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Tag Archives: $COMPQ

Fresh Context to Guide Traders Through The Short Week

Strength rolled into equity futures overnight after a mild and choppy globex session cruised through Sunday evening and MLK.  When the markets opened at 7pm last night they were met with buy flow which pressed prices above Friday highs before finding sellers.  Turning attention to the NASDAQ futures, the marketplace found sellers at 3609, which was the overnight high last Friday and is 1.25 points below our current swing high at 3610.25.

Friday printed a neutral session which features range extension on both sides of the initial balance.  It suggests indecision.  The late afternoon selloff makes sense, as option expiration occurred and speculators perhaps reduced risk into the long holiday weekend.

However, their profit taking was met with aggressive buying of the reactive variety which made it clear demand exists for NASDAQ exposure (and S&P).  The afternoon selloff was effective in shoring up the wide open gap left behind last week Wednesday, and price stopped just a tick above the naked VPOC at 3574.  Any trade sustained above this level keeps us outside of intermediate term balance, and increases the propensity for a large move.—either a harsh rejection of higher prices, or a discovery exploration higher where the market seeks to locate new balance.

My primary expectation is for some selling to come in early on and work the overnight inventory lower to close the gap down to 3586.  Should we instead see buyers driving off the open, I have upside targets of 3610.25 (swing high), 3612.25, 3616.75, 3620.50, and 3622.50.  In essence, there are many algorithmic buy stop targets above.  They may either trigger a temporary short squeeze, or be the catalyst to our next let higher.

There are no major economic releases today.  We are set to open in range, but outside of value.  This is an elevated risk/reward environment intraday.

Note: On the S&P futures via the /ES, I am looking for sustained trade above 1844.50 to signal a shift from intermediate term balance to long timeframe control.

I have highlighted levels I find important on the following market profile chart:



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Big Waves Overnight

Futures are up down a bit overnight after a busy night.  S&P futures printed over seven handles in range while the NASDAQ printed an eighteen handle range.  The action was fast at times and the resulting market profile print shows no signs of balance.

We have a busy economic calendar today including some premarket data.  However, as we approach US trade markets are set to open in range and in value presenting us with a lowered risk reward environment.  This condition could be favorable for individual stocks since the mild climate will not exert macro forces on these plays.

It will be important today to see who is in control of trade.  Yesterday the action was predominately controlled by the local time frame (LTF) and this could be seen as value area highs and lows being faded back to the VPOC all day.  These choppy conditions lack the order flow of other time frame who push us out of short term balance. 

The /ES futures representing the S&P 500 are still trading within intermediate term balance.  I will be watching a micro composite volume profile spanning back to 12/20/2013 which describes this intermediate term balance.  The two closest levels in play are 1834.25 and 1840.50. I have highlighted these key levels on the following /ES chart:


Turning to the NASDAQ futures, yesterday the action was contained entirely within the range of the prior day and we traversed most of the daily range in the last half hour of trade.  The action is nearly identical to the prior day and printed matching VPOCs.  This inside day print can sometimes occur near infection points.  In this tape, it would demonstrate a time based correction at the highs which erodes at short sellers.  Price is slippery below 3594 and opens to door to a gap fill.  If instead we hold 3583.50 we may be successfully leaving intermediate term balance and exploring higher.  Otherwise, the naked VPOC at 3574 becomes a target.  I have highlighted these levels on the following market profile chart:



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A Thorough Application of Auction Theory Live

Nearly every day you can find a trader on twitter expressing their belief that markets are manipulated.  This type of dialogue is a major risk to your emotional dialogue.  Instead of claiming corruption, focus on exactly what is happening in the marketplace through the lenses of auction theory.

We go heavy on context here on the Raul blog every morning and this work pays huge dividends.  It is always a pleasure to share my thoughts and have them read, but rest assured I do this for my own selfish benefit.

Yesterday the market extended upon our Tuesday rally by printing a moderate gap higher and sustaining the gap throughout the entire session.  We had range extension on the day which tells us new initiating buy flow came into the market during the day.  However, the midday buy flow was not dynamic enough to press us higher and into a second distribution.  Instead a two-timeframe trade ensued with locals and other time frame participants conducting trade amongst one another.  The final daily print resembles a letter-P suggesting a short squeeze.

This action makes even more sense when you observe the course prices have taken since starting the year.  We printed a lower high on 01/09 and a lower low on 01/13.  This type of action will do two things—it causes longs to capitulate and sell and it causes new shorts to initiate positions.  Sellers may have gotten a bit ahead of themselves.  Net inventory may have become too short while we were still inside of an intermediate term balance.  When the snapback rally erupted, a reentry by the long term controller (buyers), it happened fast and left shorts and underexposed longs in a pinch (RIP @tlMontana, this was one of her specialties).  Thus the market algorithms drove price above the 01/09 lower high because that is where the buy stop orders were.

See?  No manipulation at all.  The best part is, the market can still put more pain onto the shorts.  We have a secondary upside algorithmic target based on the year-end swing highs.  The market may want to eventually press into this.

Taking to the NASDAQ futures, I have highlighted the upside target I mention above in yellow and green.  We are trading just above our intermediate term balance.  Just like orbital gravity, it becomes less powerful the further we get from it.  The slingshot move made this week would be like swinging around the earth several times then flinging a ship into outer space.  That is something to keep in mind.  However, the mean revision force is still in place, and we may see price retrace a bit.  If we are breaking out of balance sooner then later, my expectation is for price to fail to fill yesterday’s gap up.  Talking exact prices, my expectation is for our naked VPOC at 3583.50 to hold.  Should this occur, I will be pressing longs hard.

Secondary support exists at 3574.00 and we could still work out of this intermediate term balance while holding this level.  I have highlighted these price points, as well as some max pain algorithmic upside targets, and a few other levels that intrigue me on the following volume profile chart:


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Assessing Overnight Inventory and Early Expectations

Inventory was pressed long overnight, with prices in both the S&P and NASDAQ futures continuing higher.  The bullish action started early this morning at about the time European markets opened.  The move was dynamic enough to press us into short term overbought conditions.

My early expectation is to see sellers entering the marketplace who are gunning for an overnight gap fill.  Focusing our attention to the NASDAQ via the /NQ_F contract, I will be watching for selling down to 3574 which is the VPOC and closing print from yesterday.  Sellers will have to contend with a naked VPOC at 3583.50 which dates back to 12/31/13 on their way to filling the gap.

Should they succeed in filling the gap, they will focus on secondary targets down to 3566.50 then 3562.50.

This does not mean I am recommending shorting.  It is instead my expectation for early trade.  If we see a strong gap-and-go drive by the buyers it will be clear the long term timeframe is still asserting itself and we should look for dips to add exposure into.

Given the wide ranges of the past two days however, I am looking for a more balanced, two-way tape.

Upside targets are 3587.50, 3592.25, & 3595.75.

I have highlighted these levels on the following volume profile chart:


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A Big Dose of Sentiment To Level The Mind

Yesterday we printed an interesting session in the NASDAQ futures.  We took out Friday’s high and inside the Pelican Room I was commenting on how I had never seen sellers push as hard on the bid as they were.  It was odd however, because they were making little-to-no-progress.  A huge amount of aggressive selling was absorbed up at the highs before we finally gave way and liquidated down.

All of that volume was so heavy near at the high that value never was able to shift lower and catch up with price.  This is a huge piece of context today, where we can observe whether value migrates down or price reverts back to value.  A huge gap between the two exists.

If you pull up a daily chart you can see the long term auction is still firmly in control by the buyers.  There continues to be higher lows and higher highs.  Intermediate term, we are positioned on the cusp of balance, the extreme and thin tail where we hunt for reactive forces to press us back to the middle of balance.  This price zone presents the greatest amount of reward for the trader, also the greatest amount of risk.

We saw a buying tail print near the end of the day and if we are staying in intermediate term balance then it will hold.  The force buyers exerted into the bell carried into the overnight session where price was first pinned sideways for many hours following the US markets closing before buy flow pressed prices a bit higher.

We have a potential gap trade down early on if sellers can push down to 3509.25.  Caution on the short side if the open exhibits strong driving action upward.  Likewise, caution on long exposure or new buys on a drive lower.  If we see two way auction early on, we will have a better opportunity to slowly assess control on the day.

I have highlighted a few key levels on the following NASDAQ volume profile chart:


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A Fresh Look at Market Auctions

The behavior of the equity markets last week cleared up any uncertainty as to whether or not everyone was back to doing business.  Volume increased in most instruments and move have increased in size and speed.   Both the NASDAQ and the S&P have been chopping around which creates opportunistic conditions for day traders.  These benign conditions have allowed individual pockets of momentum to make large runs too.

I spent the weekend building out a few new charts since Mirus futures and Ninja trader will not be working properly any time soon.  The first chart is 30 minute candles of the S&P 500 via the /ES contract.  I am using the 30 minute bars to simulate the TPOs of market profile.  I am doing so with high quality tick data which produces a very accurate volume profile.  In this chart we can clearly see the intermediate term balance occurring since 12/20.  I have highlighted the low volume nodes of this chart, as I feel they present strong opportunities for traders to position their books and also observe sentiment:


Next I have made RTH volume profiles for the NASDAQ via the /NQ contract.  These will assist me in observing the day session and who is asserting control of the tape.  We can see price consolidating recently.  The past four sessions have been “P, P, b, b” in structure.  In other words, two short squeezes then two long liquidations, but neither time did the consolidation break.  This is big players wrestling for control. 

At the apex of this action is 3551.75.  This price level has been the scene of many struggles between buyers and sellers and I will be using it as a pivot of sorts today.  I have highlighted this level and my upside and downside targets on the following volume profile chart:



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Pre-NFP $COMPQ Analysis

The market has been one-directional overnight, with a steady bid elevating prices.  Immediately turning our attention to the NASDAQ, the weakest market of late, we are trading inside of yesterday’s range but outside of value meaning the environment is risk elevated but not as elevated as yesterday.

Bear in mind however, that we have an NFP announcement premarket, which may materially impact price and where we trade when the opening bell rings.

I have framed our current price action in the context of everyone’s favorite sentiment chart, and I have taken to the vision that we are trading inside of aversion, the uncertain state occurring prior to a new thrust higher.  If I am right, then we should not see much of these overnight gains given back early on.  Instead we should see price press up to 3577 and churn about before ultimately pressing higher.

However, I do not want to be caught flat footed so I will run though the layers of control in the marketplace:

Long term price action is firmly controlled by buyers (BTD)

Intermediate term, we are seeing balanced, 2-timeframe control with extremes being faded and a slight bullish imbalance

Yesterday, sellers dictated direction of the tape but ultimately printed a “b” shaped profile after showing no follow-through in the afternoon

Overnight, buyers are in control

When the market opens at 9:30, watch the opening swing closely.  If we see a one directional drive higher the long timeframe is asserting itself.  If we see two way action, we are still in the intermediate term and we need to be keen on the intermediate term’s balance structure.

I have highlighted the key zones of the intermediate term balance on the following volume profile chart:


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Hunting Aversion

Market activity picked up overnight.  We are certainly seeing signs in this marketplace that the big hands have come back to work, and their actions are jerking price about.  The market has been in a rather benign drift for many weeks, but business is clearly becoming more pressing as the year ramps up.

Yesterday, we saw an aggressive seller enter the NASDAQ in the afternoon.  Their action was dynamic and fast.  The sell flow was quickly reacted upon by eager dip buy orders, and if I have a clear read on sentiment here, I can see the case for dip buying.

We are currently trading outside of yesterday’s range meaning we are coming into an elevated risk/reward environment.  Your losers will press harder into your pocket, as will your winners.  Tight stops will be obliterated, and exuding a gentleman’s patience will be paramount today. 

Pick your spots and let the market come to you because there will be an added velocity to price today which may carry the market well through your desired entry point. 

Long term the buyers are firmly in control, intermediate term there is balance, yesterday was dominated early on by buyers and again late in the day with their aggressive reaction to lower prices.  Overnight buyers were in control.

It will be important today to understand which timeframe is active.  My expectation is for the intermediate-term timeframe to be prominent because of the aggressive sell flow that began yesterday afternoon and also because they are reacting premarket to higher prices.

I will be looking for an overnight gap fill early on down to 3564.50.  Below this level is a thick layer of volume for the market to work through.  Should we see sellers pressing a second rotation, they will be seeking downside targets to 3551.75 then 3546.25.  Keep in mind however, trading as low as 3536 is possible today, and would fit the framework of “aversion” context.  That is to say, the intermediate term balancing process is a violent one and it is best to pick a side and stick with it, especially near extremes.

I have highlighted these levels on the following volume profile chart:


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Price Action Tightening Up

Overnight we printed a balanced session of trade into 8:30am, where the markets appear to be catching a slight bid. Overall we are mostly unchanged across the board.

The opening action yesterday whispered of long timeframe activity, where aggressive buyers came in and disregarded day timeframe price zones. Thus although the Think or Swim volume-at-price is highly inaccurate, it proved sufficient for measuring intermediate term activity.

Sticking with the intermediate term, and by no means is it my choice, I again turn your attention to the Think or Swim platform, where the NASDAQ futures are working through a consolidation pattern with some interesting volume reference points to gauge market sentiment upon:


My first vision is for resolution of this consolidation. I would like to see sellers push off the open, perhaps down to the 3539 LVN, where I will look for signs of buyers. If they are not present, a second thrust lower to 3527.50 may be in order.

Ideally, this weakness is met with aggressive/reactive rejection from buyers which propels us up above the highlighted consolidation formation.
My second vision is a slow grind over the MCHVN at 3558 and over the top of this distribution to my upside target of 3576.

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The Show Must Go On

I want to apologize to my reading audience for building a set of tools reliant upon one third party.  Mirus futures updated their API and since then there data connection to NinjaTrader has been patchy at best and often down entirely.  They are failing, repeatedly, to stabilize their relationship. 

Due to inclement weather, the staff at IQ feed are very slowly working to get my data stream online.  Unfortunately, I will not be using this data to feed my market profile charts, but instead to feed my algorithms which no doubt will need to be almost entirely rebuilt based upon the new data.

In the meantime, we need some kind of vision for the day, some sort of lens to view price action through to ensure nothing is afoot.  You know the market, it wants to catch you sleeping so it can cut your ear off and feed it to its Van goats.

The equity markets have rotated higher overnight, with the NASDAQ composite flaring open a gap down to 3518.50.  The width of this gap is not quite of the “pro” variety meaning we should expect to see an attempt by sellers to fade the gap fill.  This piece of sentiment alone does not mean sell the opening print, but instead look for a logical price level where we may expect to see sellers. 

We have a volume void up above on the /NQ.  My expectation is for buyers to press into this void but find sellers, either around 3540 or 3545.  From there I will look for a rotation down to 3527.50.  If buyers are not present at these levels then a swift push down to the gap fill 3518.50 is in order.

I have highlighted these levels on the following 30 minute TOS chart.  Note: I have always questioned the integrity of future’s data presented on Think or Swim.  Thus these are very rough estimates, especially in regard to volume-at-price.



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