Home / Tag Archives: $QQ

Tag Archives: $QQ

Nothing Has Changed…YET

Geico-CamelsWhat if you had a large data set that said you suck at Wednesdays? It would give a whole new sting to hump day, wouldn’t it? For reasons unbeknownst to me (I have looked over the data with a comb) my will power breaks down and old bad habits creep in by Wednesday resulting in poor trading performance.

And that’s okay because will power is finite. These days I only take the highly qualified trades and only early on. Once my will muscles are stronger I will increase duration.

Nevertheless today is incredibly important in the grand scheme of things because today we make an earnest attempt to find a tradable low. Early this morning we had MBA Mortgage Applications which had a sell, buy, sell reaction affirming the sellers are still in short term control (the number was a bit better than expectations). At 10:30am we have oil/gas inventory stats and the market is working higher from VAL already, constructive. At 2pm we have a Monthly Budget Statement, and most importantly we have the results of the Fed’s Bank Stress tests after market close at 4:30pm.

The short term trend is seller dominated. It started Friday with a motivated move out of balance. Monday price drifted higher but found a sharp responsive seller (responsive relative to Monday’s open, initiative relative to the upper balance, VITAL you understand this). Then yesterday we had a pro gap down and completion-type wave which closed down near the low of the session.

Overnight prices drifted higher on normal volume and range but were unable to reclaim the lowest seller-defended area from yesterday at 4349.50.

Heading into today my primary expectation is for sellers to push into the overnight inventory and test below the overnight low 4330.75. Just below there at 4326.75 there is a wonderful NVPOC magnet. I will look for signs of responsive buyers here, otherwise we continue lower to test the 2/12 session low gap zone.

Hypo 2 is buyers hold above 4336 and we start working higher. Look for a move above 4349.50 and look for buyers to become initiative above 4353.

Hypo 3 is a quiet digestion of the selling with price holding yesterday’s low 4328.50 and reverting to quiet, two-way trade.

Levels are highlighted below:


Comments »

China Drops an OPEX Surprise

Today is option expiration day for many stock options, and although we live in the age of weekly expiration dated options, the original third Friday expiration carries a bit more weight. Just before 6am we received unexpected news from the East where the Chinese Central Bank cut deposit rates by 40 basis points. This news fueled a rally in the Nasdaq globex session which is currently printing a range in excess of the 1st standard deviation of normal on volume to the same degree. In short, this is an outlier overnight session verse 68.8% of overnight sessions over the last five years.

The price action has us set to gap to new swing highs on the index suggesting the market will be out of balance come opening bell. This can lead to big moves. Leading into today was yesterday’s session which had the look of a short trap. Prices went gap lower and took out Wednesday’s low only to sharply reverse early on and squeeze shorts. The overall look of the profile suggests a short-squeeze event occurred leading into today.

Auction theory is not quite as effective at new highs, however I have listed the support levels I will be observing on the following volume profile chart:


Comments »

Surrounded By Weakness

Prices moved lower in the Nasdaq overnight and as we approach US trade the market is hovering inside the lower quadrant of yesterday’s range. At 8:30am traders learned about the CPI and Jobs situation in the United States, and all numbers but one were better than expected. Initial Jobless Claims came in a bit higher than expected. After the open we have Markit PMI at 9:45am and both Existing Home Sales and Philadelphia Fed at 10am.

The futures broke loose to the downside just after 3am and since then the overnight profile has taken on a b-shape suggesting the initial wave might have been of the long liquidation variety.  It also exposes a slip-zone up to 4217.50. You can see the overnight profile below: 11212014_NQ_ONMP

At our current prices, the weak low at 4207 is now in range. This is a piece of context that formed on Monday when the market printed a double bottom on this tick. That is a poor low and carries an expectation of resolution. The swing high also looks weak but is nearly out of range statistically. The net result is a neutral stance which leads me to expect choppy trade. This is unless we see a strong driver off the open like we saw the past two days. I have highlighted the key price levels I will be observing as well as the weak high/low observations on the following volume profile chart:


Comments »

Contextual Dose to Hunt Balance

The first day of the month is statistically favorable to the bulls in both the SPY and the QQQ.  People have written entire books about this stat, divulging in great detail all of the first day of the month scenarios and holding periods.  One of the findings of the study [spoiler alert!] is when the first day of trade for a new month falls on a Monday, the upside results are greatest.  The study also showed a 4 day holding period from the close before month end yields the most favorable results.  This is why you likely saw many traders pressing their longs into a cold war weekend.

Thus, to come to market this morning with price trading out of range, out of value from last Friday’s action puts the market dangerously out of balance.  We still have an hour and 20 minutes to at least return inside yesterday’s range which would slightly reduce the risk/reward environment, but as it stands we are set to open out of balance.

This presents a unique opportunity situation for the intraday trader.  The volatility will allow a disciplined trader to either end their day rather quickly or see several high probability trade setups during the day.  Either way, this type of environment gives much quicker feedback as to whether your trade choices are right or wrong.  As for existing positions, it makes sense to give more weight to the close than the open.  Let the imbalance get slugged out for several hours to allow some signal to show up through the noise.

Context is more important than ever in this environment, as we do not want to lose sight of the big picture.  The long term is still controlled by the buyer.  This can be seen as a series of higher highs and lows on a daily chart of the NASDAQ composite.  Buyer control of the long term was questioned by the market in early February.  The outcome was a sharp, snapback rally which affirmed demand to be strong and pressed prices to new highs.  A new test of this control would be price trading to 4100 on the $COMPQ index.

The intermediate term is in balance.  This balance spans 75.5 hours of regular trading hours which dates back to the afternoon of 02/13 when we blasted out of prior balance and went exploring higher.  A series of higher highs and lows degraded into balance ahead of last Friday where we attempted to move up and out.  After a failed auction at the new highs, price aggressively reverted back into the intermediate term balance.  After such a move, my expectation is for price to test the lower extreme using the velocity of the failed move to propel us lower.  I have highlighted this action as well as some key levels inside balance on the following volume profile chart:


In the short term, sellers are pressing value lower of the last two distributions.  Their most recent thrust lower was rejected and a bit of a snack back rally has shown up in the early hours.  I have highlighted a few scenarios for this morning, one which sees sellers retaining their grip of the market via being the only active participant (orange) and another potential scenario which sees more balancing occur via a two timeframe marketplace (green).  I have highlighted these observations and a few more on the following market profile chart:


Comments »