I Know Where This Market Could Get Fast

Nasdaq futures are trading a bit lower overnight on a balanced session of trade.  Before weakening, the prices rose to the Monday opening swing low (also initial balance low) at 3906.75 to the tick.  There was a slew of weak economic data out of Europe overnight, we have JOLTS Job Openings at 10:00 am, Consumer Credit at 3pm, and key Chinese PPI statistics this evening at 9:30pm.

The intermediate term auction was set into balance yesterday.  The early action was successful in discovering a responsive seller and once that was established we saw a successful discovery process lower.  It took some time to entice buyer back into the market however once they were found a modest response was registered.  Overall it left a key LVN above at 3906.75 (same level as mentioned earlier), see below:

The market profile print yesterday has a slight b-shape suggesting a long liquidation took place.  The action was relatively dynamic, however sell flow was not overwhelming the bid enough for prices to continue exploring lower.  Instead we formed a lower distribution.  If we take out yesterday’s low I could see it sparking another exploration lower.  I have highlighted the levels I see potential to test on the following market profile chart:

Somewhere I lost my footing and started taking unplanned trades today. It cost me 36 ticks and put me in the red to start the week. I have highlighted the impulse trades I need to back off from if I am to become consistently profitable below:

I was also flushed out of some calls I initiated in the morning in TSLA and FSLR. I may not be in such a hurry to take on new positions come next Monday because it looks like “a case of the Monday’s” over here. I am off to the dentist for deserved torture.

Nasdaq futures are trading lower overnight as we come back to the market after a long holiday weekend.  Last week was a very strong week for the composite and extended the new swing high made in the prior week.  The net result of the action is an extended chart with buyers doing a good job migrating prices higher.  The biggest economic news overnight was weaker-than-expected industrial production numbers from the Germans.  We have little on the docket in the United States until Wednesday when The Fed will release minutes from their June meeting.

Looking at our long term Composite chart, you can see buyers in control via seven weeks of near uninterrupted progress to the upside.  I have highlighted two price levels above our current price action.  The first, red line, is where the 14 year old gap in prices starts and the second yellow line is where the gap ends.  This the biggest piece of context I am observing above.  Gaps tend to initially offer stiff resistance, perhaps even several times, before possibly being filled and likely in a rapid manner:

Long term, there is a bit of structure that troubles me a bit and it started in May.  When I look at the monthly volume profiles, I see weakness in our recent bull run, the foundation poured before the rally seems odd.  These long term context pieces are just that, long term, and are the very broad strokes before honing in on the more actionable short term.  See below:

Intermediate term we might see a better perspective on just how much progress buyers have made these last two weeks.  There was a significant compression down near 3800 and buyers used its combustion to propel market prices over 100 Nasdaq points higher.  In their wake is a thin stretch of volume profile with some low volume nodes we might begin testing out if sellers start responding this week.  There is some structure near 3890 but no really thick volume structure until you look down to about 3800.  This is climbing the wall of worry and it appears many participants have opted to do so, see below:

Taking to the market profile, we can see the market never really came into balance as we closed out the week.  The only balanced profile in sight occurred Wednesday after the trend.  I broke out part of the trend day, the part where the trend ended, and combined it with Wednesday’s balance.  This gives us a nice thick balance structure below to monitor.  It also made the vulnerable double bottom more clear to see at 3883.  We are currently set to gap lower inside an unbalanced profile which buyers were in control of at the end of last week.  This lack of balance and the gap lower might lead to some interesting intraday action to start the week.  I have highlighted some of the key zones I will be observing on the following market profile chart:

The holiday drift was in full effect last week and there were not very many opportunities to trade the short side of the tape.  Overall we saw very methodical auctions where the market set a low bid and then auctioned higher.

I highlighted the opening swings, except for on Tuesday, the strong trend day, which did not print an opening swing, instead only driving higher.

I have highlighted some of my best and worst trades of the week as well, enjoy:

MONDAY:

TUESDAY:

WEDNESDAY:

THURSDAY:

I did very little today, but enough opportunity presented itself in the Nasdaq for me to turn a profitable today.  We are only working with a 1 lot in this first stage of the game, thus when a grind higher like we are seeing now occurs, I do not have the opportunity to milk it completely.  I simply hit my first logical target and bounce.  This is to prove out the trading methodology before increasing size.  It is a first stage I always skip over in my greedy rush to be a badass.  Not this time.  Supreme patience is one of the key attributes of a Jedi trader.

Here are my trades on the session, very nice:

I also am riding a TSLA YOLO trade right into the bell here, looking for it to go green for America, for glory.  The rest of my book stands into the holiday.

May you Coors Light cans stay cold mountain activated.  Saluti!

http://youtu.be/b8zO_DV09QE

Today might be an interesting day.  [Super] Mario Draghi is speaking as I type and giving some commentary about the ECB rate decision which was in line with expectations.  We had US jobs data at 8:30am and was stronger than expected.  The initial reaction in Nasdaq futures was a selloff which is currently finding some responsive buying.  As we come into the nine o’clock hour futures are set to gap higher.

On deck during the session is a Composite PMI at 9:45 and ISM Non-Manufacturing Composite at 10:00am.  We also have a 10:30 Natural Gas Storage change report.

