Friday, February 12, 2016
I turn dials and fiddle with knobs to hone in on harmonic rotations
Joined Oct 26, 2011
2,269 Blog Posts

That Right There Is Balance


Despite the bitter despair traders expressed today, and Janet Yellen doing her absolute best to spout out senseless drivel, thus killing the NASDAQ, we have formed a rather orderly balance.

These are the building blocks of a rally, if I may be so bold.

Caveat: we put in swing low during globex.  Not good! [Extra Trump]

These are your balances, use them well:


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Let’s See If Yellen Can Break The NASDAQ


NASDAQ futures are coming into Thursday gap down after an extreme overnight session, both in range and volume.  Price spent most of the session working lower until finding a responsive bid around 7am.  Buyers were found just below the open gap left behind on 10/20/2014.  At 8:30am Initial/Continuing Jobless Claims data came out better than expected.  The initial reaction is buying.

Also on the economic calendar today we have Fed Chair Janet Yellen’s testimony before the Senate Banking Committee.  Expectation is for a continued rhetoric that does not strike a dovish tone.  We also have a 30-Year Bond auction at 1pm.

Yesterday we printed a neutral extreme down.  Price started the day gap up, and after a morning of buying and a brief range extension up, a sharp excess high formed and price worked lower to close near session low.

Heading into today my primary expectation is for buyers to work into the overnight inventory and trade up to 3925 before responsive sellers step in (responsive relative to the open, initiative relative to yesterday close).  Sellers then work to take out overnight low 3862.25.  Look for responsive buyers at 3848.50 and two way trade ensues.

Hypo 2 buyers push up through 3951.75 (yesterday low) and sustain trade inside of it, setting up a move to target overnight high 3971.75.  Look for responsive sellers up at 3977.25 and two way trade ensues.

Hypo 3 gap and go lower.  Take out 3872 early and sustain trade below it setting up a move to target 3862.25.  Buyers put up a brief defense at 3848.50 but are ultimately overrun as sellers target 3825.25.



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The Dow Is Literally The Weakest Index on The Bounce


The market is officially on day 1 of a bounce.  In 2016 markets, an upside move that lasts more than a few hours is an event to note.  Despite meticulous research over the weekend, I picked the slowest horse in the race–the Dow Jones, which is up a mere 20 basis points as we head into the close.

Last year I eliminated picking stocks to trade, opting instead to focus on futures trading and investing.  Now I am entertaining the idea of using Motif to go long all four indices when I want to take a position trade.

The best methods are the simplest.  Simplicity is durable.

The bounce is mature in bear market terms, but perhaps my lenses have been fogged by the harsh conditions and the bounce is still young and the Dow can rise to outperform the others.

You can see all my weekend research for free these next five days if you take us up on the free trials we are offering for Exodus.  Just sign up, no credit card required, then go inside and click the Strategy Session.  Here’s the trial link:

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The ‘Risk On’ Push


For the fourth time this year we are seeing a hard buy rotation push into the market. Tracking these strong responsive bids is important, because they represent times when the higher time frame steps in and buys this toxic market.

The third such instance occurred last Wednesday afternoon.  Those bids were steamrolled.  The first major up rotation earlier this year suffered the same fate, but the second rotation resulted in a multi-day rip.  I did a crass write up on the matter.   It appears all my charm was burned off while standing too close to the sun.

There were signs of impending buy opportunity over the weekend as well.  The New York Times wrote a, “kill the bankers” piece:

The hard rally is a key feature to today’s market.  The mechanics of investing have changed.  Tactical asset allocation is now commonplace for money managers, and with one mouse click they push their clients into risk.  This was one of the topics discussed during the second annual iBC Investor Conference.  Bulls are looking for the cliche turnaround Tuesday–let’s see if it sticks.

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Welcome To The Year of The Monkey


This week is an opportunity for the USA to trade without the incessant nagging of a crumbing Chinese stocked market.  Instead they will keep their market closed all week as the celebrate the year of the monkey.

I have expectations, and I have laid them out inside the Exodus Strategy Session.  I channeled the clairvoyance one can only achieve from well over 10,000 vertical feet before the sun rises.

After the index model nailed the come out for February, I plan to take it easy into week two.  Monday will have investors groggy after their Super Bowl celebrations and this is a weird month, a leap year.  No sense forcing anything.


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The Dow Jones Will Save Us


Two weeks running the Dow Jones has been a bastion of hope in an otherwise grim market.  The index is fortified with steel and brawn and men of industry, not software nerds selling software designed to sell software.  It is these men and their industry that will lead us out of the trenches and onto the offensive.

Look for physical industries like Machine Tools and Industrial Equipment to lead on the next bounce.  I will only invest in companies servicing the United States, the only industrious nation that can hold its water when the going gets tough.

Investors are spooked.  We have generational uncertainly in politics, the Chinese and other fake capitalist nations risk breaking their currencies, and oil is back to being a cheap sludge much to the chagrin of resource cursed Arabian nations.

The Utilities sector is up nearly 8% year-to-date.  Certain REITs are doing well.  Walmart, telecommunication, etc.  If American social media companies are worth 30-40% less than we perceived them last month then Chinese social media stocks are damn near useless.

If you are itching to increase your equity exposure next week, look to the Dow Jones and its core components.  Investors having been hiding out there.  Conversely, they may be next to meet the guillotine if we decidedly turn lower.  But at least for the next 5 market days, my data is optimistic.

More tomorrow after I complete the Exodus Strategy Session which was all over last week’s action.

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The @IndexModel Lays Waste To Its Mortal Enemies


The market is being dismantled despite the bullish fund flows often in play when a new month starts on a Monday.  The downward price action marks a decisive victory for my index model, a working strategy inside the Exodus Strategy Session.

