Too Good To Be True

One of the recurring life lessons, one that comes with lesions and ego bruises, is that something too good to be true is usually a lie.

Neutral days by their nature are balanced. They like to revert back to the mean before they ultimately travel elsewhere. That’s what made today so curious—it through about reverting but could not penetrate the initial balance. Thus we were left to explore higher prices late into the session.

Then buyers pulled their favorite power move, the ramp. A flurry of buy programs hit the tape, sellers backed off, letting the bulls have a position of perceived control. They created space and then lurched with mystical speed at their prey.

One of the hardest parts of fading the second range extension is timing the entry. My early attempt, and it went okay, was around 4225. It never stuck though and I abandoned trying to short. While unfocused, taking in the late day ramp and providing some banter to Twitter, the market came right up to a level I scouted weeks ago—a high conviction level—and I missed it.

E.R.R.O.R.

It’s okay, but if you think these market profile levels are just your old buddy Raul throwing darts, hopefully today can help persuade you otherwise, for your own benefit not mine, mates:

Listen, you and I both know the sovereign health of Europe and Greece doesn’t matter THAT MUCH. They don’t matter 40 Nasdaq points, right!?

Wouldn’t you rather have something more tangible to justify a move with? Neutral profile, day 3 unidirectional, NFP on Friday, oil down a hot 8, etc. etc.

I could go on, but this post already is too long. Instead soak in this tasty hit:

If you talk to traders in the small circle of market profile theorists they often say neutral days tend to follow one another. However, if you do a statistical study of the catchy saying, spoiler alert, it only happens 20% of the time.

Today is a one-in-five instance, a rare sighting indeed. Fun to see such behavior as we set our eyes on Friday’s NFP announcement. The quirk to yesterday’s neutral day was it closed on the upper extreme, will today’s do the same? If yes, and you are net short, you might want to gird your loins because I reckon that 2 rare neutral extremes in a row is some kind of omen.

Oil, as you likely have been told numerous times, gave up a good chunk of its progress off the lows. How much? You may ask, if you’re nature is one of curiosity.

So far about half, so chill baby.

I have work to do into the bell. Godspeed mates.

Nasdaq is trading lower premarket on a balanced structure and normal range and volume. ADP Employment change came in a bit lower than expected at 8:15am and prices saw little reaction to the news.

On deck we have ISM Non-Manufacturing at 10am, Crude-distillate inventories at 10:30am, and Fed’s Mester is talking at 12:45pm.

Yesterday the market went gap up after a strong bounce of the lows Monday only to see some early selling. Sellers pushed to test the afternoon rally and found responsive buyers who took us all the way though the initial balance to put a neutral. Buyers then sustained their strength into the close resulting in a neutral extreme print. This day-type is a high conviction day type for buyers.

Intermediate term, we are trading at the top end of a six-day range after a big gap down last week. This balance structure is inside an even larger balance structure dating back to late October. Compression-inside-compression.

Heading into today, my primary expectation is for sellers to try and push lower early on and test the LVN at 4189. Here I will look for responsive buyers who work toward closing the overnight gap up to 4215.25. Stretch target is a move up into the above gap and a targeting of the MCHVN at 4233.25.

Hypo 2 is sellers push through the LVN at 4189 and test through the pocket and down to the 6-day mCVPOC at 4178.75. If buyers are not found here then a continued move lower to test yesterday’s low 4166 and a revision to the October MCVPOC down at 4144.50.

Hypo 3 is buyers press up and close the gap to 4215.25 and push above 4233.25 to sustain a drive up to close the gap to 4269.25.

These levels are highlighted on the following volume profile chart:

Oil made a big move so far this week, and as this morning’s session pushes onward it is trading lower. We have Inventory stats at 10:30am. If the sellers are to strike hard, they’re likely to show their hands around this time.

Note how we tagged the value area high from 01/01/15 to the tick then found sharp responsive sellers:

I know there is a point to keeping a bloggery. Its why I do it, and while writing there is an effort to entertain you. But also, this is my mind’s temple. The more auctions I observe and chart and hypothesis upon, the more confidence I have in an approach that earns me money.

So if you’re basic, and your desire is amusement via a quirky title/picture combination, there are other places for you. And it’s okay for you to seek entertainment, I do it sometimes too.

Even though I throw in some peaches and honey in with my vanilla auction writing, my primary mission is to bank coin via extraction market extraction. This avocation allows me to pursue many other wonderful life endeavors without being restricted to the confines of a grey cube. Life is more than a pleasant commute, home, salary, and three weeks paid vacation.

