I never know if any of you are paying attention so very quickly let me update my stance on equities from a long term perspective down to intra-day oscillation.  I believe we are entering a period of economic prosperity the likes of which no living human has ever seen.  A throwback to the roaring ’20s, only this time the drivers are semiconductors and AI.  As nation-states and religions continue to lose their grip to science and the internet, I expect this expansionary period to be longer than anyone can reasonably fathom.  We will likely never see another recession in my mortal life (current age: 34).

That stated, the equity complex will succumb to intermediate term corrections.  There is only one way of forecasting these events and that is by interpreting years-and-years of raw stock market data—interactions between buyer and sellers of all rank.  This data tells a story and from it we can build probabilities.  These probabilities are our most objective method of taking action without being selfish or arrogant.

There are very few stocks worth owning, ever, even if you’re just a ‘trader’.  Stocks should only be bought with a 10-20 year intended holding period and to own a share of a corporation that long is the closest thing to faith any living human should ever subject themselves to.  Tesla is a cult.  It just so happens to have the sexiest and most confident Leader in the world and a mission that The People Who Matter believe in.  This is an important concept—The People Who Matter.  These are people who actually have money to invest into long-term strategies.  They have real wealth and can deploy it for a cause.  Think Bill and Melinda Gates.

These are people who can read reports on the climate and mortality and other things and make rational, objective decisions based off of them.  Then, armed with scientific facts, they go about using their resources to effect change.

These people, like most humans, tend to fear death the most.  Therefore they invest in ways to thwart death, both biologically (CRISPR) and species-wide (SpaceX, Tesla, and so on).  They like their rich life and aren’t ready to abandon it for the ethereal plane.  They don’t run out of money and they always need places to invest, even if (shocker) the equity markets are in a correction.

Even if the United States is losing world dominance to China and their one party political system.  Even if fiat currency, The Grande Illusion, is starting to fail.

Our job as ruthless speculators, profiteers of the highest rank, is to take advantage of any and all situations.  To seek out shipwrecks and pick up the flotsam and sell it.  To be ahead of herd migrations, to set up kiosks that sell important wares at a nice profit margin.  To borrow things, sell them, then buy them back cheaper in a few days.

The most effective way to do these activities successfully is with a set of tools that short-circuit the human ego, allowing us to consistently do our job with as little personal offense or self-aggrandizement as possible.  My set of tools is signalling bearish for the second week in row.

The other data I take into consideration every Sunday is not as clearly bearish as it was last Sunday.  Last Sunday the deck was fully stacked in the favor of the bears.  This week, not quite as much.  But two bear signals in a row, that is not common, so I got to looking back at other repeating occurrences.

My data set only has one—back on July 30th, 2017.  Dust off your charts and peer back to then, and you will see we entered a two-month-long-time-based correction.  Basically we marked time, in a tight range, across the entire equity complex.

Now a lesser interpreter of data would take this observation and run with it, decreeing from far and wide that the next correction is neigh!  But your old pal RAUL doesn’t carelessly write such predictions with a data set of one.  I need at least 50 samples before considering something to be statistically significant.

Nevertheless, the price action on the PHLX semiconductor index is troubling.  And if you recall, a few hundred words up I noted that our entire rally is predicated on semiconductors.  So this requires our attention.  IOTS screwed the pooch two weeks back, last week it was MU.  There is a downside gap that we are accelerating down into and that selling is likely to continue.

Therefore I will set out early next week to establish a short position trade against the NASDAQ via SQQQ.  I will also be only working the short side of the tape via NASDAQ futures.  That means shorting gap ups inside the prior days range, ‘going with’ crosses down through the daily mid as long as an overnight or initial balance stat is in play, and shorting the levels highlighted during the morning trading reports.

One of my key cues throughout the week, as to whether I should continue working the short side is NVDA.  I watch that ticker like a hawk.  I also bear in mind where were are trading relative to the weekly ATR band, on both the Russell and the NASDAQ.

