Day Two of The Vanishing Morning Seller

For the second time in as many days there was an aggressive seller at the open in the NASDAQ Composite futures who simply vanished at the first sign of rotation higher.

This is a strange occurrence as the opening swing had seller control written all over it.  Then before you even have time to make lunch plans, the sell flow dries up, dippers lurch back in, and boom, we’re off the lows.

We’re back in yesterday’s value and buyers are in the driver’s seat until further notice.

Trade accordingly.

Buyers could not hold on to their afternoon progress overnight when sell flow came in and effectively erased the gains.  The market began to stabilize early this morning but looks vulnerable to another rotation lower.

We are in the process of establishing value on the indices as we work though earnings season and this week’s Twitter IPO.  They busy calendar has done little to the prices on the Nasdaq and S&P index thus far, but that is likely to change as the week presses on.

With that in mind, I like to define the edges of the field or price levels which would tell me we are transitioning out of value and into vertical discovery.  I have highlighted these levels below on the following S&P RTH Market Profile Chart.  I used the Nasdaq 24-hour chart to envision a few scenarios on the day because the S&P 24-hour chart is very fragmented:

The sellers had market control in sight this morning.  They came into the open of /NQ and drove price lower.  They dictated direction with ease, pressing on the buckling bids.

Then they abated a bit.

Then when they tried again to push, their ranks were too weak, and the market began gliding higher, riding the tidal movements of money flow.

Seriously though, being constructive on the short side when momentum stud muffins like SCTY, TSLA, WLT, DDD, and more are off to the races is like wishing Friends was still on the television. I hate you.

I feel underexposed again.  I should not have sold AMBA.  That was a cowardice move and I want my shares back.  WELL HOLD ON.  Alright I bought my AMBA back.  I am writing this live.

Scalping in the /NQ has been very good to me today even though the market is stoopid [sic] and quiet.

Chicken is on the come up.  PPC has plenty of seasonality gas left in the tank and I intend to capture it, FTW.  Arise chicken, arise.

Walter grabbed the golden ring today and I scaled off some profits, naturally.  I still hold a gentleman’s stake in the company.

As I write, we are squeezing into the bell.  Also, very naturally.  Value failed to migrate lower.  Sellers failed to take advantage of their early mover status.  The bulls smell weakness, just like real bulls, and they are pressing their hooves into the beguiled shorts.

Hell, I was starting to become a believer with my 25% cash.

Now I am in a more comfortable 15% CASH for the great dash into equities.  People want these stocks and the market is about to snatch the limelight with the TWTR IPO.

Unlike the gluttonous majority of my peers who spent the weekend rooting for their stupid alma maters and their U.S. football teams, I was holed away in my command center heavily researching the LED industry.  The opportunity is too big to ignore, and if you are not adding exposure to this space via investment friend, you too are a glut.  This opportunity is magnanimous because the opportunity is so widespread.  That means even a team of clowns can make a fortune.  That’s why I still keep size in RVLT.

I added VECO to my LED longs today.  Their forecast for the upcoming quarter was rather dire because they are dumb.  They don’t realize that demand is about to rip the tits upward.  Knowing their own industry and company better than they do, I bought their shares today for thirty two dollars and twenty nine cents.

Naturally, I will retrace my steps and pair down long exposure if the sellers press recent lows successfully.  But until then get ahold of some hot stocks and then occupy your hands with food and tobacco.

The stock index futures were strong during the entire globex session which spans from Sunday evening 6pm to the opening bell at 9:30am.  The action thus far has pressed the /ES futures (the contract tracking the S&P 500) six handles above Friday’s closing price of 1754.50.

Long-term, we are still in an environment where the buyers are in control of the auction.  This can be seen on daily bar charts as a series of higher highs and higher lows.  We can view this longer term control in Market Profile by observing the continued migration of value (or volume-at-price) higher.

Last week, we began seeing signs of an active seller who managed to gain a foothold in the action and press value lower four sequential times.  However, late into Friday’s session we saw dip buyers on the scene who regained control late in the day.

The key upside level I will be watching today to gauge whether the bulls have regained control of the short-term auction is 1766.50.  If we can sustain price above or tightly below this reference point we can hypothesize the buyers have gained control of the short-term auction.

The current conditions can be summarized as follows:

Long-term control: buyers

Short-term control: sellers

Overnight-control: buyers

I have highlighted the key price levels I will be monitoring to gauge intraday progress by the auction on the following market profile charts as we as a few scenarios to envision as the day progresses:

My Halloween was a rather non-event.  A few children came to my door demanding tricks or treats and I drank one mug of cider and rum.  It took a while to unwind yesterday’s action.  I played it though my head a few times, remembering the subtle moments when the market gave me a little wink.

