profile. When we have several sessions of overlapping action I add one of these to get a better picture of what is going on in the region.

Heading into today, my primary expectation is for buyers to push into the overnight inventory and close the gap up to 4324. This opens the door for a move to target overnight high 4328.75. There is a cluster of short-term resistance just above from 4328.75-4331.25 but it resembles a weak high so I will not be leaning on it. Instead I will look for responsive sellers around the open gap at 4341.25 and two-way trade to ensue as we wait for Fed minutes.

Hypo 2 sellers work lower off the open to take out overnight low 4288. We have a weak looking low on the overnight session which makes this test likely. Look for sellers to attempt a continued probe lower to close the weekend gap still open down to 4261.75 but stall out around 4277.25.

Hypo 3 buyers push up and close the 4341.25 open gap early on, some churn north of 4307 (LVN from the 3-day volume profile added to chart) which sets up a secondary leg higher to target the open gap up to 4366.25.

Hypo 4 is liquidation ensues. Price pushes down and closes the 4261.75 gap early and sellers set their sights on 4243.25. If they get down below this level we could see a fast, liquidation-type move.

Levels:

I rarely show my renko chart.  It is a great chart for understanding how the tape prints.  The bars are not time-based.  They instead print only as price fluctuates by a level of your choosing.  When the Nasdaq is moving fast, I usually dial them back to 3 points.  Lately I have been running them at 1.5 points.  When conditions get real bad I dial them down to 0.75 points.

I mainly use the renko for profit expectation and risk management, but I do watch for this picture to emerge—the triple intraday confluence.  One lined up this afternoon, and I worked a long into the close, click and enlarge it if you want:

This situation is the only other ‘working zone’ I have besides the morning market profile levels.

This isn’t good. I held my DXD and BIS—my marquee trades of the week—but I have a reasonable expectation of how tomorrow will transpire.

They want to keep bears engaged. That means no sudden movements or loud noises. If short sellers get spooked, then they won’t stick around overnight. And that is when the campaign will begin. At night and slowly.

There’s no rush you see. This is all about slow motion. Time is valuable. If the market can keep bears in until about 11am, then they’re practically obligated to wait and see the FOMC minutes at 2pm. After all, in our fickle marketplace a few key fed minutes can provide direction.

This is where it becomes a lose-lose situation and where I expect they will really heat the coals cooking below the bear’s arse.

At this point I will want to wait for the minutes. Meanwhile, the market starts to slowly ascend and I have to sit through it. I can cover but risk missing out on a sharp reaction lower.

The likelihood we see any sort of downward price action during this wretched 11am-2pm widow is real low.  So I added some risk.

Finally, remember this—Twitter is my ticket out the ghetto. My position is meaningful and I intend to hold it, sans technical analysis, for years to come. Therefore I insist you tell one person everyday how ‘Moments’ makes Twitter infinitely more accessible. Show the layman what we’ve been going on about for nearly a decade, but reintroduce it via Moments.