So there you have it.  Long-term bullish on tech and bearish on nations and fiat, short term bearish on equities with a laser focus on semiconductors.

That’s all I’ve got.

Raul Santos, September 29th, 2019

Exodus members, the 254th edition of Strategy Session is live, go check it out!

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I don’t deal in geopolitical, fiscal policy or sensational narratives behind stock market moves.  I digest a bunch of raw data every Sunday in form of price and volume—and not just volume at a specific time—where it occurs and what it accomplishes.  Then I dig down into the internals, update my charts on a few key sub-indexes, review the big news from last week and how the market reacted, see which public companies rocketed or tanked on earnings or other news and then finally I add in a layer of sentiment.  Add all that up, and I am bearish heading into next week.  These are a few of the most pertinent details regarding my bearish call heading into the week.

IndexModel, my auction theory model, signaled Rose Colored Sunglasses, the only bearish signal it generates.  Other recent signals were August 11th and June 16th, and going back to 2015 the hit rate on this signal is high.  So when I write a blog title that says “high probability” it is actually backed by a data set that is measured and tracked.  Not just some careless tweet.

The PHLX semiconductor index printed a failed auction last week.  Here is a picture of what I mean:

Most of you jokers don’t pay attention to my work, but the upside down version of the failed auction above happened on the NASDAQ Transportation index at the beginning of September and was what precluded the rally.  This was my note on September 1st:

Since this week’s failed auction is on the semiconductor index, and since semiconductors are the key driver of the entire stock market rally since 2016, the situation deserves a bit more attention.

Thirdly, the current picture of the NASDAQ transportation index is rather bearish also.  Looks like an island top:

Fourthly, last week saw investors rotate into UTILITIES, the most risk-averse sector in the financial ecosystem.  The only other strength last week was seen in low quality sectors.  Meanwhile consumer discretionary was weak.  BIG RED FLAG:

If you drill down into the industry-by-industry performance from last week, the picture becomes more clear.  Key industry groups saw significant outflows last week:

The third move after the Fed rate decision was down.  That had me leaning bearish Wednesday and as you might imagine, I had to tuck and run when then powerful rally blew through late Wednesday.  I was on the road for business the rest of the week, but sure enough, sellers worked us back down to the weekly low.  I am talking NASDAQ prices.  Sellers took control of the tape.

Finally, I listen to other traders, the real OGs and otherwise, through a variety of methods—-Twitter, newsletters, internet videos, and so on.  Coming into the week I picked up on a tone of arrogance, borderline hubris.  My mentor always like to say though, which drives me nuts, “if you see it, you be it.” I know what it looks like because it is inside of me too.  And usually the market whips me back into obedience.

So there you have it, my bearish thesis over the next five days.  It’s an uncomfortable call with markets near record highs and the Fed LOWERING interest rates, which disgusts me.  Maybe some news bit or Presidential tweet will come to my bearish aide, or not, or the opposite.  I have no idea and anyone who claims to is a liar.

My plan is to establish a position short via SQQQ at some point early next week and ride the position through late Friday. I will also only be working the short-side of the NASDAQ 100 tape, intraday, fading overnight gap ups, “going with” downward crosses of the daily mid point if I have an open overnight or range extension stat, and selling into any rallies into the key price levels highlighted during the morning trading reports.

Nothing fancy.  It’s all quite simple actually, and wholly independent of any world happenings.  Do you know how satisfying it is?  To love thy discipline and let it support me?  Making my way through the world, no one’s master and no one’s slave?

Really nice.

Raul Santos, September 22nd, 2019

Exodus members, I basically outlined this Sunday’s Strategy Session above, but there are more details in the report, which is live now.  Go check it out!

