Futures Turn from Neutral-to-Bullish Ahead of The Bell

The first profile characteristic of note is yesterday’s neutral session, where we saw range extension on both sides of the initial balance (first hour of trade) and how this type of profile often shows up near inflection points.

The overnight market was balanced out up until 7:45am when a burst of buy orders pressed the market over yesterday’s high of 1601.25.  On the upside, the only profile I’m displaying is from 06/20, above which a large gap exists.

This week continues to bring a series of higher highs and lows giving us upside momentum, this is occurring amidst a corrective market so we want to keep in mind where the buy side action may fizzle out.  The initial probe into the above gap starting at 1609, the high from 06/20, should be monitored closely for signs of an aggressive sell reaction.

I’ve noted this level and other important levels on the following profile chart:

The tape we’re navigating continues to be tough on me, hesitating to grant me generous sums of money.  I came into the day a little over 60 percent long, as where I was more like 80 percent long on the way down, so I’m not recapturing my losses.

Plus I own some overpriced AAPL.  I’m afraid this stock lost its momentum a few weeks ago and is now destined to drift lower until a catalyst presents itself.  And here I am, -6% on the name.  I suspect we’re seeing profit taking by the huge funds who have called AAPL home for many years.  After a lousy quarter, who wants this name on their books?

My only action today in the portfolio was taking a ½ scale on my ZION shares.  Regional banks continued their strength today and we reached my initial destination.

I’m sick of solar stocks and I own YGE and ENPH.  I thought about selling both no less than three times today but I wanted to give them a chance to regain their mojo.  Perhaps they would think about how cool it used to be when they would run hard.  I don’t know.  Put yourself in a business owners shoes for a moment.  Would you rather build gigantic solar panels on your roof to generate a fraction of the energy you need, or cut your lighting expense by 75 percent?  Lighting which in most business settings accounts for 25 percent of the electric usage.  If I’ve said it once, I’ve said it a thousand times, “The easiest was for a business owner to place themselves in the graces of Premier Obama is to upgrade their lighting to CREE bulbs.”  CREE should have been accumulated on the dip…that’s your hindsight trading tip of the week.

I wanted to add to SODA all day and then I didn’t.  It just never convinced me.

Today was one of those sessions in the futures where I grind out all day long to compensate for two mistakes I made.  Then, sitting on a beige-green day, fairly confident the HOD was in, I got cocky and went long again and gave back my daily gains.  I made 1500 in profitable trades and 1650 in losing trades.  The lessons keep coming.

I’m off to tend to other business then swim no less than a mile.

The S&P spent the overnight session first wrapping up unsettled business below yesterday’s close then taking a one directional move for over 10 handles higher.  The move started around the opening of the European markets, and only just now offered a pullback for eager entrants.  Thus far they’ve all snapped up the opportunity, driving price from 1587 – 1591 in a matter of minutes.

My greatest concern today is early weakness once the US cash market opens.  If a dynamic move lower takes hold, it could press us through the large and important value zone buyers have diligently progressed through.  However, the thrust that just occurred as I type accomplished the important matter of setting a higher high which gives bulls some momentum to work with.

The angle of ascent overnight is very steep and may be prone to sharp dip.  Should that occur we need levels in mind to gauge the overall sentiment of market participants.  I’ve highlighted some levels of support and resistance I’ll be using today to provide insight into the overall context of today’s price action in the following profile chart:

Perhaps it’s the way I chastised bondholders earlier today during my hunger rage, but I’ve had debt on mind all evening.  With good timing and prudence, debt can be a company’s best tool, allowing them to outpace their competition when times are good.  Of course it cuts both ways and poor treasury management can make a bad situation worse fast.

Rates have to rise eventually.  You know it, I know it.  Havens like municipal debt are experiencing a rout.  Pick your California waterfall: CXA, PWZ, CMF…brutal.  The unprecedented actions by Detroit’s financial manager effectively cutting bondholders at the knees, it’s shocking.

Brutal action, potential for rates to rise, you get the point.

But we know there’s a Fed bid in the equities market.  We know stocks have an upside bias until the whole shit house goes up in flames, and some of us (me) want to have names we can go long in this environment.

Enter The PPT.

Like Fly said earlier, trading without The PPT sucks.  He said so much more eloquently.  I’m not financial statement illiterate, but I like to spend my time digging into statistics and reviewing my trades and such.  So I come to The PPT with a simple query, find me companies with a beautiful debt situation, fat profit margins, and enough cash on hand to operate.  My thinking is companies not only will have to fork up higher interest rates on new debt, they’re going to have a harder time obtaining it.  Resources that should be focused growing their business through innovation will be siphoned into the debt game.

You dig though 10-K’s and what have you, I set up a screen.  Here are the bullet points of my screen:

MTD Return > 0% – I want stocks that took this selloff in stride, trading in a microcosm

Positive Total Cash per Share

Debt/Equity Score > 4 – I could fiddle with the other debt knobs, but I trust The PPT scoring system to do that for me

Hybrid Change (Daily) > 0% – In hybrid I trust, I want stocks that will move sooner than later, always

Profit Margin Score > 4 – Fat margins

ROE > 25 percent – I don’t know, “The Fly” always likes ROE

There are a few other qualifiers, the screen can be seen here by PPT members.

The list produces 11 matches today:

Then I grab the charts and see if I can wrap risk into any of them.

I like AOL vs 34

PSE sports awesome July stats, gapped huge on May earnings, and looks like it was a gift at 32.75

PCLN is coiled up tight with risk down to around 790 and tons of cash on hand

CBOE has a picture perfect trend higher, but feels like a chase (the best always do)

QCOR is a biotech, which I don’t dabble in much, but that chart looks great vs 42

These are just my back envelope notes.  I’m open to any refinement of the screen, comments, or questions.  Note also, given the hybrid screen I placed, the list may produce new results on a daily basis.  However, I feel like the most recent action bared the brunt force of bond panic, making the listed stocks’ hybrid strength of notable importance.

The degree to which I care about bond holders and their draconian rights is so low, I must defy them.  It’s all bullshit, I’m not buying bonds, are you?   Don’t answer that.  I’ll buy bonds when all you rusty bastards die and I get a real interest rate.  In the meantime, prepare to get Dr. Detroit-ed.

Bear with me, I have a point but I forgot to eat today.  Take your shoes off and let me explain something to you.

Every summer like clockwork something matters.  Alas!  Something matters guys, let’s get on the teevee and talk about it.  Pity many of you subject yourselves to such hubris.  Pundits know as much about these markets as my cat.  Unlike my cat, their reflexes are slow, their climbing abilities poor.

I key off the S&P.  Call me old fashioned, but I’m from the school of thought that the most traded financial instrument in the world leaves a unique footprint in the financial world, one we can derive much from.   I brought 1579.25 – 1580.25 to your attention this morning, good people of iBankCoin, because it displayed significant price behavior and a curious profile footprint.

Then I took to twitter, which is a medium I enjoy, it fits my fringe lifestyle.  And all day I stammered on about this level like a crack head:

“Building acceptance, building acceptance, future, future, way of the future.”

I would unfollow me, I don’t know how anyone stands it.  Nevertheless, the level was our tell on the day.  We’re back inside a very significant value area and the market’s next move from here will be the tell going forward.

Bottom Line because food: we have clear guideposts to the next market move, I’m betting it’s higher, there’s a bullshit scare every summer, and Dan Aykroyd’s humor didn’t make sense to me until like a week ago.

Top picks: F, FB, YGE

The overnight market continues to be corrective and volatile, swinging the S&P futures around 20 handles.

The key price zone above today is 1579.25 – 1580.25 which marks yesterday’s high and the value area low of the major distribution printed last week.  If price gains acceptance above this level, the probability increases of us working our way through to the other side of value, up to 1589.50.  In between these prices we have a thick VPOC at 1584.25 which will may slow the market.

I’ve split yesterday’s profile into the two occurring events, first the early long liquidation, printing a b-shape, then the short covering rally.  The sellers were finally met by a force greater than their own at this point and an auction higher began.  Price gave up the progress late afternoon but still held above the VAH at 1564.25.  This level as well as other levels I’ll be judging sentiment from are noted in the following profile chart:

While stocks are diligently working to syphon money away from my person, I am doing likewise to the futures market.  The game of cat and mouse going on around the world with Robert “Carmen Sandiego” Snowden playing catch me if you can with the US government is much like the run and gun jabs I’m taking.  How do you eat an elephant?  One bite at a time.

But for real, my equities are getting completely poleaxed in this environment.  All the dirty money I made trading momentum pumps is gone.  All redemption of coin depends on this market finding footing, which it started to do for a while, but they’re giving it up into the bell.

I sold RVBD for a loss and bought ENPH.  That’s all I’ve done.  ENPH did a pretty good job springing a bear trap on Friday, IMO.  Any upside velocity in the overall market could produce a squeeze here.

I’m still on #teamBTFD, now I need to get lucky and stop getting risk bombed on every swing.

The S&P futures have been under significant selling pressure since opening Sunday evening, producing five significant rotations lower.  The sellers are exerting their control on vertical development as the market continues to go down easier than up.

As I type, it appears the market is running stops on Friday dip buyers, pressing into their positions.  I strongly suspect we’ll see stabilization take hold in this 1566.75 – 1564.50 region.  If not, we could be in for much lower prices.

My profile data is being buggy this morning, so I’m only able to present you Thursday and Friday’s profile.  We balanced out Friday afternoon, but only to the extent of printing a D-shaped profile.  Although the resulting curve resembles a Gaussian bell-shape, it lacks the same significance.  Mainly, it lacks any directional conviction, so we should respect the intermediate direction, which is corrective and lower.

I’ve highlighted some levels (resistance only) that I’ll be keying off of today:

The S&P is trying really hard to form a tradable range here.  Talking ETF SPY, the brackets would be 158.50 – 165.50 give or take.  The mouth pieces are trying their best to help, coming out of their smoky offices and jawboning in the middle of a quad witching.  PPT wants a range low too.  Everything is pointing to a range low—except SHIBOR rates and suspender-wearing bond traders.

In the spirit of our gaptastic, have fun sleeping, stock market, we need some ridiculous headline out of Asia over the weekend that wastes no time, gaps us above the midpoint of our range, catches everyone out of position, and forces your hand to buy at a higher risk.

It would be fitting given the recent nature of this choppy courrrection.

I could see us coming into the office Monday to a huge gap lower too, that’s the environment we’re in.  That’s the environment Chess objectively describes to members on Sunday night when gentlemen take to their studies and make preparations for the week.

So I’m keeping position sizes smaller, cash higher than I would like to, and limiting the number of positions I hold.

I took a SODA long this morning.  It’s looking really good.  It’s only half size.  If it goes lower, I’ll double down.  If it gets to $74 I’ll scale ¼ off and let the market pay me.

I’m a proud bag holder of $423 dollar AAPL shares.  I bought them in the middle of the FED announcement yesterday.  I was completely swept up in the hype.  $420 is an important price level for AAPL because the degenerates who trade it think Phish plays good music.  Maybe they should stick to Chief Keef.

I’ve decided to stick with TPX through this indecision.  I hold a ½ position here also.  I want to make it 2x I love these beds, especially as the adjustable bed market continues to boom.

Holy Mt. ZION is trading well as are many other regional banks.  Holding.

It’s finally summer hallelujah.  We shouldn’t even be holed up on our computers but there are moves to be made.  Get your pasty ass outside and don’t forget the sunscreen.

The overnight session featured three clean rotations higher, propelling the S&P futures as much as 20 handles off yesterday’s low and over 15 handles above yesterday’s close.

The key take away from the dynamic action is it erased the large liquidation break we spoke about yesterday afternoon, erasing all the progress it made.  This adds to the likely hood that the move lower seen yesterday afternoon was in fact long liquidation and not new shorts being initiated.  However, anyone overconfidently starting shorts into the move lower now finds themselves in the hole for a quad witching op ex.

Both of yesterday’s profiles are b-shaped, added additional visual confirmation to the move being long liquidation more than short initiating.

We’re currently priced right at the mouth of the liquidation which features a VAL price mark for us to gauge sentiment with.  The VAL from yesterday’s first distribution sits at 1593.25.

I’ve highlighted the above price level and other key reference points in the following profile: