News from The Stair Climber

“Markets take the stairs up and the elevator down, babe.”

You need to know when to change gears in this market, much like hitting a lower gear for a big hill climb on a bike.  If you miss your gear when the slope changes then you will be passed by several more focused cyclists.  There is no opportunity to “go with” momentum in the futures this week, the Nasdaq is a choppy, two-timeframe mess with a positive skew.

Perhaps it is the warm breeze gliding across the reprieved northern bones that has everyone a bit slow moving and happy.  Perhaps we are nearing enthusiasm, hell I feel enthusiastic.

Either way momentum pockets are working on the long side better than the short side.  I will remember this next time we are establishing a swing low, to instead push on momentum shorts.  These instruments, mere acronyms and numbers, now swing both ways.

The Nasdaq ripped higher into the bell and that has me anticipating keeping risk elements on the screen for the mornings trade.  I really like EGLE here and have no position yet.  What a tight daily chart after putting sellers in the pinch.  It feels/looks like YELP did last week or SINA two days ago.  It is a tight consolidation after a sharp move off the low.

Stocks are blowing up, and the key is not to start shooting everthing that gains a slight pulse.  But have a few ideas in mind and be ready to group think as the day progresses.

Now I must get back to my aerobic exercises.  They say aerobics is like taking a little bit of Adderall and Prozac.  I say OK.

http://youtu.be/L_MciWnfaZQ

“Let your winners run babe.”

I have a few well positioned June calls in CREE and ANGI which I am pressing into a lazy Nasdaq tape.  We found a responsive seller on the highs today, but the overlapping-to-higher value positioning suggests buyer control.  The range extension higher does too.  It is tough to trade a churning balance in the futures, and better to focus on tight charts in individual names.

I have not bought anything yet today.  I tried to short NFLX for a moment but once buyers established a decent foothold on the day I cut my loss.

“Cut your losses quick babe.”

Slightly tighter price targets have been working well to string together some singles and as of this post my annual losses are just under 12%.  We are building over here, and positioning mentally for the next big opportunity.

Stay hungry out there.

http://youtu.be/qXEu1odjKZM

After closing out trade yesterday in the Nasdaq futures with a neutral print, the balance and indecision continued throughout the globex session.  The market balanced ahead of GPD and jobless claims information.  The expected numbers were -0.5% and 318k.  Actual GDP number was -1% and actual claims were 300k.  Thus we had a slightly worse than expected GDP number, which was blamed on weather and a slightly better reduction in jobless claims.  The premarket reaction is timid.

We are currently priced to open in balance and in range suggesting a lower risk environment.  Keep in mind however that we started the week with a gap higher and have yet to even attempt filling it.  This piece of context in the back of most speculators minds as they position throughout the day.  This is either gap and go support, or a more likely fill opportunity.

On the intermediate timeframe, we can see the buyers controlled price action for nearly 6 uninterrupted days.  The late selling yesterday almost gives the intermediate term a balanced look, but with a slight edge to the buyers.  See below:

I have merged the overnight market profile into yesterday’s profile so we can see the near perfect balance on the short term.  These levels will be in play early on:

Overall, on the short term, we are coming into balance after squeezing shorts. Whether we continue to squeeze shorts is contingent upon sustaining trade above yesterday’s neutral print.  See below

When the market works upward in the grinding manner we have seen over the course of the past 10 days, it makes sense to consider rotating into lower quality stocks that have not yet appreciated alongside the market.  Such is the case with my long in FCEL.  I have already locked in 2/3 of my long and I now have a runner piece as earnings approach.  Stocks behave very odd into earnings because humans begin questioning the very fabric of their thesis as the micro news approaches.  It is my intent to profit from the uncertainty, and I have secured my risk well.

Considering the success I had dabbling in the dumpsters, I initiated and intermediate long in Waste Management.  The truth is I have been watching this name behave well for many weeks and I was waiting for signs of initiating buyers.  This stock pairs with TWTR and LO as long term holds that will not overly distract me while I trade futures.

Speaking of Twitter, she is off to the races today.  You would think this would distract me, but I am a long term investor in Twitter who is convinced of its media prowess and certain the stock will trade at upsetting valuations within my lifetime.  These valuations, mind you, will not upset me whatsoever.  I am currently down about 34% on my position.  This is committed capital whether I like it or not.  Fortunately, I like it.

I took a new long in WB in anticipation of the Chinese waking up, reading of the crazy Americans and how they rushed into Twitter like a pack of fresh zombies, and immediately using their iPhones to buy their native twitter Weibo.  This should bode well for not only my WB June calls, but also my SINA shares.

We printed a neutral day today, suggesting we are again at an area of intense indecision in the Nasdaq.  Be prepared for violence:

NOTE: The neutral print suggests very little directional conviction if we close near the middle.  HOWEVER, the neutral print with an extreme closing, like HOD or LOD suggests strong directional conviction by the dominant party.  So this close is very telling…pay attention!

http://youtu.be/Z3yBzgem2V4

Nasdaq futures traded quietly for most of the night before sellers came in around 8:30am.  Since then, it appears the sellers have taken control on the very short term in an otherwise balanced overnight session.  There are some retail store numbers out premarket including the Redbook, and we have several treasury auctions in the afternoon.  The economic calendar is otherwise quiet for the session.

Buyers pressed the envelope of extreme on the intermediate timframe yesterday after starting the day with a short squeeze.  The market profile print into the early afternoon resembled a P-shape, which signals a dynamic short squeeze which failed to attract fresh initiating buyers.  However, buyers were enticed by the higher prices eventually and an afternoon rally took shape.  You can see we are trading above a composite volume pocket below.  This may be traversed several times today and during the rest of the week:

On The short term, buyer are in control but we are set to gap lower a touch in a thin volume zone.  One must be careful in this region as price can move very fast.  I suspect we retest yesterday’s VPOC if sellers continue their early campaign, and we still have a large gap left below on the weekly chart.  I have highlighted a few short term observations on the following market profile chart:

I am never one to complain about heat.  Being a man of the north, the steamed air comes as a welcome reprieve after a hard winter.  My computer on the other hand decided to “give up” and I believe it may have died, at least a little today.  It may be a sign I need to turn on the air conditioning.

Before my computer combusted, I was trading NASDAQ futures and sashaying from one position to the next, ensuring I do not overstay my welcome with any of these hot potatoes.

I sold my YELP calls and SCTY shares.  I bought FSLR calls, SINA shares, and more FCEL.  It is with earnest intent I participate in the order flow which is drawing short sellers to question their hypothesis on FCEL as earnings creep closer, and closer, and closer.  With risk elements ripping a la carte their position is a rather precarious one, if I may be so bold.

I must be brief for I am writing you, finest people of the interwebs, from an olde relic and I need to tend to my damaged mother ship.

Nasdaq futures drifted higher while stocks were closed for trade Sunday and Monday, and as we approach USA open prices are around 15 point above our Friday closing price of 3675.  Durable Goods Orders came in better than expected at 8:30am but was received by the market with a muted response.  This may suggest buyers have already priced in best case scenarios on the short term.  Or perhaps participants are moving slow after the holiday weekend.

The short term pivot level early on appears to be 3689.75.  Taking a look at our 24-hour profile which includes all of the globex trade during the holiday, we can see a buildup occurring just below this level before finally bursting through.  The resulting profile has a low volume node at this action point.  See below:

Buyers are in control the intermediate term swing.  Price has been trending higher since setting swing low on 5/20.  The action indicates other timeframe (OTF) activity.  These longer term participants became evident last Wednesday and now they are coming into the week in control.  There is a possibility we see some profit taking by the OTF early this week, and an early tell about the profit taking and the overall health of the market will be the depth of the next pullback.  It seems bulls will want to hold 3645.25 which is Friday’s low print and a low volume node on our composite.  Otherwise the door swings wide open for a fast mean revision trade to take hold:

It is important to keep the long term market structure in your mind even while you trade the very short term.  Looking a monthly candle chart you can see the sideways churn or bracketed trading action.  Markets spend around 70% of the time in balance.  Hanging out up near the dot come bubble peaks for this long is rather interesting.  What is it telling us about the overall health of the marketplace?  What is it telling us about investor risk tolerance?  See below:

Traders often look for the markets to behave a bit lazy as we head into a long holiday weekend because the normal participants are perhaps skipping out of the office early or checked out mentally even if they are at their workstations.  The grind higher certainly seems to have taken hold this year.  As the week progressed trade became more and more slow.  There was a fast sale early Friday, perhaps a move driven by longs in the profit eagerly looking to cash in and head out of town for the weekend.   That move ended up being a huge opportunity to hop on board a quiet trend day higher.

I highlight this tradable opportunity and many more on the following charts of Nasdaq opening swings, enjoy:

MONDAY:

TUESDAY:

WEDNESDAY:

THURSDAY:

FRIDAY:

There was not much you needed to actively do toady except avoid any urges to take action.  If you came into today long, your primary objective was to sit put while the Nasdaq slowly trended higher.  This is the holiday drift, a contextual environment unlike most with its calm demeanor and consistent appreciation.

If you managed to sit out the carnage earlier this year and instead wait for The PPT to give an all clear signal, then you could easily be up 15% on the year.  I was able to regain some losses, but still sit -19% on the year.

There is more than half a year left, and if I can diligently execute on only the solid opportunities in the marketplace then I can regain green by the end of the year.

I took a scale on the YELP calls I bought yesterday.  There was not much power on the late-day new high and we were trading up into my favorite moving average, the daily 33 exponential.  I will always take a scale at this spaghetti string.

Enjoy your holiday weekend and stop by the Raul blog if you want to study auction theory pertaining to opening swings.  This stuff has become super useful in guiding my morning trading and this week was no exception.  Stop by to see some of the opportunities I traded.

The Nasdaq is trading a touch higher after a relatively quiet and balanced overnight session.  As we roll into the holiday weekend the economic docket is quiet, with only new home sales at 10 am and some markets closed for trade at 2pm.

Given the weekend context and the strong progress of the week, we may see some profit taking where sellers are more prevalent then they have been during the rest of the week.  Yesterday the buyers continued to show control on the short term where value migrated higher without any overlay of the prior day.  The action dried up a bit and as a result we printed an oddly shaped profile with almost two distributions.  We may see this area of low volume more thoroughly auctioned today:

The intermediate term is really attempting buyer control here, and I will say they are in control of the current swing, but it is just barely confined to the intermediate term balance.  We exceeded the prior high of the intermediate term balance yesterday by two points.  However another leg and sustained prices above yesterday’s high would be needed to establish a strong foothold of the intermediate term time frame by buyers.  I have noted a few other key upside levels as well as our two point range extension below:

Don’t lose sight of the big picture.  These are important prices we are trading:

Volume may be light today, so have well established price ranges and try not to get whacked by the day traders.