 

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Your first distraction was served up just before market open—Caterpillar earnings didn’t live up to analyst expectations and the algos spiked the indices lower on the announcement.  The company is still making [literally] billions of dollars.  Here are the facts so you can read them and then shelf them as noise:

Caterpillar Q4 Adj. EPS $2.55 Misses $2.99 Estimate, Sales $14.3B Miss $14.33B Estimate

Caterpillar (NYSE:CAT) reported quarterly earnings of $2.55 per share which missed the analyst consensus estimate of $2.99 by 14.72 percent. This is a 18.06 percent increase over earnings of $2.16 per share from the same period last year. The company reported quarterly sales of $14.3 billion which missed the analyst consensus estimate of $14.33 billion by 0.21 percent. This is a 10.89 percent increase over sales of $12.896 billion the same period last year.

You know what to watch, the PHLX semiconductor index.  It is already recovering intra-day.  For more insight turn your attention to NASDAQ 100 market profile.  It is catching a bid at logical support:

I’m not going to remind you all week what matters.  I share my morning report, that’s it.  The rest was written Sunday.  The industry is designed to confuse you so you forfeit control of your wealth to some daft but handsome fund manager.  Or you can tune out the bullshit, the Howard Schultz running for president angst, and focus on the SOX.X.

Your choice.

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Sometimes you look back and wonder how your mind was so wrapped up in the minutia that you missed an obvious cue.  Sure, my trading and investing is grounded in solid routine and habit.  Yes, I would never take a single trade unless I completed my Sunday research, formed a morning trading plan, and then received an algorithmic entry signal from MOTHERSHIP.  We should have healthy routines for approaching something as important and big as trading index futures, but we run the risk of being so caught up in all of that intellectual work that we miss a not-so-subtle wink from the universe.

Listen to me, did you see that little dog nearly split asunder by the giant fucking longhorn bull last week during an American football match?  That is everything you need to know going into next week.  A pathetic little dog that needs its skin folds regularly cleaned with q-tips, and its butt hole wiped after every poop, was nearly killed on national teevee by a big, healthy Texas long-dicked bull.

The resources wielded by short sellers are very much the size of that dog in relation to the money coming into the stock market every American pay period.

While this weekend has been difficult, and I nearly didn’t make it to my desk to file the Sunday research due to my time being in high demand, I checked in and filed my latest Exodus Strategy Session.  It has all sorts of reasons to be bullish, and it has a plan of attack for the first full week of 2019, but it should be suffice for all readers of this public blog to know that a bullish omen has been sent.

Position accordingly.

ciao

Exodus members, the 216th edition of Strategy Session was late to post, but it is live.  We have an interesting dialogue going in Section III that takes all the recent signals IndexModel has been generating and gives them words.  Be sure to read through how I’ve been navigating this market trough, and what I expect next.

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I made my Q1 motif allocations before quarter-end, and bought a TQQQ position end-of-day that I will hold for no less than 4 and a half trading days (X-mas eve half day).

If the same insomnia that had me awake at 5am grabs me again this evening, I’ll elaborate.

Until then, enjoy my horribly timed tweet from just before lunchtime:

we about to have a Thanksgiving, Hanukkah, and Christmas rally #hallelujah

— RAUL (@IndexModel) December 17, 2018

Quick shout out to my trading plan for putting me on the sidelines before this $4000/contract unidirectional move in $nq_f could blow me up #grateful.

Hope you guys are doing okay out there.  Feel free to leave comments in the hotline below.  We’re all in these battle trenches together.  Even the traders on the right side of this move have much to process.

#developing

I probably look like a mad man, but I do think we could be at or quite near the bottom of the trough (hole? bottomless pit?) we’ve worked down into.

I will be cleaning Mothership for the next five hours, perhaps even tackling a major appliance scrub down.  Cleaning like I just killed someone is a drawdown habit I formed over the years, for better-or-worse.  Next comes the thickets of sage and chants.  I probably look like a mad man.

#tbd

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Last week I mentioned in the comments that I would do a post describing why I rely on IndexModel for directional bias instead of a coin toss.  I did not forget.  I will write about the statistics soon and explain where the trading edge exists and why I use thorough auction research to drive my decision instead of flipping a coin like Harvey Dent.

