Playing Offense

There is something special about micro breaks, micro anything really—just enough of something to make an impact. All too often the greed comes out, you know, and once you have a taste of something good you go hard like a glut. This is a problem, dude.

Today had the early hallmarks of a sell type day, but buyers refuted the action, early, and have been leaning on the levee ever since. It’s a special sort of day, one where I rekindled a relationship with an old friend and also a general day of gregarious winship.

One must of course remember these fine days and savor them like a nugget of chocolate. There’s little for me to do (my bed is made and just right) and I feel no urge to work for the sake of occupying myself. The winds outside are blowing a consistent 30MPH and enterprise is calling my name.

Top picks into tax weekend: DE, CHGG, SUNE, and the magnificent Elon

Nasdaq futures are set to open flat after spending the globex session consolidating along the upper-end of Thursday’s range.   The economic calendar was quiet this morning and has little scheduled for this breezy Friday. Around 12:20 Fed’s Kocherlakota is scheduled to speak, but these talks have not carried much weight recently. At 1pm energy traders will have a look at the Baker Hughes Rig Count and at 2pm the US Monthly Budget Statement is out.

Yesterday the Nasdaq printed a neutral extreme day. Bulls used a tactic recently employed by sellers (Tuesday, 4/7) and made a late-day second range extension. Of day-types generally observed by market profile theorists, the neutral extreme carries one of the highest directional convictions. Thus when Tuesday printed one, it likely enticed bears into thinking they could build off it. When Wednesday opened strongly against them it may have created tinder. Today it will be the bull’s job to hash out whether they truly meant business with their intra-day and late-date initiative buying.

Location wise, we are trading in the fast Fed reaction range (about 4410 – 4375) where price can move fast. If we instead build out lots of time and volume at these prices, that would suggest a significant sentiment shift is underway.

Heading into today, my primary expectation is for buyers to continue exploring higher prices. Look for a move to take out overnight high 4403 and continue higher to target 4414.50. From here to about 4418 I will look for responsive sellers to come in and 2-way trade to ensue.

Hypo 2 is sellers push down though overnight low 4393.25 and accelerate us down to 4382.25. From here to about 4379.25 I will look for signs of responsive buyers and 2-way trade to ensue.

Hypo 3 is buyers take out 4418.25 early and sustain trade above it, setting up for a drive higher to 4440.

Hypo 4 is we fall down through yesterday’s range and test out 4365.

Level are highlighted below:

I do elaborate work on the weekends. While the markets are closed, I roll out maps in the war room and review enemy positions.

I look for weak points to direct the potent spear tip of a blitzkrieg. More then ever my style is inaction followed by aggressive position. This decisive maneuvering is the love child of a bastard bull market with shifty undercurrents.

Now, with markets opened and four cards nearly on the table, the markets need do little more. As long as the bears don’t catch a flush on the river this week will set the stage for a warm ascent.

Now I must see about leaving this overcrowded wünderland and returning to the desolate ruins of Detroit.

Typically neutral days are my favorite day type. They rile everyone up, cause confusion, and most importantly they set up sweet intra day opportunity. But whoever directed us into this neutral, did so with little time on the clock, effectively lopping off opportunity for bulls to complete the reversion trade.

Market trust levels are low, and events like this are behind it. You can’t be a 10 day trader and turn your back on this market. As a matter of fact, the 10 day trader is a dying entity. You can either hunker down and invest, or shorten your time frame.

But enough glum, more fun. Twitter is a perma-favorite of mine and Exodus telegraphed this move rather lovely back on March 24^th. On that strong day, TWTR became overbought, which is cool because it gave me a trove of data to analyze. Said data described how the next several days would likely go, and indicated that behavior was likely to be a bit dodgy for the next 3-5 days, but around day 10 the signal actually bodes well for bulls.

They have something special with Periscope, and all the heavy hitters are using it. That says something. Just like they love to tweet, they love to Periscope, aka, they love Twitter. You should too, regardless of any silly rumors.

All time highs or bust.

https://youtu.be/9VV8sgVSZNQ

Nasdaq futures are priced to trade flat/higher at the open after a normal-looking overnight session. Price spent most of globex in 2-way trade contained in the upper quad of yesterday’s trend day. Price managed to take out yesterday’s high a few times before ultimately falling back to the middle of range.

Intermediate term, we are trading neutral. We’ve spent the last 3 weeks oscillating but not really going anywhere. Instead we are bouncing along the tips of prior resistance. Bulls have struggled to confidently convert the prior resistance into support but have managed to hold the line thus far.

The nature of yesterday’s push higher means the ground below is us unstable all the way down to about 4280. Thus as enthusiastic as the rally was, bulls will want to see additional progress made away from this fast region. Conversely, the structures above are well established value curves suggesting it will take sustained demand to work through the thick supply.

