March is when everyone gives up on their New Year’s resolutions and returns to their dirt bag lifestyle.
Up north March is also when the thaw begins. That means mud and rain and everything looks disgusting. So while it was easy to carry the hustle through January and the tiny month of February, March is a different animal entirely.
The last two years have not been kind to investors in March. Here are two decades of SPY performance in March:
And while this pesky leap year means we have one trading day left in February, next week is mainly a March week.
I am coming into March invigorated. Exodus was lockstep with the recent market bounce, winning again. Also, I intend to work 5x smarter and harder in March than I did in January and February combined.
This market however cannot be trusted. So goes January goes the year they say. Beware the ides of March they say. Well I don’t believe any of that nonsense but my model is out with the bear call for a second consecutive week.
Look the new month’s fund flows to be as unkind as February’s.
Last Tuesday the Consumer Confidence reading dropped to 92.2 from a revised 97.8 in January. The number was well below the 97.3 forecast. Sellers pounced after the reading and drove price lower.
This move was a key piece of my expectations, as laid out in last Sunday’s Exodus Strategy Session:
I. THESIS FOR THE WEEK
Rauls bias score 3.30, Medium Bull*. Look for a bit of buying momentum to follow through into early next week. Then expect sellers to reemerge after the Tuesday morning Consumer Confidence reading at 10am. Sellers then become initiative and work the market lower. Be aware of the GDP data set for release Friday morning and look for it to provide market direction into the weekend.
Everything was going according to expectation until that huge rally took hold yesterday which is now forcing me to consider an alternative scenario. Yesterday was the fifth major ‘risk on’ push [mash] we’ve seen this year. Click here for a brief history on the other four.
As we head into the afternoon, price is consolidating just below where sellers aggressively came in on Tuesday, right about 4200 on the March NASDAQ futures contract:
Sellers have responded twice today at this level. Each test weakens their ranks. If we see a sustained push above 4200 into the close, we’re likely to squeeze higher overnight and into Friday’s GDP reading, and ultimately into the weekend.
So while the Thesis from last weekend’s Strategy Session was bang on initially, it makes sense to be flexible and open to the idea that this key context could be a pivot in the opposite direction. If you look close, there is a nice air pocket above 4200 that price can rip through fast.
It’s that simple, 4200 is your pivot. Smoke’em if you got’em.
Directional gaps into Monday are often a caution flag. Last week buyers defended and progressed higher off the gap, but last week was holiday shortened and option expiration. This week, the pajama guys have a full work week ahead of them.
Sellers entered the fray after a bit of morning fanfare but the tape was slow–precarious conditions for the short seller. Nevertheless, the afternoon rip was faded.
Breadth was decent for a Monday, Tuesday could see another push from the bull camp, but sellers are showing up right where we expected to see them per the Exodus Strategy Session. These are ideal price levels for initiating weekly shorts according to my data.
The ‘sell the rip’ game plan calls for raising cash and initiating some shorts tomorrow morning. If sellers reemerge with speed, I will also be aggressively pressing intra-day shorts. TBD
It will be interesting to see what J-Mack and J-Kohl say at this week’s Investor Bootcamp. I am ready to raise some cash in my investment portfolio, but perhaps they can offer insight into why I should hold out. You can still sign up. Live attendance is at 7pm eastern each day this week and all sessions will be recorded. Bonus! Yours truly is presenting on Friday.
Everything’s really looking up, isn’t it? Temps in the northeast climbed to levels unseen since last August, prompting thousands of people to leave their hibernation dens and explore the nearby urban ruins.
Calls for a warm March through May resonated through the streets, as if fact. Wild-eyed predictions taken as fact by desperate shut-ins who were emboldened by the southern winds.
The markets breathed a collective sigh of relief as well, rallying in [almost] all the right places. Those pesky banks don’t seem eager to participate in the upside, what with interest payments starting to be missed by the shale industry.
So while the indices are painting a rosy current state of affairs, my cold, dead logic suggests otherwise.
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.
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 Fridays 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.
Now is not the time to be cute. Your gut might be telling you the chase is on. When the market rallies hard your juices start flowing. These independent oil stocks are up double digits by the hand full. Facebook is the Berkshire Hathaway of the social media game.
Sentiment analysis is blurry here. Analysis of sentiment analysis shows a perception that sentiment has made a sharp 180 back to optimism. I would not be so sure about that. Let’s disregard everyone’s sentiment for now, shall we?
Data is cold and dead and logical. The data calls for lower prices on the week. It comes with a thorny caveat, one that could lash short sellers across the face and scrotum. Tomorrow is February first, on a Monday. Seasonal winds statistically favor bulls when a new month starts on Monday. Paststat’s Kora Reddy wrote an entire book on the matter.
So this is the play: I want strength early in the week. I will let the bulls have their parade, hopefully chock full of euphoria and jubilee–a pagan celebration becauuse the market monster has been slain and staked to the ground. Then, come Wednesday, ideally into some smug tweets from one of my bellwethers, I will begin shorting, aggressively. Or I may just watch from the sidelines whilst methodically operating the futures.
Distinguished Exodus members: the latest Strategy Session has been published. Inside I cover the latest signaling from my working index model, a recap of last week’s action, and some key context for the upcoming week. Check it out!
We came into today with some major unsettled business. I was talking this out inside Exodus yesterday afternoon and this morning–when a trend day prints there is a high probability we exceed it, if only for a tick, the next session. Then we made another little mess overnight when we made a new swing low during Globex. However, the stock market did the dirty work this morning.
The trend day logic was settled. The gap up this morning was a problem. If bulls stepped into it and ran price higher, it was likely to lead to a soft afternoon. Another one. Instead we had a strong open-rejection-reversal down off the open. The low print from yesterday was breached. Golf clap.
Then sellers really had their juices flowing and took out overnight low. All the sudden the clouds broke and a ray of sunshine burned into the dark hole where seller were celebrating Marti Gras. It was at that moment their world was turned upside down.
Now I know most of you are not excited about this move, citing breadth and broken charts and every other problem. But I have seen this script play out many times in recent history. Breadth can catch up to the indices or we just run on narrow participation. I have been flabbergasted more than once by how soon we return to all-time highs.
Today the market did what it needed to and took care of it fast. Have you ever woke up to duct take on your forearm? One of the boys playing a rotten prank? You can either cringe and peel it off, hair by hair, or you just rip that fucker off in one foul swoop.
A few of you can attest to this: I have been straight up killing it on Snapchat. Something about being able to just whip out my phone and show you guys what I look at while trading has finally unlocked my ability to trade and share content. But that is not the only reason you should get Snapchat and add me (Vcali) to you feed right now. These are some other reasons to get on Snapchat.
It is completely transforming every industry. There is tons of new content springing up on Snapchat every damn day. This morning, The White House made an account.
You will see more of me. And I am really, really, extremely good looking. It’s like messed up how good looking I am. When I am not flaunting my fringe/champagne lifestyle I am working my ass off to show you guys what order flow trading is all about.
I will answer any questions you ask me on Snapchat with a video response. Who needs email? Do you have a question about Exodus or trading or the fall of the Roman Empire? Ask me via text or video on Snapchat and I will respond to you.
I am going all in on Snapchat because it is a huge opportunity. You need to figure out today how you can use their platform. If I discover anything along the way, you will be the first to know by following me at Vcali. We just traded the intra-day reversal live, for instance.
PS – do not be discouraged when your 16 year old nieces and nephews have Snapchat scores exponentially larger than yours. They have been on it for years and all their friends are too. Right now Snapchat is aging up, and all us nerds are discovering it. Don’t be the last nerd my friend.
BONUS: I will follow back anyone who follows me so you can DM me your questions. Another one.
BONUS #2: I’m gonna take care of you. One time only, I posted my story to iBankCoin’s YouTube channel. It looks like crap on YouTube (looks way better inside Snapchat) so this is one time only, so you can get an idea of how we do:
PS – Are you subscribed to our YouTube channel? If not, please subscribe! We are putting out tons of content over there. Good content.
These next five days are the most important trading sessions of the year. ‘Liftoff’ of interest rates has been the talk around the globe for the last six months. Wednesday we find out that that butterscotch eater means business. This year stocks have been ruthless while indices maintain a veil of decency. Several option and futures contracts expire Friday. Price is already moving fast. I intend to buy blood this week.
Buying blood takes intestinal fortitude. It takes guts. This is the best job in the world, is it supposed to be easy? Then everyone would do it.
Buying blood does not mean catching a falling knife, for me. I will wait for the cavalry to come in. This means I need to see the brute force buy thrust before I engage. Something like we saw on 12/08 around 10:30am.
Buying blood means listening to all my objective data and executing with a steady hand. It means accepting risk and being okay with taking some heat.
This will be the biggest market week into year end. This will be a defining moment heading into 2016. This will be a test of the financial complex. I intend to buy early, to anticipate a rally into the FOMC minutes. From that time forward I will improvise.
Best job in the world.
Exodus members, the Strategy Session has been published. Be sure to check it out.