Rose Colored Sunglasses [RCS] triggered its first 2016 short signal on Sunday, and its cold stats were paired with a bit of contextual mojo to formulate my predictions heading into the week.  This post is not bringing your attention to this victory so I can pat myself on the back, but instead to demonstrate that the market continues to be methodical and compliant with auction theory–the only viable theory for consistently approaching this market with poise and objectivity.

What is the market likely to do from here?  Well the NASDAQ is trying to lead lower, but the other indices aren’t cooperating.  This is a classic Option Addict risk divergence.  Heck, I bet he is considering a long /NQ trade any minute now, if I had to guess.

I will not participate in such trades.  Instead I will wait for tomorrow when I will be in the smog infested air surrounding L.A.  If at that time I see fit to procure equity exposure, I will do so via the QQQs.

In the meantime, chalk up another win for the good guys.

Want to see more?  Here’s an expert from last Sunday’s Exodus Strategy Session:

Bias Model: Rose Colored Sunglasses Short Bias

After two weeks of neutrality, the model has a short bias heading into the new month. I am hesitant to initiate new shorts, especially early in the week, due to the seasonality of a new month starting on Monday. However, by Wednesday I will be looking for a potential position short into the end of the week.

Here is the current spread:


Want even MOAR?  Here is the ‘Thesis for The Week’ from Sunday’s Strategy Session, an executive summary for those too busy to read the entire report:

Buyers continue working higher Monday based off last Friday’s strength.  A gap up Wednesday is reversed and we spend the rest of the week trading lower with the Non-farm Payroll data Friday accelerating the selling into early Friday before the week finishes with quiet, two-way balanced trade.


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NASDAQ Futures Green After Big Overnight Session


NASDAQ futures are coming into Wednesday positive after a Globex session featuring extreme range and volume.  Price worked down below the Tuesday low before reversing around midnight.  Since then price traded up to the session mid from yesterday.  At 7am MBA Mortgage Applications came in way below expectations and at 8:15am the ADP Employment Change was better than expected.

Also on the economic calendar today we have ISM Non-Manufacturing at 10am and crude oil inventories at 10:30am.

Yesterday we printed a double distribution trend day down.  This day-type carries the second most directional conviction.  Therefore, opening gap up is likely to surprise a few participants.

Heading into today my primary expectation is for sellers to work into the overnight inventory to close the gap down to 4191.25.  From there look for a move to test4173.50 before responsive buyers step in and two way trade ensues.

Hypo 2 buyers work up from the gap and trade up to 4224.25.  Look for responsive sellers here and two way trade to ensue north of 4173.75.

Hypo 3 sellers accelerate down through the gap fill at 4191.25 and sustain trade below 4173.75 setting up a test below overnight low 4175.25.  Look for responsive buyers around 4147.

Hypo 4 strong buying drives up through 4224.25 and moves to target 4247 before two way trade ensues.



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Down in The Slip Zone


NASDAQ is pushing down into the single prints from last Friday.  In theory, not much information has changed since Friday morning, but what has?

Don Trump took the #2 slot in the IOWA caucus without using nearly as many resources as the other candidates.  Trump wants to kill Wall Street.

Alphabet became the biggest company in the world.  Therefore the internet surpassed the gadgetry that takes you to the internet.  Some call it a paradigm shift.  I call google The Leader.

That’s about it.  Everything else is the same, so buyers ought to act the same down here, yes?  Behaving with the same tenacity and vigor they sported Friday morning?

Perhaps, but these single prints, once reclaimed, tend to be thoroughly examined once we spend time inside them.

Therefore, if buyers do not show up ASAP, we are likely to close on the lows, bros.

Over the weekend Rose Colored Sunglasses triggered, a working short bias generated by my index model inside Exodus.  The week is young, but the model nudged toward taking home the victory this week.  It took the ‘IOWA caucus’ victory already in the Russell (a risk-off divergence) but I will not consider it a proper victory until (and only if) the NASDAQ tags 4147.

Here is the slip zone I am going on about:


Stay sharp.  February is starting to act a lot like January.

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Sellers Cut into The First Night of February Trade


NASDAQ futures are lower heading into Tuesday after an overnight session featuring extreme range on elevated volume.  Price spent most of the session working lower but sellers were contained ahead of the Monday low.

On the economic calendar today we have a 4- and 52-week T-Bill auction at 11:30am.

Yesterday we came into the week gap down and after very briefly exceeding overnight low price worked higher to close the overnight gap.  From there we continued higher up through overnight high.  The afternoon also saw a rally.  Yesterday afternoon, just after closing bell price spiked higher on strong earnings from Alphabet. The rip was faded by sellers to form a distinct excess high on the session.

Heading into today my primary expectation is for buyers to work into the overnight inventory but struggle to fill the gap.  Instead sellers stall out around 4268.  From here we work lower to take out overnight low 4234.25 before two way trade ensues.

Hypo 2 buyers work up though 4268 and sustain trade above it.  Look for buyers to target 4277.  Buyers struggle to get up through 4282.50 but eventually do a full gap fill up to 4289.50.  From here buyers are likely to take out overnight high 4293.25.  Look for responsive sellers ahead of yesterday session high 4309.25 and two way trade ensues.

Hypo 3 sellers push off the open and take out overnight low 4234.25.  Unable to recapture 4242, the market continues lower to target 4215.50 before two way trade ensues.

Hypo 4 strong buyers drive higher off the open and close the overnight gap up to 4289.50.  They take out yesterday high print 4309.25 and we trend higher to target 4330.



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