On the intermediate term timeframe, we can see buyers held control yesterday even though it was a fairly balanced session yesterday.  The key context was the low volume node “pivot” we discussed at 3885.75.  We pretty well used that level up yesterday, testing it four times.  I have now adjusted my key LVN down to 3882.50, just half a point below yesterday’s low of the session.  This level seperates us from any potential liquidation.  I have also put some measured moves in place for the session, with the 3900 century mark being a primary goal for the session.  We tested the level twice overnight too, see below:

These are some of the levels I will be watching on the short term, as defined on the market profile:

REMEMBER: 1pm market close today.  Thus, 1pm = time to turn on your #MERICAN

If consistent profitability as a futures trader was easy then everyone would do it.  Volatility is so low right now that most traders are frustrated by the dead index markets.  The more versed players have taken their trading elsewhere to crude oil and metals to hunt down some volatility to trade. I still like what is happening in the Nasdaq.

Swing traders are back in the captain’s chair, beguiled by the warm drift of the summer tape.  Meanwhile Janet Yellen has been watching us kick bears up slides inside the schoolyard.  She blew her whistle today, sending a few ADD addled speculators to the principal’s office.  The clever swingers are getting away with rolling bears up hills behind the gymnasium.  The downright shameless have taken to the trash heaps, having their kicks just beyond 4^th grade teacher Yellen’s watch.

This is the market we are in.  Today was the day after a trend day.  We had below average volume during the opening hour, we had an in-range open auction (scalpers paradise, the best days to fade extremes back to the mean, and just before I took trade #7 we one ticked yesterday’s high of the session.

Let all of that context settle in a bit, it really is a mind full.

Had I resisted just this one trade, trade #7, my day would have been profitable.  Had I exercised a proper flex of my contextual research, work I take great pride in, my win rate would have been 70% on the session instead of a failing 63.6%.

Here’s trade # 7:

In summary, although we are near record lows in volatility, am still 1 trade away from being able to turn a profitable trick.  I am pretty sure I can figure out one less trade to take with a consistent enforcement of context.

DEVELOPING…

Today traded about exactly how we expect trade to occur the day after a trend day.  You typically see a few individual names stealing the show with some lovely follow through while the index goes nowhere, balancing along the upper quadrant of the prior day trend.

This is acceptance of the higher prices, at least in the short term.

I love doing my analysis, and understanding market profile, and how it allows me to have a sense of understanding as we navigate the markets.  The problem is always execution.  I need to be more mindful of my own analysis.  In this case, we opened in range, had an open auction opening type, and it is the day after a trend.  This is chop city paradise, where scalpers reign supreme.  Yet, here I was, trying to press momentum on the dap in trades numbers 6,7, and 8.  Trade # 8 earned a C letter grade because I do not hate the entry, however it was way out of context to expect downside follow through on the day.  I was ignoring context when I made that trade and it cost me 7 ticks.  Trades number 3,4,10 and 11 were the most quality, sure trades.

Here is the stats and the trades:

On the day I was up just a touch, despite GPRO and TWTR biting into me.  Long term holds are tough, especially if you do not separate them out into a different book, because you have to be more passive in your management of them.  I swapped out TSL for ONVO, bought some AFOP, closed RGSE, and bought some July GOGO calls.

Reminder, tomorrow is a half day with US markets closed for trade after 1pm eastern, and all day Friday.

Nasdaq futures are trading a touch higher overnight in a balanced session of trade.  ADP Employment change came in better than expected this morning and there was a brief pop in the futures which was quickly faded.  This suggests yesterday’s price action might have been sufficient to bake in some optimistic economic data points.  We have US Factory Orders at 10am, crude oil, distillate, and gasoline inventories at 10:30, and a lecture from Yellen at the IMF in Washington at 11am.

Tomorrow is a holiday shortened trading session and the day is loaded with economic releases including an European Central Bank Rate decision at 7:45 am and NFP stats at 8:30.

As the Nasdaq Composite climbs into 2000 price levels, what jumps to my attention is March 31, 2000.  We closed the 1^st quarter of trade in 2000 with a big red week.  April started with a gap lower and the market never looked back, falling into the abyss for a good two years.  Nature is effective at filling voids or vacuums or gaps, and when the market left one behind for 14 years I know it drove a few speculators nuts to see this gap remain.  Well, here we are 14 years later, pressing back up into this gap.  This is a Nasdaq Composite Index price level, thus I do not have a specific future’s contract price level to reference, but I think it is likely we fill this gap up to 4572.83, see below:

On the intermediate term timeframe we can see the in-control buyers exhibited a high degree of confidence yesterday.  There order flow was crystal clear from the opening bell when they gapped up and drove higher.  It was essentially off to the races for the duration of the morning.  The market finally came into balance late into the session and the balance carried through into the overnight.  We are left with an interesting low volume node which aligns well as an early pivot point for today’s expected consolidation-type trade:

I have noted my short term observations on the following market profile:

And although my primary goal is to become a professional futures trader, my focus was primarily on increasing my longs this morning.  This multitasking does not allow for timely trade entry in the futures and I was a few seconds behind on my attempts to get long.

My only trade was a loser, a short, when we 1-ticked the high just before the European session came to a close.  We often see a decent bit of order flow around the 11:30am mark and we were far enough from the EMA to attempt a short.  However, it was the more difficult and less sure trade.

Anyhow, you can see it below:

During the morning I bought more ANGI calls, closed my DDD calls +500%, added to FRO, and bought more WB.  We are squeezing up into dot com madness, and although watching an afternoon soccer match was my ruin last Tuesday, I believe to USA game is a good omen for this Duck of a day.