Then today came.  I anticipated sell flow on the S&P which led me to offer three scenarios that emphasized sellers.  But I never felt confident on the short side intraday.  The moves were too unorthodox according to my practice, and I could tell I was out of my element (Extra Donny).

Come 11am I started selling down my long exposure a bit.  I trimmed where I could selling parts of my LO, GOGO, and BALT.  Something about the AMBA bounce did not sit well with me so I scratched this position entirely.  I know flip-flopping can frustrate spectators, but some of these positions require confirmation for me to stick around.  AMBA stalled and after I gave my book a hard look AMBA stood out.  I still like the stock.

My two largest positions now are PPC and WLT.  This is completely unacceptable.  A young gent like me should not have size in stupid chicken and coal interests.  That is plain vanilla dumb.  I want my size in places like GOGO and Zillow and FaceBook.  You know, new companies.

Fortunately I have these TSLA shares.  I was so excited to finally own TSLA shares that I exclaimed the news to friends.  I have no idea what has me so god damned excited to own TSLA shares.  Of all the positions we go through on a weekly basis, I have never excitedly told friends about any.  That being said, I should probably just sell the stock now because I am way to enthusiastic about it.

I boosted cash up to 25% into the weekend because I am sticking with the theme that a large seller is at work in the S&P futures market.  Until that seller slips up and loses control, I am keeping some cash to buy up your margin liquidations.  Individual stocks are still working though, much to my dip buying chagrin.  October did not have a “day of terror” where everything goes on sale.

May November bring a solid day of terror, saluti

I am calling it like I see it.  I reduced my long exposure by scaling profits in many names:

We are coming into the first of the month, a Friday, the day after Halloween, with the long-term picture of an auction controlled by the buyers.  The sellers have recently stepped up and have been absorbing aggressive buying more successful then we have seen in a while and they made an aggressive push into the bell yesterday.

The sellers have an opportunity to sustain their foothold today.  The overnight action stayed below the low volume node at 1756 signaling little has changed to the level of conviction the sellers possess.

Early on the 1756 level is in play and is my early tell of sentiment.

The overall picture of the S&P looks fragile both on the upside and lower therefore I am keeping an open mind.  I have presented a few scenarios to guide my vision on how today may print and also highlighted key price zones on the following market profile charts:

I love days like this.  A general observer of the markets may pull up a chart of the $COMPQ and surmise the day was a nonevent.  But inside the matrix, there was money flowing all over the place and often with strong currents.  Another month in the books October is, and everyone wants needs to be right into year-end.

It was an exciting day for me because the market offered many opportunities to exhibit my swagger during the iBankCoin open house.  If you tuned in to the 12631 chat room today I have to be honest and tell you I don’t always make so many moves and today was certainly an exception to the norm.

The day started off on the wrong foot because the pitter patter of rain kept me sleeping too long.  I arrived at my office and jogged to my desk only minutes before the opening bell.  My morning work had me wanting a short and I had my offer in the market right as the bell rang.  I caught a quick move lower in the /NQ, then a long, then another short.   All were winners.  I may have said this before gents but last night I had a massive epiphany in futures trading.  Suffice to say, it is a post for another day.

I sold my SLW very early.  I should have followed @chessNwine’s cues I suppose, but I march to my own drum and thought it had upside potential still.  The morning gap lower made it clear I was wrong.  I cut the loss early, and I am glad I did because it continued to slide all day long.

I scaled off some GOGO on the morning rip too but it is still my largest position.  I WAS huge long (15%) yesterday because I knew I wanted to be full size into the weekend, but that I should be scaling some profits at this logical level.  This adding then trimming is a new process I have been refining.  I did the same to ONVO last week.

The dynamic surge in buying activity around 11am piqued my interest and I wanted to get my cash position to work as early as possible to take advantage of potential new money flows entering the market tomorrow aka mutual fund Friday as Option Addict calls it.  Last night I created a metaphorical drug reference which explained why I sold SCTY and would be buying TSLA.  Did you catch it?  I bought TSLA first.

Then I bought all of my PPC shares back, lol.  I could not ride into earnings and I fully accept missing 2% of the upside because this stock is going to run all the way to the New Year.   Top pick #timestamp that.

I bought BALT.  Many a good trader have strong conviction in this name so I consider these discounted prices a gift to ride their coattails with reduced risk.  Also it came into my favorite ema, the 99, and made the turn.  That’s my honey hole.  This took my cash down to 5 percent.