Heading into today, my primary expectation is for buyers to make a move for overnight high 4357. If they do so, then look for a test up to 4362.25 where we find responsive sellers and 2-way trade ensues. The market may go into “wait and see” mode sooner than some anticipate with Wednesday afternoon’s FOMC minutes scheduled.

Hypo 2 is sellers push the overnight lows 4337 and work toward 4328.25 before finding responsive buying and stabling out, perhaps even printing a neutral day.

Hypo 3 is sellers accelerate us down below 4328.25 and set up a trend back down the zipper, all the way down to 4280.

Hypo 4 is buyers sustain trade above 4362.25 and continue on to test 4374.25 – 4375.75.

Levels:

People are becoming rather reticent on the subject of allocations at these levels. Nobody wants to be caught with their pants down, levered long of the tape, when it makes a decisive move lower. The nature of buying verse selling creates a fear.

The primary fear is being too far from the exit. This puzzles me a bit. Markets are electronic. They’re fast, but so are the execution tools. We’re not talking about picking up a phone and sending a handwritten order down a chute to a smoky room of ingrates who pull rusty levers. Modern financial architecture has come a long way.

Nevertheless, you won’t find a shortage of critics. But think of it this way. Pick a high school sport, say football, and of the three-four hundred spectators there will always be two or three asshole hecklers. Now extrapolate that sub-set to everyone involved in finance. Then give them a Twitter handle.

Said another way, sentiment is in the pipes right now. It feels like a good time to press risk. And if I am wrong, I will stop out and reassess, thus living to fight another day.

But what of the salary Joe’s retirement plan? What of the worker bee whose entire nest egg is predominately market exposed? Do we really think they let that go upside down? Preposterous. The house of cards requires growth.

Markets underwent an upheaval of sorts this morning, propelled by the enthusiastic thrusts of amped up bulls. As we round the bend, prices are trading on the low end of April fool’s value area. A zone wrought with shenanigans and predatory algorithms.

To declare today a grotesque victory is a bit premature. There is still much work to be done in the bull camp. Columns must be erected, walls fortified, and vats of molten tar refilled. But this morning they beat off the confident bears who, driven by fear, crowded into the hole of demise.

Everyone sashays around the internet all googly eyed speaking “truths” like how nobody owns puts and everyone is a complacent bull. Yet when you actually investigate last week’s data, dammit, put buying was among the highest we’ve seen in two years.

So the fuck what VXX is chilling? It is a bastard measurement and particularly effective at confusing 95% of its observers.

So what’s next? That’s a fair question. Shorts were in for a pretty warm squeeze this morning, but we haven’t found sellers yet. Look for a run up to Nasdaqs 4358.75 and take it from there. This week is what I affectionately call an early riser. They can be nasty if they trap bulls all week, but that was last week’s play so perhaps this week it sticks?

Ultimately Wednesday is the arbiter, the day of the hump.

And $51 oil.

And earnings. Wednesday.

Nasdaq futures are lower as we head into a fresh week of trade. Sunday evening we came into globex well below Thursday’s closing price due to a reactionary sell to Non-Farm Payroll data during the holiday shortened session Friday. Since opening yesterday evening volumes have been abnormally light and trade behavior has been 2-way.

The nature of the price move lower (news driven, low volume, outside of regular trade) makes it suspect. However, it has thrown us out of balance and therefore is likely to induce the higher time frame participants into the market. This means an elevated risk:reward environment intra-day. It also means I have an expectation for us to return to the scene of the crime, prices much higher, around Thursday’s close 4307.50.

Heading into today, my primary expectation is for buyers to push into the overnight inventory and test up to 4286.75. Here I will look for signs of responsive selling and 2-way chop to ensue which holds value low 4272.50. If this sets up, look for a secondary leg higher to test the 4300 century mark.

Hypo 2 is sellers become initiative off the open and press to take out the overnight low 4262. Look for signs of responsive buying around 4255.75 and 2-way trade to ensure.

Hypo 3 is an aggressive buying response, drive-like open when recaptures 4300 early and makes a full gap fill move up to 4307.50.

Hypo 4 is a gap-and-go trend lower.

Levels are highlighted below:

Let’s not be mawkish about what will happen when markets open this evening. Instead let’s just be candid for a moment, shall we?

What transpired Friday morning, whilst 95% of the world was bereaved by the death of Jesus, was a complete sham. Fodder for idiotic animals to troll about in—a favorite pastime of modern cave folk.

I am of the opinion, backed by copious amounts of data, that said sham will not affect my person, even temporarily. In fact, it may even serve as bull tinder.

In summary, Father forgive me for their gains I am about to receive.

WSS subs, the latest report is out and should be hitting your inbox shortly.

There’s always work to be done, and one must make time for all of these matters. If you engage the markets on a daily basis, other duties may soon fall behind. This must be combated. Of course it is easier said than done.

On a day like today, which is a working day for all intents and purposes but with closed markets, you can often rediscover how productive you are.

Hopefully you enjoyed your Friday, may your weekend bring good tidings and the return of pork.

Happy Easter!