But for now you can rest assured that last week’s call for a calm, sideways drift was bang on.  We drifted last week.  Now the model is flagging bearish.  It flipped from bullish-to-bearish, skipping over a neutral reading.

I will be shorting NASDAQ futures any time we gap up overnight and are inside the prior day’s range.  I will be playing for range extension down after the first hour of trade.  I will be a sellers at the logical price levels highlighted during the morning trading reports.  I will also use SQQQ as a proxy position trade starting Monday.

I may close SQQQ before Thursday because we have a wildcard Thursday.  But maybe I won’t.  Nvidia reports Thursday.  The company has been an absolute success and anyone shorting NVDA has been made to look like an imbecile.  But much of the company’s recent success has been tied to crypto mining.  Cryptocurrency has been in the doghouse all 2018.  That could impact Nvidia’s recent growth trajectory.

If Nvidia reports soft revenues and guides lower on earnings, how will the markets react?

We don’t know.

But we do know that there is a wildcard Thursday.  And we know the IndexModel is bearish.  You don’t know whether or not the IndexModel is any more useful than a coin toss.  But I do.

That’s everything we know.

Walmart report this week and so does Home Depot.  The quarterly earnings from these two companies are much more indicative of the state of the overall economy than any government statistic.  Pay close attention to them as well, but NVIDIA is the name I am watching the most.

The RAUL blog is bearish until otherwise noted.

Trade accordingly.

a’dios muchachos

Exodus members, the 195th edition of Strategy Session is live, go check it out!

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Guys I cannot keep updating my thoughts throughout the day and trade to the best of my ability.  Some of you are asking and while I appreciate that you find value in my writing I write what I write so that you can understand and implement the process on your own terms.

Here is a quick recap of how I’ve found myself long two units heading into the closing bell and Apple earnings.

This morning’s hypo 2 did a good job of identifying where sellers were likely to show up should the market’s first matter of business be to test higher:

Hypo 2 buyers gap-and-go higher, trading up through overnight high 7230.  Look for sellers to defend around last Friday’s low 7263.50 and two way trade to ensue.

Hypo 2 was off a bit off.  While I attempt to make these price levels as precise as possible, this is nature and nature will do natural things.  The NASDAQ is a slippery instrument, it sloshed past 7263.50 but peaked out a touch higher at 7271.25.

I tweeted:

that is all the upside I was expecting until Tim reports $nq_f hypo 2 complete https://t.co/8aKGf74UtT

— RAUL (@IndexModel) July 31, 2018

So I thought we’d already seen all the upside for today but then something happened.  We made a sharp low before 10:30am.  Why does that matter?  There is a 72.6% probability that either the high OR low of the NASDAQs initial balance [first hour’s range] is exceeded before end-of-day.

Then there is [was] that rare b-shaped profile we are [were] working inside of [we still kind of are but it’s filled in].  It looked even more b-shaped this morning, remember?

“As the profile begins to mature, it is taking on a lowercase letter b shape which is sometimes indicative of a long liquidation, a short term phenomenon that sometimes occurs near the bottom of a down move.”

My muscle memories:

Market profile context said we could be nearing a bottom.  The ATR bracket from Exodus Strategy Session was tagged by /es_f Monday and we formed a good looking bottom.  And Apple reports earnings after the bell.

We all know Apple reports earnings after the bell…how is the market going to behave after the report?

We don’t know.

But Apple earnings are a wildcard.  That much is fact.  And

I had the 72.6% stat.  Mothership signaled I could go long so I went long and targeted IB high.  By noon we took out IB high, I left one contract on and went to the gym.

This next part is absurd but I managed the runner from the gym using the logical 7250 level as my stop on the final unit.

But why?

Per the morning homework I though we’d already seen as much upside as the day had to offer before Apple earnings.  And now we had gone range extension up, so that stat was complete too.  There’s no real reason I should still be long.  Looking at /ES $IBB and /YM I can see that if we take out 7250 those instruments have a long way to fall before any logical support.