I would have stayed put, but I saw the indices developing a bit of excess supply.  Before too long the sellers were pushing very hard on the tape and I had to respect the action so I scaled my ONVO position down to half size.  I gave my entire book a hard look and wasn’t able to sell anything else.  I need charts to prove me wrong or hit targets otherwise action is futile.

Net-net, I made a few bucks so far this week but nothing to write home about.

This brought my cash up to 10 percent into the bell and now it is time to celebrate Halloween by consuming exorbitant amounts of cider and Appleton’s rum while watching scary movies and passing out eCigarettes to the neighborhood bastards who toilet papered my trees last night.

Happy Halloween folks!

The sellers gained control of the day session yesterday when they successfully pressed lower in the afternoon.  However you can see the lack of conviction from the sellers at this juncture because again the lower prices attracted dip buyers who returned price back up near the mean of trade by the closing bell.

The sell flow returned during the evening yesterday before again being met by dip buyers who have returned price back to yesterday’s closing print.

This action is a product of the long-term characteristics favoring the buy side.  I have highlighted a resistance cluster from 1762.50 – 1760.75 that the sellers need to defend early on to sustain the foothold they established yesterday.

I have sketched out a few possible scenarios on the day also.  These are really just visions of how these incomplete profiles will fill out into nice, Gaussian distributions:

Ladies, gentlemen, please…allow me a moment to address the market.

You may not make it down to the Raul blog often, but I reside rather gingerly on the front page of iBankCoin.  I know that my continued existence in these hallowed halls amongst the finest strangers the internet has to offer depends on one very important matter: banking coin at criminal rates.

After exhibiting complacency two weeks ago Friday I have been on the receiving end of a severe bludgeoning via shares of PPC due to a salmonella scare.  I regret to inform you I was forced out of this position today and took a large loss.  Let’s talk about large losses.

This was a ten percent position and I stopped out at twelve and a half percent.  Math:

0.1*0.12=0.012

I lost 1.2% of my account value.  Part of me wanted to ride the stock into earnings for the glory.  I envisioned myself riding into town on a chicken-drawn chariot with plebs laying olive branches on the street.  Upon reaching to town square I would be handed the ceremonial staff to perform a blessing of the populares, restoring balance to the social classes.

But in a rather stoic manner I cut the shares loose.  Because the truth is public perception is fickle.  Many of you are simple, as am I, and lack the resources or time to give a company a full fundamental shake.  I know inputs to making chicken meat are down across the board, but so does anyone else who analysis this company.  Elon Musk set a new standard with his quick assessment and public response to the Model S fire and now I expect the same from all companies.  I get Old Wall Street silence instead.  So PPC and its shareholders can go fly a kite for all I care and I’m back in the sewers, hungry as ever.

I cut LEDS too.  Perhaps the critics were fiddling with their catalytic converters when I scaled 10% profits one day into my campaign.  That would justify tossing tomatoes in my direction when I cut my net position for a scratch.

Finally, I cut SCTY.  Let’s say you love bath salts but all you can find on sale is old fashioned Mexican speedball.  You decide something is better than nothing and in your constant urge for instant gratification you gobble like ten Mexican speedballs.  But since you want that bath-salt-bug-eyed rage fueling your body while you chew arms off hobos, you find the speed only providing an uneasy feeling in the pit of your stomach.  That’s why I cut SCTY for a 3.4% loss.

My final move was buying a modest allotment of AMBA shares.  Morgan Stanly flip flops and the investment community dumps Ambarella?  GMAFB.  Well actually, you did give me a break because this was an opportunity to get back on board stock in a great company.  I liked it at 22, why wouldn’t I love it at 20?  I am a buyer of further weakness.

Now I have 22% cash power to buy some blood and a stable of stocks fit for an entrepreneur.  Largest-to-smallest friends, largest-to-smallest like always:

GOGO (huge), LO (+15% what?), ONVO, WLT (Walter), RVLT (a love/hate), AMBA (SAIL!), SFM, CREE, SLW, F, FXY, IMMR, MJNA, and the big O

That is a hot look.  I like this basket of stocks.  I have a few names I want to add to the pot to get back to full long exposure but I am content to ride into tomorrow’s spooky trade with some cashish. The Fly’s ALJ has the look, FB is making ATH after hours, and YELP is at a slight discount.

FINALLY: YOU SHOULD COME INSIDE 12631.  There is a free trial tomorrow and Friday ONLY.  I do my best work in there with little-to-no shenanigans.  I would love to see some of my twitter buddies in there.  The password for the free trial will be released at midnight, so you vampires can come inside tonight and kick some ideas around and us normal folk will see you bright and early.

http://youtu.be/c-P5GpkPrk4