Busy Overnight Session

Traders were busy overnight pushing the Nasdaq around. Price managed to print an abnormal 47.75 point range downward and starting around 6am traders have nearly gone round trip on the range, taking us back to positive as we head into cash open.

Economically, we have Existing Home sales at 10am and Crude/Distillate inventories at 10:30am. KO,BA, and MCD are some of the big players who reported earnings premarket, and after the close we’ll hear from FB, T, QCOM, and EBAY.

Yesterday we opened gap up and printed a normal day with no range extension. We’re currently priced to open on the top-end of its range.

Heading into today, my primary expectation is for sellers to work into the overnight inventory and push dwon to 4427. From here I will look for buyers to step in and start working toward the overnight high 4446.25 to ultimately target the HVN at 4450.75.

Hypo 2 is buyers drive off the open, take out 4446.25 (ONH) early and test through 4453.25. If they can sustain trade above this level then look for a run to new high on the Nasdaq.

Hypo 3 is sellers responds at 4450 and reverse us down through 4426 setting up another tour of the choppy range into the end of the week.

Hypo 4 sellers push into overnight inventory off the open and sustain trade below 4426 to target the overnight low 4398.50.

Levels:

Now that I’ve locked in partial gains and abolished trade risk, I would like to discuss how Exodus is changing the way I trade options. You may be asking yourself, why not be more transparent and declare your positions to the world upon origination? It’s simple, when you pirate across the seas waving the Jolly Roger you make enemies—mostly predatory robots.

Now listen closely lads I’m going to teach you how to fish with the latest tactical gear.

Yesterday GILD flagged oversold on the 12 month algo. Said signal came with historical precedence, a 10 and 2 record of winship, indeud. It also came with expectations, look to see a move around 3.6% or so, great.

Thanks to this information, picking a strike was simple. If yesterday’s price was about $100 and we’re expecting about a 4% move, the 104^th strike was about right. And since the signal cycle is 10 days, 2 week’s worth of time is sufficient.

Enter today, one day into the cycle and we can see Exodus has won again, flexing its sublime ability to time near term lows, and each contract purchased has already paid about the semi-annual price of admission to Exodus.  Each contract–how many you bought is a factor of your risk tolerance.

This is just one of the tools that has me in love with Exodus. It is changing the way I trade big time. I am so confident in the value Exodus offers that I am helping out with sales.

If you haven’t already made your interest known by emailing The Fly, shoot an email to me at [email protected] so you can be hooked up with a free trial. BONUS – If you email me by market close I will share with you today’s pick, served on a complex web of mathematical harmony.

Nasdaq futures are up on abnormal volume and managed to print an abnormal 2^nd sigma range as well. The globex session managed to print out a low by about 6pm eastern time and spent the rest of the session trading higher. Around Europe open it began trading lower but found initiative buyers around 4417.

The economic calendar is quiet today and the market is more likely to take its cues from natural order flow, earnings, and macro currents.

Heading into today my primary expectation is for sellers to work into the overnight inventory and attempt a gap fill. If they can close the range gap (4417) they might have a chance at it. However, early on I expect buyers to defend ahead of 4417 and make a push to take out overnight high 4441.

Hypo 2 is buyers drive off the open, squeezing higher to target the HVN at 4450.75 before finding responsive sellers and 2-way trade ensues.

Hypo 3 is a full gap fill down to 4407.25 and a break of overnight low 4402.75. This may lead to a liquidation especially if trade goes below 4396.50.

Levels:

In my latest quest to stack paper I am doing the dastard deed of buying into the pump. The idea, in essence, is that your absolute best performing stocks are undergoing some draconian pump campaign wherein the first is paid fat, the middle can extort some juice, and the last is stuck holding the bag.

Being first requires monk-like patience to sit through several consolidations and hope the gods bless you with a mind-bending surge of order flow. Being in the middle requires little—a quality bit of software perhaps. To be last you must cast objectivity aside and fully embrace hubris which will have you imagining all the moneys you’d make if your perverted fantasies play out. LOL

As long as the Russell does the money dance (holds onto its breakout), I am of the school of thought this uncomfortable means of earning a buck will flourish.

In other news, the Nasdaq did in fact close the gap bears cracked open Friday morning. That gap has been filled with all the trimmings of a Thanksgiving dinner.

If bulls can sustain 4396.50 it’s going to be a long-A week for shorts.

Any stock who doesn’t make money tomorrow is being fed to my dogs. There is no reason (outside of pathetic earnings) a company should be down verse their Friday close come Tuesday afternoon—nein! Such underperformance firmly places said stocks in camp loser where they can enjoy bouncing around and listening to drum circles for all I care.

It is your job, low float micro crapper, to outperform the bastard indices, by a factor of 10. Is that so much for a reasonable speculator to ask?

Also, please, may we have another analyst initiate bullish coverage of Ari-BABA? I think one more might put a bid in this demented China-laggard.

The longer we sit up here, the more buyers are going to gain confidence to trade up to 4414.25 (Thursday gap fill).

Range is a touch above first sigma overnight on normal volume as we head into a fresh week. Friday the market opened to a pro gap down and the selling continued throughout most the session. By about 2:30pm however we formed a decent looking excess low and the auction showed early signs of changing direction.

Yesterday the Chinese announced a reduction to their reserve ratio. It led to choppy trade in Shanghai but has seen a favorable reaction in US markets. The economic calendar is quiet today. At 8:30am we had Chicago Fed National Activity which did not generate a reaction from the market. At 9:45 there are some details coming out of the ECB regarding their QE purchases.

Morgan Stanley is trading higher in the pre-market after reporting earnings and after the close attention will be on Big Blue (IBM) as they report their first quarter results.

We are currently set to open inside the fast liquidation zone from Friday. Opening in this thin zone and the fact we are at much different prices then Friday’s close mean we are likely to see other time frame active on the open.

Heading into today, my primary expectation is for sellers to push into the overnight inventory and test down to 4355. From here I will look for buyers to come in and work higher for the session, targeting 4388.50.

Hypo 2 is buyers push off the open and find responsive selling up near 4388.50 and two way trade ensues.

Hypo 3 is sellers work down through overnight now 4348.75 and continue to 4339.75 before finding responsive buying.

Hypo 4 is a drive higher, up through 4390 with a stretch target of 4406.75.

Levels are highlighted below:

For westerners, the week hasn’t even started. But news from the orient already has participants buzzing. Several sources are reporting the Chinese have cut their reserve ratio. These actions prove they give zero shits about the rapid advance of their stocked market because the growth isn’t fast enough.

It’s difficult to say what the ramifications of these actions will be. However, I laid the groundwork in this week’s strategy session that will allow me to filter out the noise and focus on a few distinct puzzle pieces as a tell.

Moreover, these actions tell a story about what needs to be done in the United States. We need more QE. Our economic superiority depends on it. At the least, this action should give participants in the ‘liftoff’ camp a major reason to reconsider timeline.

Welcome to the two way market, it’s pretty great if you respect some form of mean revision.

Everyone sleeps on your boy Raul. Perhaps I am not clear enough at times. Maybe it’s these esoteric charts and words putting readers asleep. Maybe the fragmented nature of my existence is confusing for the slow internet types. You would prefer it all be more clear, totally fair.

Aside—thank you Weekly Strategy Session subs. You may not know it, but your contributions fuel insightful research into how the markets tick. I’m grateful for your pittance, for it raised the stakes on my data-keeping skills.

In return you guys, all of you guys (even the public school kids), will know when the data senses a raid on the horizon.

To be honest, you were better served reading the blog than the Strategy Session this week, because I did not fully embrace what the data was saying until after Monday’s giving up the open drive (which “should not” happen).

There’s a lot of day left and no sign of buyers yet. I have no idea what next week will bring, but come Sunday I will so throw a few bucks in the vending machine and grab the latest edition of Weekly Strategy Session.

Nasdaq futures are lower overnight. Reports of widespread failure by Bloomberg Terminals may be at least partially to blame for the selling which accelerated around 5am. One may think volume would be low if participants were without data, however quite the contrary, volume was elevated to second sigma as was the range.

CPI data came in lower than expected and so far we have not seen any reaction in price. At 10am The primary read of U of Michigan data is out.   The primary read has often been a source of fast intraday Nasdaq moves. Also at 10am we have Leading Indicators and at 1pm energy traders will keep an eye on the Baker Hughes Rig Count.

Yesterday we printed an neutral day, the second neutral day in a row. Price settled right in the middle of the range however, which was unlike Wednesday’s neutral extreme day. Now, given the context of Wednesday’s neutral extreme, it is likely the initiative buyers seen Wednesday will be underwater due to this morning’s developments. Whether they can make a strong and aggressive responsive buy today will be telling. If not, we may see liquidation take hold.

Headed into today, we are priced to open on the low end of Tuesday’s range. The naked VPOC just above at 4386.25 is likely to attract price, as is the overnight gap up to 4414.25. However, today we are dealing with a pro gap, thus it will take significantly more resources to fill.

My primary expectation is for buyers to push into the overnight inventory and trade up to 4386.25 before finding sellers attempt to work down to the overnight low but struggle to take out 4363 and find responsive buying. Two way trade ensues.

Hypo 2, sellers gap and go lower, taking out 4363 early on and trigger a liquidation move down to 4337.

Hypo 3, strong buyers off the open work up to the range gap 4401 before finding responsive sellers who defend the range and churn us back down to 4386.25.

Hypo 4 full gap fill up to 4414.25 then a run for overnight high 4417.50 with a stretch target of the NVPOC at 4435.25.

Levels:

Go ahead and take comfort in the gentle markets. This is unbelievable. Conditions look good and stocks are behaving well.

Today the Nasdaq did almost everything a well functioning market would do. Primarily it gave the nearest volume pocket a thorough discourse consisting of assessing the quality of the terrain and deeming it fair footing for buyers to sellers to orderly come together and facilitate trade amongst one another. Anyone who made a transaction today was welcomed to tea sandwiches and soda water on their way out.

Bears and bulls discussed the current events over cigars afterwards and the nearby steakhouse was made busy with folks dressed in business professional attire.

Fine. But that doesn’t create the lower prices I need to ease back in, so here I sit and brood.