Indexmodel is calling for the short, via Rose Colored Sunglasses. Stocklabs is somewhere between a few oversold cycles and last week we had about as textbook a Bunker Buster as one can hope to expect.
With all these signalled crossed, and the way January sloppily ends on Monday, making us suffer through this wretched month for another business day, well chaps I am inclined to step aside.
I want to impart a bit of wisdom to my dear reader today. Work is about purpose. Without purpose or goals or whatever there will be a million distractions and then there is the toxic mentality of greed. More for the sake of more.
My needs are simple—to live in a progressive community full of smoking hot babes. A town with a thriving techno scene and quality bath houses. Good, nutritious food. Health for ma familia. That’s it.
I’ve earned enough to satisfy these needs indefinitely, even if I never worked another day in my life.
I’m the captain now. Now that there is no need to work I can pursue the sweet life and I shall. Speaking of, I shall make my way west later this week to enjoy some reprieve from the mundane grey streets of Detroit in exchange for a nice ski chalet up near Lake Tahoe.
With that in mind, and the way signaled are crossed, my time these next few days will be best spent getting my affairs in order. This will likely keep me out of trouble—because if I was hellbent on trading this tape next week I would be working the short side aggressively, and who know? That might be painful.
I know I haven’t really worked yet this year. I will work again soon. I figure, two months without work is a minor break. So hopefully I will find some clarity in the mountains and then come back to work.
Maybe I won’t. We don’t know.
But February has always been good to me when I don’t force opportunity. IPAs and PBJs for breakfast. Reefer and snowsports all day. Hootch and fish meat for dinner by a nice fire. Let the accounts do their things and ride into quarter end a champion.
But as always, who knows this year. This is Jim Biden’s america, a much healthier place with much less chaos and white trashedness. That chaos was pure gold for me. Now that democracy has won and the idiots have been run out of all major city centers. There is a peaceful unease amongst the people who buy stocks and other risk assets.
So we don’t know.
I hope you’ve learned something valuable from these musings. Risk assets have made men’s fortunes long before we existed and they will continue doing so long after we’re gone. So find some nice boobs and hot baths and mountains from time-to-time, or whatever sends you into a state of bliss. Then bring that energy back to the game.
Seh la,
Raul Santos, January 30th, 2022
And now the 374th edition of Strategy Session. Programming note—I will not be producing a strategy session next weekend.
Stocklabs Strategy Session: 01/31/22 – 02/04/22
I. Executive Summary
Raul’s bias score 2.98, neutral*. Expect a choppy week. Perhaps a rally through Monday then selling pressure through Tuesday. Then watch for Alphabet earnings Tuesday after the bell to provide direction to the overall tape.
Meta reports Wednesday and Amazon Thursday, both after the bell. Then non-farm payroll could provide direction into the weekend.
*Index Model signaled Rose Colored Sunglasses (bearish), see Section V.
II. RECAP OF THE ACTION
Gap down and heavy selling Monday morning, eventually formed a sharp excess low and rallied into the close. The rest of the week was choppy but ultimately resolved higher with a Friday rally.
The last week performance of each major index is shown below:
Rotational Report:
Tech out in front last week. Bulls would ideally like to see Discretionary alongside Tech, but overall decently healthy rotations.
slightly bullish
For the week, the performance of each sector can be seen below:
Concentrated Money Flows:
The selling skews over the last eleven weeks have been dominated by sellers. Sellers skewed the ledger again last week. None of the industries on the positive side of the ledger are much use in swaying the overall market.
slightly bearish
Here are this week’s results:
III. Stocklabs ACADEMY
Signals are crossed again
Sometimes this happens. Signals start to be conflicting and the environment really is not where I trade best. Everyone’s style is different, but my strategy is to stack as many favorable statistics as possible before I engage.
There will always be another trade. The markets were here long before us and will continue on well after we’re gone. I am content to avoid the tape next week.
Note: The next two sections are auction theory.
What is The Market Trying To Do?
Week ended searching for sellers
IV. THE WEEK AHEAD
What is The Market Likely To Do from Here?
Weekly forecast:
Expect a choppy week. Perhaps a rally through Monday then selling pressure through Tuesday. Then watch for Alphabet earnings Tuesday after the bell to provide direction to the overall tape.
Meta reports Wednesday and Amazon Thursday, both after the bell. Then non-farm payroll could provide direction into the weekend.
Bias Book:
Here are the bias trades and price levels for this week:
Here are last week’s bias trade results:
Bias Book Performance [11/17/2014-Present]:
Some potential failed auctions the other way
Markets fluctuate between two states—balance and discovery. Discovery is an explosive directional move and can last for months. In theory, the longer the compression leading up to a break in balance, the more order flow energy to push the discovery phase.
Market are most often in balance.
Every week this newsletter uses auction theory to monitor three instruments, the Nasdaq Transportation Index, PHLX Semiconductor Index and ethereum. Readers are encouraged to apply these techniques to all markets.
Transports still appear to be in discovery down but if you look back to July 15th you can see we exceeded the recent swing low only to sharply reverse. This could be a bullish set-up, a failed auction.
See below:
Semiconductors have that old failed auction above and potentially printed a failed auction below. Buyers will need to confirm this set-up by making a strong move higher.
Ether for another week still has the discovery down look.
V. INDEX MODEL
Bias model is Rose Colored Sunglasses bearish into this sloppy Monday month-end. We were Bunker Buster last report. This is the second Bunker Buster in recent history, with the previous one being nine reports back. The Bunker Buster before these recent two was forty seven weeks ago.
Rose colored sunglasses calls for sellers to pressure the tape lower.
Here is the current spread:
VI. 3 month Hybrid Oversold
On Thursday, January 13th Stocklabs went hybrid oversold on the 3-month algo. This is a bullish cycle that ended Friday, January 28th end-of-day. Here is the final performance of each major index:
VII. 12 month Hybrid Oversold
On Thursday, January 20th Stocklabs went hybrid oversold on the 12-month algo. This is a 10 day bullish cycle that ended Thursday, February 3rd end-of-day. Here is the performance of each major index so far:
VIII. QUOTE OF THE WEEK:
“A proud man is always looking down on things and people; and, of course, as long as you are looking down, you cannot see something that is above you.” – C.S. Lewis
Trade simple, with humility and kindness
If you enjoy the content at iBankCoin, please follow us on Twitter