But there is a wildcard.  And a nice, bi-centennial price level that every trading desk around the world is watching.  7250.

When I returned home to Mothership from the gym we were churrning the 7250 level and I managed to size my position back on and scalp it back off.

Though scaling off from the initial position, then adding and scaling again, I’ve significantly reduced my cost basis on my /nq_f long.  So, while I have a stop in place, I’m going [hopefully] let a piece ride into the wildcard.

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I just put down the nastiest morning trade session so far in 2018 and I am taking to the pen instead of using this chest full of courage to give back any gains.

Fuck.

Was long in the pre- per the primary hypothesis.  Let’s dissect the plan and take a magnifying glass to it, shall we? First:

Heading into today my primary expectation is for buyers to work into the overnight inventory and test re-entry into the Tuesday range 6667.25.

This expectation, that we would push into the overnight inventory had me long ahead of opening bell, targeting the Tuesday low.  Then I watched 6666 because I am weird but also because I wanted to see sellers step in.  THEY DID.  And then, a gift from the tape gods, a retracement for me to sink my teeth into, crocodile style. Look:

I had time to think but not much.  Why would I go short around 6662?  Because of some EMA or other chart magic?  Not really, the renkos just help to time entries and manage risk.  I went short because of the next part of the primary hypothesis:

Sellers defend here and we go down to take out overnight low 6640.50.

This is why I blog.  This is why I write a morning trading report before I even think of stepping into the arena.  I could not care less if the gen-pop reads my reports.  I hope some of you, the ones who really are totally immersed into investing and trading start to see how helpful this approach to trading is.  But I know there aren’t many hardcore trading nerds out there.

The morning plan clarifies my vision.  It has one piece left, but I will not engage.  I will take my quick 600 bucks and go pursue other interests.  If I were still trading, I would look for this action to continue lower, eventually tagging 6623.  Why? Sentence three of the primary hypothesis:

From here we continue lower, down to 6622.75 before two way trade ensues.

It could be wrong, how we trade the daily midpoint around 6650 is the pivot.  And I do not feel like mucking around inside choppy value.

Listen, this post is a bit robust and braggiose, I suppose I am happy that I stuck to my plan and did so with the tenacity of a crocodile.  I do not seek your admiration.  Just hoping to inspire anyone struggling to gain a grasp of how the auction works.

MOVING ON

We do not have much to go off of over on bitcoin.  The CME instrument is only a few weeks old.  These are the two hypotheses I laid out on Monday:

 

So here we go:

• 2-3 day trend : 2
• 2-3 week trend: 2.5
• magnets: 3.5
• strongest volume: 2.5
• Excess high/low: 2.5
• SCORE: 2.6 MEDIUM BEAR

It looks like primary hypo (hypo 1) is on the table.  We are bouncing along the range-lows of a messy balance.  Keep an eye on 14,340 as a pivot back to neutral, otherwise look for more selling.

Listen, like all facets of life we take trading one step at a time.  On Sunday we form a bias.  Every morning we write a plan.  Then we take it one trade at a time.  Trade THIS TRADE RIGHT NOW, then once it is complete, reassess the plan and get ready for the next trade.  THEN TRADE THAT TRADE.  I believe this is how best to achieve the coveted ‘zone’ so many professional athletes talk about.

Up in the mountains, there is no better feeling then when all your equipment is dialed in, a good song is playing in your helmet, a couple of bros are with you, and the mountain has good conditions below.  There is a similar feeling when trading.

Bias, plan, execution.

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How checked out was everyone on Friday?

The weekend had already begun by the time US markets opened.  Americans, fat off economic gains in housing and retirement accounts (lolz), took out their chipped cards and headed out of the office.

A long weekend for the overworked masses. The best of times, right at the advent of summer.  Mating season in full swing, the mind wanders.

While all seems well on the surface, when you peel back one golden layer from this vidalia onion of a market you see rot. BEHOLD, sector performance last week:

If this data were our only basis for being short, then it may be a bit overzelous.  But there is more.  The infrequent but highly potent Rose Colored Sunglasses signal triggered in the often overlooked Exodus Strategy Session, a report so vital to iBC laboratory security that it is produced every single Sunday by any means necessary.

We will be selling in May.

Right at the end of it, after participating in the bountiful gains it provided.

For summer is upon us and investors are distracted by their summer homes and primal instincts.  The good scientists constantly return to their foundation stone—cold, dead, lifeless logic.  The kind of information that allows for objective decision making.

With any luck, when USA stock markets open Tuesday, they do so in a strong manner.  A gap up.  An early rally.

Or they begin plunging right off the rip.

Either way, and without a moment of doubt, cash will be raised and NASDAQ futures will be shorted at every official opportunity.  We only take official trades, no gun slinging.  This is science.

The results often resemble a Van Gogh painting, and some call our output art.  Which is fine. We know what it is.

Long term accounts, the stocks beautifully chosen by Exodus robots at the end of each quarter, will remain in place.

Everything else is subject to liquidation.

Nobody remembers the Great Recession, the pangs of austerity.  They hardly remember last June’s BREXIT vote.  We are collectively flying too close to the sun.  The Fed knows it, our data shows it, and now your good scientists have wrote it.  Do with this information what you see fit.

If I were you, thank goodness I am not, I would create my own quant model to empower my decisions.

Stay sharp out there and remember—the market is not rigged to get you.  It does not care how you are positioned or whatever else is happening in your microcosm.  It it simply a numeric representation of the net interactions of humans around the world.  NATURE.

Exodus Members, the 133rd Edition of Strategy Session is live.  See all the details of the short bias, and what would confirm the idea even more.  ENJOY!

 

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Greetings and happy Mother’s Day from the hard working scientists at iBankCoin laboratory!

Despite being a subject matter that many find uninteresting, and perhaps because it is presented every.single.Sunday (131 weeks running) in a lighthearted manner, another overlooked Exodus Strategy Session has been prepared.  At the core of it is a live quantitative trading model which serves our team quite well when it comes time to trade.

The preparations are done Sunday, with a best possible effort, in order to A. ensure we have the proper information in place to make objective decisions and B. instill the type of confidence that comes from creating your own working trading model.

This week is no different in that we have humbly prepared another Sunday report.  The only difference is we have a live signal going into next week.  It is the same signal that triggered last Sunday which called for a calm, sideways drift.  A marking of time.

While the world was going bananas over our authoritarian leader, the model called the market right again.  No mayhem, no May punishment for investors.  Smooth sailing last week was, unless you were heavily positioned in bank stocks.

Therein lies the beauty of a quantitative and objective approach to financial markets.  They do not care about your latest freakout, and if your emotional conduct is being factored into how you engage the market, you are setting yourself up for bitter failure.

Which is fine.  Maybe you need to fail, not that it is something the good folks at iBC labs with for you.  We create tools that can empower you to take control of your investment decisions in an objective way.  And while the toolkit may seem esoteric, we will do everything we can to make it more accessible for you, including live one-on-one support.

Yes, you heard right, you could have a personal discussion with yours truly about the software.  And if you have already had a phone demo, and you are still struggling to properly deploy an investing/trading approach that works for you, let’s circle back around at see if we can make it fit your workflow.

In summary, the the sell in May axiom has been a misguided story passed down by old men so far, according to 2017 performance.  However, the idea is not to sell before May, or after May, but in May.  So conditions could change during/after option expiration’s week.  Do you have the models in place to make that important assertion?

Get at me.

And again, Happy Mother’s Day.  If there is one day of the entire year your belligerent ass could project stability it is today.  Women tend to worry way to much.  Ease their burden.  Barbecue some local poultry, hopefully birds that lived a good life, in nature.  Or at the least, were allowed to roam open pastures.

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