There’s Order To These Markets

One of the reasons I write morning trading plans is to lay out a few ways the day could progress that wouldn’t surprise me.  Today was a primary expectation day, my favorite kind a day, the kind day I clean up on—killing unsuspecting and unprepared enemies.  When markets behave as I expect I start pushing on more risk.  Today I put on more risk.

Tier one tech has been my preferred theme of late.  When all the dust clears we will remember that technological innovation is the only virtuous capital endeavor left to man.

Nothing else interests me, which is why I outsource most of my stock picking to the GARP portfolio.  I added some funds to my GARP motif as well.

From order comes chaos, chaos for the enemy, chaos for the bear.

NASDAQ futures are coming into the October nearly flat after being nearly 60 points higher early this morning.  Once the European markets opened pressure took price lower after buyers briefly pressed the market up into last week’s range.  Volume and range are both extreme on the session which so far managed to hold above yesterday’s midpoint.  At 8:30am Initial/Continuing Jobless claims data, an appetizer to tomorrow morning’s Non-farm Payroll data, came in mixed.  The initial reaction is selling.

We have a few economic points out at 10am including Construction Spending and ISM Manufacturing.

Yesterday price opened gap up right on top of Tuesday’s range and buyers pressed the morning trade.  By 1pm sellers pushed us neutral and by the close were trading just above the daily mid making it a classic neutral day.

Heading into today, my primary expectation is for sellers to press this overnight gap closed.  Look for trade down to 4154.50 then take out overnight low 4150.25.  From there a test down to 4132.75 where I will look for responsive buyers and two-way trade to ensues.  The 10am data may provide the turn/direction on the morning.

Hypo 2 sellers push down through 4132.75 setting up a test of 4100 with a stretch target down to 4083.

Hypo 3 buyers show up right around the gap fill 4154.50 and push higher to target overnight high 4225.75.  There is another piece of ‘pole climb’ context above 4238.50 which extends up to 4273.75 which would be my upside stretch target.

Levels:

Today had a nice rhythm. The longer time frame was participating but the short/intermediate term position traders were controlling the pace. In the final hour an onslaught of buy programs, the cavalry, brought home 100 NASDAQS. The quarter featured nearly a 14% peak-to-trough move and ultimately finished down 7.35%. But the last 12 months are basically flat. Let’s assess the journey, shall we?

Using charts to build context is similar to driving across the country using old school maps. The national map shows the major interstate and you may check this when you cross a state line. The weekly composite chart is the national map, see below:

We view state maps to see a bit more detail.  If the below chart were a state map it would be Ohio–where nothing happens. The daily bar chart is our state map:

Inside a city we want even more detailed maps to show alleyways, one-way streets, etc.  And if we went to the fruit market we would go even closer. These are the charts I post in the morning.

Anyhow, look at where the daily chart is trading—more or less right where we were last year, which also lines up with the old “14-year” gap. This area was resistance for a long time, then support for a little while, then abandoned, then returned to at high speed by maniac robots, and now being retested. Price has memory and this level is demonstrating it.

Let’s keep in eye on which side we reside mid-month and again at Halloween.

There is a warm spot in my heart, right on the bottom, next to the lodged sausage, for how little interest you show in my morning report.  It sure is boring, isn’t it?  If you have stuck around for a while, you may notice I am a routine person.

Morning reports, meals, Exodus Strategy Session, and pumping iron.  These are looping events in my life.  The whole world could be crumbling around me [like the stock market for the last year] and I will still do my best to keep my routines intact.  It’s how I keep my grit.

This morning, in hypo 3 we highlighted 4166.25 /NQ_F as a price level of interest.  Then, mid trade, because I love you guys, I even blasted out an update:

Hypo 3 and seeing sellers show up at this level $NQ_F https://t.co/5tD4XgtmnS

— Raul (@IndexModel) September 30, 2015

This is the only trade I’ve taken today, a short.  I also reinitiated BIS at that level.  So while they were having an orgy on CNBC over these sick market gains (Were they?  I don’t run that distraction ever.) I was selling my level in a routine fashion.

I don’t draw these lines on a market profile chart for artistic reasons—they are how I make my living.  How do you make yours?  I’d love to know—big ups to the accountants out there.  More respect to the laborers—picking sugar beets or laying bricks.

Want more Raul in your life?  Follow me on Twitter @IndexModel.

Futures are pro gap up heading into Wednesday after a globex session featuring extreme range on elevated volume. Price managed to hold well above yesterday’s session low before trending higher for most of the evening.   At 8:15 am ADP Employment change came in slightly-better-than expectations and as we head into cash open price is hovering near yesterday’s session high, but buyers were unable to take it out overnight.

At 3pm today Fed Chair Yellen and St. Louis Fed President Bullard are giving a talk on community banking. Investors may be watching closely to see how Yellen’s health has progressed after last week’s near-vomit experience.

Yesterday we printed a neutral day, barely. Just after 10:30am, for a fleeting moment, price went range extension up. Shortly after, excess high was formed and we spent the rest of the day auctioning lower. Around 3pm we pressed neutral on fast liquidation and by the close price was back inside the initial balance.

Heading into today, my primary expectation is for seller to push into the overnight inventory. Look for price to work down to 4100 level where we may see responsive buying. Look for sellers to overwhelm the bid and continue lower to close the overnight gap down to 4074.75 then target overnight low 4066. Stretch target is the open gap down at 4031.25.

Hypo 2 buyers sustain price above 4100 and we make a move above overnight high 4138.75. Buyers target 4147.25 before two way trade ensues.

Hypo 3 buyers gap-and-go up, take overnight high 4138.75 early and set their sights on 4166.25. Potential exists for a pole climb all the way up to 4200.

Levels:

Alright so after a rocky morning the market is settling into a nice little balance here.  This is hypo 4 action.  And with volatility peaking like we have now, that means you can make cheese despite the market not actually going anywhere.

Play the edges until you are steamrolled and whipped into changing your behavior:

I expected choppy conditions heading into today.  If the surprise nature of the early strength paired with the digestion of Uncle Carl’s special video wasn’t enough, we had the added chopping effect of a Consumer Confidence report.  A younger Raul would attempt to press trades on days like this, often firing 20-30 trades by noon only to open up the old p/l which would be a mild shade of green before my broker got paid.  Then it was a losing endeavor.  At that point I would overeat at lunch, usually an extra fatty burger, then sit in a comatose state until I was dismissed, completely controlled by mother market.

Gone are these days, I tell you.  I have bigger battles, like world dominance.  With new responsibilities came the need to streamline my process.  In short, I trade less.

Anyhow, I only had one trade thus far this morning, right around 11:25am, a long.  It lasted just under 4 minutes and earned me another week of freedom from corporate oppression.  It’s cool, yes?

The NASDAQ managed to work higher overnight on a globex session that featured extreme range and volume.  Price managed to exceed Monday’s RTH low briefly before turning higher and balancing out below yesterday’s MID.

We have two medium impact data points coming from S&P/Case-Shiller at 9am, the Composite-20 and the Home Price Index.  Then at 10am we’ll hear the latest read on Consumer Confidence, a high impact event.

Yesterday we started the week with a gap down.  Buyers were unable to close it up and we spent most of the day trending lower.  Price managed to come into balance toward the end-of-day but by then price was down well over 100 points.

Heading into today, my primary expectation is for sellers to work into the overnight inventory.  We can look for buyers to defend the 4100 century mark and this will be a useful pivot.  Primary expectation is buyers defend and we continue working higher to take out overnight high 4128.75.  Upside target is 4147.25.

Hypo 2 sellers push down through 4100 setting up the full gap fill down to 4093.50.  From here some two-way trade which gives way to additional selling down to 4080.

Hypo 3 gap-and-go higher.  Take out overnight high 4128.75 early and push to target 4164.25.  Stretch target is a pole climb up to 4200.

Hypo 4 buyers start strong, but are knocked back at 10am by Consumer Confidence and two way trade ensues between 4160 and 4100.

Levels:

Today is not the day to try and make your bullish stance.  Step aside, let the big boys slug it out.

Yours truly was marching behind a 10 ton selling tank and using my bayonet to stab any stray bulls.  I did this until we met the hypo 2 target from this morning’s report.  That was enough gore for me. I needed lunch and respite from the action.

Since then I have been surveying the pitch from the sideline.  What I see troubles me.  The bear tanks are still tracing precise lines across the field and effortlessly gunning down the isolated buyer groups.  Good god men, stay in your bunkers.  There is no backup coming.  Your leader, Fed Chair Yellen is dehydrated and reeling from the carnage.  We haven’t been able to reach her in days.

Just sit put and perhaps the French will save us.  Until then, plan for more pain tomorrow.

If it looks like a chicken and walks like a chicken, it’s probably not a duck. Early price action has me wondering if we will see a trend day down. The market is doing a good job auctioning lower. The pushes are smooth and covering about 12 points a clip. Profile is thin until a soft zone at 4122 then leans out again until all the way down at 4066.50. Between those two points is the 4100 century point otherwise it’s thin.

My best advice is not to be a heroic knife catcher here. Let a bigger buyer step in first—someone who recaptures the daily mid. As a matter of fact we need to make a new session high before I can consider adding exposure.

I stopped out a few longs so far this morning.