Hence, you will find me fiddling with dials and pulling levers daily to cut my own trek through the jungle that is life. Along the way, hopefully I clear some vines blocking a readers way.

My book is long. I have a short term hedge of puts in AAPL because we are on the topside of balance. By the end of this week I will have a fairly strong handle on whether the fake move FUNGULA logic is to be put aside. The Nasdaqs closed NEUTRAL EXTREME—a rare bullish contextual piece.

Heretofore, I have written plans and executed on them live. Henceforth I will do the same with the inherent goal of GAINZ.

It is important to know where we are location wise.  Here is an update, we are on the upper edge of a six day balance.  It is similar to where oil was, only that balance was much more mature.  See below:

Nasdaq futures are up a few points as we head into cash open. The overnight session featured 1^st sigma range and volume (normal) trading in a balanced manner. Price extended above yesterday’s range and formed a weak, double top at 4203.25 which was also the swing high on 1/30.

Yesterday we had strong early selling which slightly exceeded our 1/29 low 4095.75 before finding a strong responsive buyer. The responsive buyers stepped in before 10:30am thus preserving the initial balance. Buyers then transitioned to being initiative in behavior in the afternoon and made a strong secondary push to close out the session.

Overall, the last 5 days of trade are overlapping but the last three in particular form an interesting view of balance. Given the week overnight high and the quality low below, my initial expectation is for price to work higher and take out the overnight high 4203.25 and continue higher to test the MCLVN 4209.50. The upper target for this move is the MCHVN at 4233.25.

Hypo 2 is a gap fill down to 4183.75 then a move up toward overnight high 4203.25.

Hypo 3 is sellers push into the overnight inventory to close the gap to 4183.75 and push through to take out the overnight low 4165.75 setting up for a move back to the MCVPOC at 4144.50.

Hypo 4 is a drive higher, take out 4233.25 early and work up toward the open gap to 4246 then 4269.25.

These levels are highlighted below:

Keep these economic events on your radar too:

Day two of February sees oil prices again higher in the premarket and at an important mid-week juncture. Price is at the upper extreme of intermediate term balance, trading just below the prior swing high (which also occurred before US cash markets opened).

After making strong progress to start the week, it will be interesting to see if the recurring sell force so prevalent in this commodity takes this opportunity to mean-revert this asset, or if instead buyers can build acceptance (read time and volume) up in the region.

The third scenario would be an extension leg up above to target the NVPOC at 52.60. You can see what I am observing below:

Everyone is different, but when I do homework outside of the trading hours and then calmly assess the context of the auction I become synchronized with the market. I can feel an understanding of its intentions and what its likely to do.

The action begins to resemble a symphony, with the invisible hand of supply and demand as our conductor. When the baton is pointed in my direction, I play my small part of the song and then I return to sitting with good posture and breathing. It really is wonderful and relaxing.

Today for instance, I came into the open with a short bias. I clearly read the open, and I started scalping shorts. There were some long scalps at times but overall I was short. And I made money, isn’t that interesting?

As the session entered the final hour of trade there was a sense the buyers were becoming more aggressive. Their rotations were larger, we knew conditions were susceptible to a sharp move, and buyers had early made a range extension.

I didn’t really participate, but I did not fight it either. Instead I watched my book, nearly 100% long mind you, appreciate. I would like to raise some cash before Friday’s NFP, hopefully even sooner because this week will be heavy on Fed jawboning.

I don’t have a top pick. Be well my friends.

Nasdaq futures are up a bit as we head into the cash open. The overnight session was on the low end of normal range and volume in a balanced session of trade. 8:30am we head Personal Income/Spending stats, we have 9:45am Markit Manufacturing PMI, and 10am Construction spending and ISM Manufacturing. XOM is trading flat after reporting earnings trhis morning.

Friday the Nasdaq gave back about half of the rally it had Thursday from oversold conditions to settle right at the MCVPOC of our large intermediate term balance dating back to the end of October. The market is trying to explore lower prices on the short term and is did an okay job of it last week with a gap lower and so far a lower high.

Early on, my primary expectation is for sellers to come in and work the overnight inventory toward a gap fill down to 4144.75. After some two way action we continue lower to target the overnight low 4129.25 and then the NVPOC at 4121.25.

Hypo 2 is buyers push off the open and work higher to 4173.50 and then stretch to 4181.25 where we find responsive selling back toward the gap fill 4144.75.

Hypo 3 is a early drive higher above 4181.25 and continue higher to test Friday’s high 4203.25.

There levels are highlighted on the following volume profile and market profile charts: