Intermediate Term Players Making a Mess of The Field

Nasdaq futures are up a few points on the globex session after a quiet morning on the economic front.  Whether or not Hari Raya Puasa sees lower volume than a normal session is something to consider today.  We also have PMI Service flash at 9:45, Pending Home Sales Index at 10, and Dallas Fed at 10:30.

The overnight session saw a few large rotations in both directions, but the brunt of the action was seen pushing higher.  The index put in a fairly durable low around 7pm before exploring higher into the early morning.  We are now lingering up near the high of the session as the USA comes online.   The net globex profile has a slight skew which could resolve itself in a few ways, see below:

We started to break intermediate term balance last week and explore higher.  However it seems the market is trying to not allow this, and as a result the intermediate term has become a bit of a mess.  This is actually a good thing, it affirms the idea of an out of balance marketplace and provides some very prominent low volume nodes as signposts as we trade.  However, if the intermediate term participants continue their activity this week, then we might see an uptick in volatility.  I have highlighted the key nodes below:

On the below market profile chart, I present the levels I will be watching as we start the week:

Nasdaq futures are down as we head into Friday trade, with the bulk of the selling taking place just after market close yesterday on the heels of earnings from AMZN, BIDU, and SBUX.  Since then we had some decent economic data from the UK which brought in a bit more selling, a minor extension, and at 8:30am we saw USA Durable Goods Orders release slightly better than consensus.  The latest data received a somewhat muted response.

The intermediate term timeframe participants have been very active this week.  Their behavior shows up in the day types we have been seeing—normal days and neutral days.  The normal days suggest they like to make their move early and then they do little else for the rest of the day.  The neutral day on Monday was the only session we saw activity throughout the entire session.  With that in mind, and the weekend edging closer, it makes sense to not rush nor force many trades today because the order flow may simply dry up—leaving you to be pushed around by big algos who eat ticks.  Also, since the intermediate term is active, it makes sense to observe the intermediate term timeframe closely.  We have some very prominent low volume nodes in the wake of our most recent advance, and any one of these might be a candidate for testing today.  Also note the large acceptance forming up near the highs.  Will this volume overhang become supply left behind or will we use it as a base for another leg?  See below:

Had I been trading yesterday, then I would have been looking for an afternoon short.  The profile yesterday shows an excess high or selling wick.  Since the day never range extended, one might have hypothesized some selling would come in toward the end of the day.  However, balance held and we printed value inside of Wednesday’s value.  We are set to gap well below Wednesday/Thursday value, and it will be interesting to see if we poke back up into the area or not.  I have highlighted these prices, as well as other prices I will be observing on the following market profile chart:

In light of my frustrated trading yesterday, I had little desire to pursue opportunity in the Nasdaq futures today. Instead I reviewed tape and read a book while keeping one eye on the marketplace.  How I felt yesterday was very subjective, with a distorted perception of reality.  When trading, it is up to us to change our attitude and act with purpose.  You can sit around waiting for someone to help you or you can take action today.

We printed another normal day in the NQ, the second this week.  A normal day is generally created by a swift entry of the other timeframe participant which has the effect of establishing a wide initial balance.  The rest of the day the other timeframe buyer and seller auction price back-and-forth and two way balanced trade takes place.  These are anti-momentum days intraday.  I am actually quite pleased to observe today’s normal day from the sidelines I tend to chop myself up in these conditions.  The key today was in the hypotheses.  As a matter of fact, the key to every day is the hypotheses.  Trades taken without a plan, no matter how nice the conditions look, back door screw me way too often.  Less is more intraday.  This is simple, only trade while applying a hypothesis after a trading picture emerges.  Simple, but not easy.

The big news on the session came from our favorite real estate apps, Z and TRLA.  Zillow is pursuing a bid to acquire Truila for a very cool two billion.  This calls into question the valuation of all internet real estate, because face it, internet real estate is very real.  You and I and Aunt Yellen have no idea how to truly value of these properties.  Smarter folks then us will use the open market to determine this, naturally.

I took down August calls in WUBA early and then some PCLN yolo action around lunchtime.  Other than that, I continue to sit here, in no particular hurry, watching my book of potent rockets sit at ground zero.

Tomorrow I will form a set of very high quality hypotheses after taking care to present you with the finest Nasdaq analysis money can buy (it’s free), and conditions willing I will take a trade or two.  No more guns blazing, especially on Fridays.

http://youtu.be/EwfI677mRXo

We have been observing the intermediate term closely this week after seeing a mini balance form within a larger balance thus forming the compression and potential for price discovery.  This all took place near the top end of the larger balance making the opportunity for a discovery higher distinct.  Yesterday we pressed right to the edge of the stratosphere (around 3974.25 according to balance analysis) and overnight more buying came in which is pushing us to new swing highs.  The timing of the buy flow lines up with the Euro Zone releasing their PMI data at 4am however we are seeing action based upon earnings as well as speculative heat in Chinese burritos and biotech.

I have noted very little on the intermediate term chart.  We are climbing a wonderful wall of worry one gap at a time.  The overnight gaps are a bit unsettling to say the least, however the foundation formed prior to this advance is as well-structured as we have seen since April.  See below:

You can see the buyer control on the intermediate term as a series of higher highs and lows:

The question today is will we sustain a third gap higher, or will we discover a responsive seller strong enough to begin the process of backing and filling?  I have highlighted the key price levels I will be observing on the following market profile chart:

Insanity is doing the same things over and over again and expecting different results.

-Albert Einstein

In case you think this is yesterday’s performance chart, think again!!!!  Your boy is losing it.  I will save you all the torturous introspective, just know the lunatic escaped from the asylum today and traded like it was groundhog day for fuckssake.

Highlights—a consolidation formed, consolidations “aren’t my thing”, I took 49304u45 trades inside of it, breaking all kinds of rules, and stopped myself just before hitting the old daily loss limit.  Then I sat in the woods and observed the squirrels and willfully allowed the mosquitoes to consume my flesh while I watched FB earnings.

Now I am off to scour craigslist for a physiatrist.

BUT FIRST, A PERF CHART FOR YOU COOL DOODS:

Let’s see if my homie Marc over at FB is going to save my week tomorrow.  I am long of TWTR calls, next week expiry of course, because momo trading is PLUM SLOW.  TSLA calls too, GRPN calls ALSO.  Cool.

Good night

http://youtu.be/x4e53wnInX4

The globex markets are the setting for bullish progress this week and early this morning we saw another wave of buying roll through the market.  As we enter the thick of earnings for major tech companies, the index teeters at annual highs.

The intermediate term is showing signs of coming out of balance.  Below yesterday we have a volume pocket separating us from the balance formation.  However, we could still explore a bit higher to settle out the imbalance existing from bottom tail-to-mid verses top tail-to mid.  I have highlighted this level as well as the pocket and key LVNs below:

Yesterday we printed a very clean “normal” day.  This type of day is characterized as having no range extension from initial balance and suggests an aggressive early entry by the buyers was following by balanced, two-way trade.  The placement at new swing highs suggests acceptance of these higher prices.  The late-afternoon selling was widely expected to continue but instead the dip was bought.  The one unique quirk that had so many day traders expecting a new LOD yesterday was the triple-bottom at initial balance low paired with the big gap.  These traders were stopped out but will be hunting a break of 3942.25 on any weakness.  I have highlighted this level and a few other observations on the following market profile chart

Day two over here of being tossed around by locals during a consolidation and boy do I feel frustrated.  I think I know what is happening here—I have a tendency to hunt out and buy into consolidating stocks.  The consolidating stock affords me the opportunity to clearly define the risk of my swing trade.  However, my trading style intraday on the /NQ_F is different.  I am not riding a position which can sit through the noise until a clear break emerges.  My risk per trade is too tight for this.  Thus, if a consolidation emerges my job going forward is to wait it out until an abnormal rotation takes place.

Otherwise I will keep donating my hard earned ticks back to the locals and robots.  I am defining my edge here, real time, using small position size.  I am happy to learn my methodology while it is still inexpensive.  I feel closer than ever to a workable trading model here.

To anyone who desires to trade discretionary in any product, my best advice so far is to find out what works for you while trading SMALL.  Also find out what is not working.  Consolidation trades are not working for me, at least not while trading the 1 lot.

When I envision trading more size, I would have carried a unit into the consolidation with a nice scale in place.  It would be much more simple to manage this position because my risk would be way below the consolidation zone as opposed to initiating fresh risk amid the consolidation.  Do you see how the two trades differ?

Anyhow, here are my daily stats below.  I dipped into the red today but spent most of the session confident in my methodology.

I bought a Twitter weekly call early in the session, but when we fell out of the short squeeze, P-shaped profile I brought the risk back to cash.  The rest of my book stayed the same.  My DDD calls are not looking too hot, but I will see one more day of trade before acting.

Nasdaq futures are up to new swing highs overnight in a session that was predominantly buyer controlled.  I am preparing this analysis just after the core CPI information has been released.  Most of the data came out in line with expectations and the initial reaction to these in-line numbers is more buying, putting the Nasdaq futures up to a new high on the session.  The move did however find a responsive seller, and as we come into USA cash open we are just shy of pro gap territory.

Coming up today, we have House Price Index at 9am and Existing Home Sales at 10am.  We will here from the Richmond Fed Manufacturing index both at 10am and after hours.  We also have major earnings out after the bells coming from AAPL and MSFT to name a few.

There were a few clues about the bullish undertone yesterday if you were watching market/volume profile.  On the intermediate term timeframe I noted a balance had formed last week.  This balance was inside a larger balance spanning the entire month of July.  The balance inside the balance was forming along the highs.  Then yesterday the VPOC shifted higher, right toward the end of the session.  This threw the entire 5 day (now 6 day) balance out of whack, thus requiring some upward discovery to restore balance.  See below:

Here’s the slightly larger intermediate term balance, a profile spanning the entire month of July (presented yesterday in relation to all monthly profiles):

Finally I present the levels I will be observing today on the following market profile chart:

Both the Nasdaq and the S&P were in neutral territory this afternoon.  The trade on a neutral print is to find a price to lean on and fade the second range extension back to the mean.  This trade was not an easy one to stomach today, and quite frankly the buyers defended the pants off of their progress.

We saw a slight risk aversion divergence when /ES made a new high without the /NQ and at that point I was looking for short entries despite the poor high printed at HOD.  Net I had a decent day, loaded with machine gun error strikes after my best trades.  This is a bi-product of trading a 1 lot.  I know that my trades might yield more than my first scale point.  Thus, I become overzealous in reentering.  I need to frame my mind as if I am still in the original trade and how I would manage my position if that was the case.  This will eliminate these errors.  I am thinking like a 1 lot chump.  One might presume I could simply bump up to a two lot and this error would magically vanish.  I won’t lie, I considered it.  However, the more disciplined approach to this issue is to avoid taking a poor reentry.  This will pay off big when I do start increasing size, because I will be more familiar and comfortable with proper re-entry/re-sizing tactics.  See below:

I left my book alone today.  If anything, I would have increased my long exposure because something about today’s neutral print smacked me in the face as BOOLISH.  But I didn’t—I rode my cycle instead. I will be poking around the sacred halls of iBankCoin for another long idea this evening.

Nasdsaq futures are trading a touch lower overnight in a balanced session of trade.  We are quiet on the economic from this morning.  The Chicago Fed National Activity index came out at 8:30am a bit below forecast but the response was low in the Nasdaq.  Looming in the minds of many participants are the rising tensions across the Atlantic, where the Israelites are waging battle in Gaza and finger pointing over the Malaysian airline crash continues.

The balance I have been tracking on the intermediate term has grown to encompass the entire month of July.  Thus I present the intermediate term balance below in the context of 2014:

The weekly chart shows the long term timeframe where responsive buying formed two tails recently, suggesting an excess low was presented to participants—prices perceived as discounts.  This activity requires a significant amount of energy, thus we will need to see buyers muster up additional strength if they are to build upon their response.  Also note the still-open 14 year gap above:

Last week our five sessions aggressively formed a bit of balance.  This balance is taking place within the balance of the month, to overall form a solid, thick, state of balance on the intermediate term.  The intermediate term timeframe was very active last week, thus I am consolidating my eye to 5 days to view the intermediate term timeframe:

Finally, I have presented the relevant prices levels I will be watching today on the following market profile chart: