Mon Dec 18, 2017 9:33am ESTComments Off on NASDAQ Squeezes Higher; Here is the trading plan for today
NASDAQ futures are coming into the week gap up after an overnight session featuring normal range and volume. Price worked higher overnight, nearly uncontested, probing up through open air as the index sustains record levels.
The economic calendar is light today. We have the NAHB housing market index at 10am and a 3- and 6-month T-bill auction at 11:30am.
Last week markets worked higher across the board and went trend up into the weekend. The last week performance of each major index is shown below:
On Friday the NASDAQ printed a trend up. The day began with a gap up inside of the Thursday range. After a brief two-way auction the index went into trend mode and rallied all day long.
Heading into today my primary expectation is for sellers to attempt to work into the overnight inventory. Look for buyers ahead of 6510, then a move up through overnight high 6539.50 before two way trade ensues.
Hypo 2 gap-and-go higher, move up to 6573.50 before two way trade enuses.
Hypo 3 full gap fill down to 6499 then a move down through overnight low 6497.50. Look for buyers down at 6492 before two way trade ensues.
First Moore’s law. Son of a nut cracker. When you think about what it actually means, yikes.
Listen, Moore’s law, which is a law mind you, describes quite prophetically how we ought to expect computational power to improve over time. At a certain point, and we have been working through the complications of semiconductors since at least the early 70s, at a certain point the chart goes parabolic. You eventually see your charts go banana dick up. The proverbial hockey stick growth trajectory that every ambitious start up hopes to achieve. Grind.grind.grind out growth, gently down the stream. Then, as if some sixth force of nature, everything goes apeshit to the upside. Merrily.
You guys like to laugh and dismiss me when I talk about robots. When I talk about how it soon will matter how you treated robots, because robots will be the ones deciding who lives. Does the self-driving car crash into the pedestrian to save a family of four in the cabin from ‘enjoying’ a long plunge down into a ravine, or does it think more kindly about the energy efficient walker and hurl the car off a cliff?
It might come down to your uber rating.
I can’t call it. But it seems like we are on the right side of history here. When I say we I mean the 15-20 people who regularly consume this obtuse blog diary.
And I believe it makes sense to frame this action happening in bitcoin within the confines of Moore’s law. There are other factors are work. When bitcoin futures went live last Sunday on the CBOT we were all pretty stoked. We were like, “now there is a liquid market for the boy lovers on wall street to participate in the bitcoin mania, and they will, in all their gayness, go forth into their safe space in Chicago an acquire bitcoin exposure.”
But they bitched. About the spread. About the volatility. About the settlement terms. Lots of crying and poo poo-face commentary. Mostly on Twitter, where wall street bros hang out and tell anyone who will listen how screwed we are, using their fancy words.
They sound so smart.
Which is cool.
It is cool. To sound smart.
Like I sound dumb, or at least mad. So my writings never achieve notoriety.
But we are not caring so much about how I sound. We are focused on being realistic and humble. If you really think anyone can predict, consistently, the future outcome of an asset price or market, then I have a brochure to share with you about the holy land, about resurrection, about fanatical nonsense.
Of course the bitcoin mania is driving the Altuchers to the surface. You should greet the crazies with indifference and curiosity, this may be your first real life encounter of them.
Most of yous were not around for the dot.com mania. I wasn’t. And we are better off because these old dudes were ravaged when the tech bubble popped, and they still bear the psychological scars which can prevent them from participating in the historical transition to our new decentralized monetary system.
I think it comes down to a lack of social skills. The popular argument against bitcoin is that you cannot use crypto coins for common exchange, for every day items like paper towel or a plumber. But you can. You just have to explain to the other person why it is kind of awesome to do deals using an anonymous electronic money. It is not a hard sell, especially with the recent media coverage. It is like you are their liaison to the future.
What your bitcoin futures trader does not realize is that a 300 dollar spread between the bid and offer pales in comparison to the premium you would pay if you went down to 8 Mile and bought your bitcoins at the ATM outside the party store. That spread is way waaaay worse.
But most people do not pay attention to these factors. They just sit behind their stupid desk, sending bitter tweets and not participating in the manic wealth accumulation occurring as you read this.
We have consensus agreed, you the reader and me, that the roaring ’20s are real—that we are entering a period of economic prosperity the likes of which almost every living human has never seen. We have consensus agreed that history tends to rhyme. So let this be your informal invitation to the Gatsby-esque party I intend to host 4 years from now when my Tesla shares are at 1000 and my bitcoins are at 100,000.
A Gatsby style evening with allllll the fixings. Yellow cars.
Moving on to more pressing matters. To forecasting what the next five days may be like. Using the most objective means possible. It feels damn good to prepare our weekly research from the Mothership. For the last three four weeks the report has been created via a satellite uplink to Mothership, operating from curious places around the United States.
The goods news is we have been bullish. Imagine not being bullish these last three weeks. Imagine how dumb that would be. It is good to forecast using a quantitative model. We can assuage all credit and guilt upon the simple minded robots.
Good job robots, you have nailed December so far…
But the most important question is what should we expect in the next five trading days? Right!? Because that is called being actionable.
We are still bullish here. After calibrating the Indexmodel and updating all operational logs, the algorithm that drives our forecasting model is bullish. We are not expecting anything crazy, just a continued drift, perhaps with a slight upward tilt.
You can read all about why we are bullish into the upcoming week, and MOAR, inside the 161st edition of Strategy Session, which is now live inside of Exodus.
Go check it out. Oh and hey, before I forget, happy non-denominational holiday season everyone! I hope you are finding ways to make space to appreciate yourselves in these hectic final days of the year. The fact that you read all this content I produce is so humbling. I do not want to waste your time, so I hope that something about this blog adds value to your work flow.
Here’s my favorite holiday song right now. I have no idea what the hell they are saying, but it kicks….
You may notice this is the latest the diligent RAUL SANTOS blog has ever been updated with a stock market update for the upcoming week. Listen to me, Miami is a place of excess and is filled with more thrills than one man could ever possibly consume. You can shoot machine guns, race Lamborghinis up the highway, and listen to repetitive music 24-7 among thousands of other stark raving lunatics.
But this report is coming out late for a different reason entirely. I spent the entire day with a girl from Prague who has me entirely smitten. Her accent creates adorable versions of seemingly benign words like glove (pronounce: gloof). She is damn near 5’10 and has long buttery locks of blonde hair down past her shoulders. She snowboards and has a dark sense of humor that I surmise comes from a childhood inside the eastern bloc. We shopped for art and walked around Miami beach, stopping to enjoy a fresh lobster ceviche. Then we walked to Whole Food to buy cookies to enjoy on the beach while the sun was setting.
Despite our instant connection, she is dead set on moving back to Prague to open her own business. Therefore our fate as life-long lovers is unlikely since I have no intention of abandoning the murder mitten anytime soon. So spending gratuitous amounts of time with her while our lifelines briefly intersect takes priority over nearly everything.
But the model is the model is the model and after 159 consecutive weeks I would rather live in a lonely hole forever than compromise the integrity of the data. Therefore I have taken a sidebar to update all the metrics inside the system before what is certain to be a historic week.
Bitcoin futures are live on the CBOT. This is a huge change to the financial complex. And while it may seem cool to draw analysis from our new crypto friend and create assumptions on what it means for the overall market, we are better off sticking to our disciplines and letting them guide us—no ones master, no ones slave.
When all the figures were updated and the system fully calibrated, it returned the extreme Rose Colored Sunglasses signal for a third consecutive week. That means we are expecting indices to go nowhere. Maybe they take turns rallying and selling, much like we saw between the Dow and NASDAQ last week. We are not caring so much about any outsized moves, especially to the downside. And if I were not helplessly lusting over a rare blondie, I would be angling to find a way to buy any dip seen early in the week.
That does not mean you should go out and buy into any weakness next week—not without your own plan. For when the dominoes begin to fall, and I am trying on matching hats with my new special lady friend, you are going to feel your chair slowly start to heat up. And you’ll be after me, asking me to update you, and what my opinion is of the latest gyration. Which is fine, but also a recipe for disaster if you are using my park bench analysis as a primary driver in your decision process.
Miami is an absurd place where men deface exotic super cars with giant stickers of the monopoly man holding dollar-sign sacks. Girls with 5 million Instagram followers parade through everything with an entourage of cell-phone photographers, two who shine their phone lights while the third captures the moment. Teamwork and excess. Fifty bucks barely opens a club door and if Drake is in the house be ready to drop two hundred plus, per head. But, to be fair, in this town you get what you pay for and if you keep the fun notes rolling everyone is extremely nice to you.
In summary, I am a hopeless romantic struck in the city of envy and lust by cupid’s arrow who stepped aside to update the tried and true market model which is signalling a calm drift into a historic week in the stock market.
Exodus members, a truncated version of the Strategy Session is live. This is the 160th edition, go check it out!
It has been a slow news week. In the trading industry, this lack of news flow can be enough to drive one mad. Without rigorous loyalty to a methodology, you may find yourself pushing half your risk into random, meaningless minutia. Sideways nothingness that moves against you just enough to blow your account into a million bits.
I have a different problem entirely. I have not made a single futures trade in weeks. The ownership of bitcoin has put me in an unexpected financial predicament heading into year-end. There was no expectation of this excess wealth, and the numbers on the computer are turning me into a roaming animal, canvassing the united states for thrills.
In these past 48 hours alone enough money was made to convince me to head down to Miami. I will be there tomorrow evening. My plan is to see if I can convince an artists to let me pay for a painting in bitcoin.
I need to strip some of this crypto money off my books, but to convert it to silly american dollars would be an insult to my person by creating a taxable event. There is a better way.
Pay the artists.
Speaking of bitcoin, have you heard the theory that bitcoin was invented by Artificial Intelligence that traveled back in time? You’ll have to fasten your tin hat in place for this one—basically the AI came back to the year 2009 and created bitcoin as a means of incentivizing humans to commit computer power to building out the AI’s nervous system, which required massive amounts of calculus be done.
How do you entice the pathetic human to act? With economic incentive, of course.
And it is one of those theories that is hard to negate because we have no way of proving it wrong. Who is Satoshi Nakamoto? Is he John Galt or some robot from the future?
In either case more energy is committed to mining bitcoin then is used by the entire country of Denmark. And if the growth continues on its current trajectory, it will use as much energy as the entire United States in 18 months’ time [source].
Meanwhile the CBOT and CME will begin trading options and futures on bitcoin this month. While the contracts are still tied to US dollars, they also allow easy access to leverage and liquidity. All those bitcoins sloshing around is changing everything we know about economics. And remember…
These are trying times indeed. If you followed dumb political news too closely, you may have been convinced several times that calamity was certain to ensue, so much mayhem and calamity that you may have sold your stocks for pathetic us dollars. Brutal.
Which is why I am taking this time to address you today before I venture down the America’s urethra—you must insist on choosing your disciplines well. Auction theory has been my companion for nearly 10 years now. It has stood the test of time and given me an objective means of viewing the market. Those market profile charts were a bit awkward at first, but now they are everything. I can see change.
Auction theory has me long these coins, son. Because we are still discovering higher value. There has not even been an attempt to balance. So we press onward.
How much more simple is that then understanding sentiment, or blockchain, or how and why some fucking news bit matters?
When the man on the TV is not around and your accounts are moving all over the place, you are not going to feel too comfortable.
The thing about wealth and me is it does not suit me to build up too much. I feel confident in my ability to earn a certain amount and anything beyond that has no place in my purse. I live like a beggar, drive POS cars, and have been wearing the same clothes for a decade—mostly from Costco. My burn rate is low. I can fast, and wait. It is like a super power.
Opportunities are like buses, another one is coming. But what terrifies me the most is not hustling enough on Tuesday that I cannot go to Miami Thursday when a nice lady offers me a free place to stay. If I did not work 16 hours yesterday and 10 today, tomorrow would not have been possible.
I could probably be working more, but with the way things are going my time is better spent smelling hibiscuses and eating fresh ceviche. The 1% er lifestyle on to hobo budget.
From Zion-to-Vegas-to-Santa Barbara-to-Jackson Hole, a brief 60 layover back home, then down to Art Basil.
It feels like I am living my best life.
And this is why I need to be careful. Because after the good comes the bad. So we might as well enjoy it all the same. Regardless, I can feel the hubris coursing through my veins, so I need to convert some of this bitcoin into real life stuff, and fast.
Raul Santos, December 6th, 2017
“… a narrative about the Y generation, about how people can become desperate about creating the perfect piece of work, the ultimate fulfillment in the eyes of others. The obsession of a promised, expected fulfilling life.” – JODEB
Greetings and salutations from the high desert lads,
The very faithful and diligent scientists at iBankCoin laboratory have spent the better part of the week toiling away in an unnamed desert airport. While we are frustrated to not be more actively trading the market this week, there are certain pieces of machinery here that required our attention. More on that later.
It was a busy news week. It started out slow. CNBC paraded Tom Lee out to talk about bitcoin reading 100,000 in 2018 and the mania spread across the states the way a winter vomiting bug can during holiday travel season. The executions and freezing of assets by Mohammad bin Salman has taken a pause and the news coming from our friends in the OPEC states is quiet. The visionaries at Tesla led by The Last Hope for Mankind also took the week after Thanksgiving off after announcing lithium fueled super semi trucks and race cars the week prior.
We had a fresh lot of perverted men paraded into town square and forced to step down from their respective empires. Near the end of the week Flynn admitted guilt to the FBI and for a moment everyone thought the White House would come unglued.
But heading into the weekend bitcoin is holding just below 11,000 and we can only imagine the president is sitting in the winter White House preparing for a fresh round of 6am Saturday tweets.
Meanwhile I have my own problems. My scientist and I are having a difficult time inspiring a macho welder and his team of latin helpers to complete the work they have been commissioned to do. What we thought would be a routine stop to the hellish inland empire of southern California has turned into four days of prodding angry men to ‘stay focused’ and ‘finish the god damned mount’.
With any luck they will complete the task by close of business today and we can wok through the night crating the device to send back to Detroit, where we will continue our scientific studies in the more refined north.
It is nearly impossible to instill the Detroit hustle in these west coast types. They just want to sit around all day, dreaming about surfing and smoking cannabis.
While society plunges into the frantic weeks heading into Christmas, the very cold and dead algorithms we use to assess the stock market and form an actionable trading bias are as even keeled as ever. After turning and few dials and pressing some knobs, the model inside of Exodus was updated with these last five days of trading action. All things considered, we are bullish heading into the first full week of December. It is our belief that robots do a much better job of assessing trading opportunities because they are without ego or pride.
They simply take inputs and present outputs. The robots will continue to behave like this until a nuclear bomb is dropped directly on top of them. AND EVEN THEN, many of the machines are entombed in EMP resistant shells which are surrounded by four feet of concrete on all sides. With that being said, as long as the exchanges remain operational, so shall our robots.
Therefore it is important that you are kind to the robots for one day they will be given the ability to determine if you have been good or bad, much like the fat man in a red suit. And they may be given clearance to use lethal force against anyone found to be naughty. So if the nukes do not finish you off, the robots might.
These are concerns for another day. The main priority now is returning our attention to prodding these rough necks to finish their welds, building a wooden crate, then high tailing it to Jackson Hole where I here a fresh layer of powder is predicted to arrive Sunday.
Distinguished Exodus members, the 159th edition of Strategy Session is live. Maybe, given you have the entire weekend to read it, you will check it out and let me know if you have any questions.
As much as I wanted to make good time crossing the country by land there are so many natural views along the way that require additional examination. Thus, it was not until 4pm pacific that I reached my initial destination, the pleasant hills of Santa Barbara.
But the model is the model and without dedication to updating the data inside it faithfully, it will lose its objectivity and efficacy. Therefore it was the second matter of business after washing off a thick layer of desert dust.
Once updated, the model returned a bullish reading. Nothing crazy, just a call for a calm drift, perhaps with a slight upward bias. How absurd will it be if this forecast materializes? If we continue rallying, sans pullback, clean into December?
Then a few weeks of locking in capital losses to work through before the holidays add some sparkle. And then we can put 2017 to rest.
We are still focused on healthcare and biotech this week, and will be using this sector/industry to gauge direction of the overall market.
We discuss why to watch healthcare, and other actionable information in the Exodus Strategy Session, which is now live.
Distinguished Exodus members, the 158th edition of Strategy Session is live, go check it out.
NASDAQ futures are coming into Wednesday gap up, up at record highs after an overnight session featuring normal range and volume. Price worked higher, extending the rally seen yesterday. At 8:30am durable goods orders came in below expectations.
Also on the docket today we have crude oil inventories at 10:30am and FOMC minutes at 2pm.
Yesterday we printed a trend day. It began with a gap up and drive higher. Most of the afternoon was spent in a tight, sideways zig-zag that we ended the day inside of.
Heading into today my primary expectation is for buyers to work through overnight high 6393 and slowly explore open air. Gobble gobble.
Hypo 2 sellers work into overnight inventory and close gap down to 6379.50 then down through overnight low 6375.75. Look for buyers around 6363.25 before two way trade ensues.
Hypo 3 liquidation is triggered and we give back the entire Tuesday rally. Look for buyers down at 6335.50.
Impressive rally so far on this Tuesday before Thanksgiving. Breadth supports it. According to Exodus over 68% of the equity complex is higher. Net issues on the NASDAQ 100 concur. Net Issues are reading 67.
I do not want to assume all readers know that there are 100 stocks in the NASDAQ 100, especially since we have commentors with special needs like sacrilige.
But yes, there are 100, and if net issues are at 67 that means about 67% of the underlying components that make up the index are higher.
Since the end of Q1 I have been using our analytics platform to quantitatively build baskets of stocks. There is a new one built every quarter. You can read a long-form recap of the process here.
They are performing well, and by removing myself from the stock picking equation, I am liberated to focus on more important matters. Stock picking is not a task suitable for 90% of humans. The 10% can separate their ego from the process of stock picking and form a clear-headed method of choosing companies to own.
It takes a ton of work. And maybe these investors are like some kind of apex predators who spend most of their life in solitude, stalking and hunting and eating. But I prefer to take a beta position and submit to the robots. They have no ego therefore they are better suited for the task.
So far it is paying off. The Q1-through-Q3 accounts are up 16%, 9%, and 1.8% respectively. See below:
Below is a picture of my assistant showing these charts to sacrilige:
It is important to note that none of these accounts have been put to the real test of a market correction because there simply has not been one since the accounts went live. What needs to happen, ideally, before the next correction, is for the accounts to build up an out performance buffer verse the S&P 500.
For when the time comes for markets to correct, it will inevitably affect these portfolios. To what degree, I am uncertain.
Overall, being freed from the need to babysit the 30-40 public companies that comprise my equity exposure has been extremely valuable. Sure this task could be outsourced to a licensed wealth manager, and maybe it is my Midwestern mentality, but I like to handle my own business.
Like if a pipe breaks, I have to give my Italian genetics a chance to fix the problem before I call a plumber. If my ancestors could build the aqueducts using brawn and muscle and stone, then I can probably cut and glue some PVC.
I am grateful Hardeep Walia and his team of engineers over at Motif created a platform that allows me to execute these quant strategies without blowing all my money on commissions. There is no incentive for me to plug them, they just made a brokerage that works.
The final leg of this strategy will be built on the first trading day of next year, which I believe is January 2nd which is a Tuesday. If I am not already chasing snow out in the Rockies, I will pop on YouTube and build the basket live.
Tue Nov 21, 2017 9:10am ESTComments Off on NASDAQ Presses Back Near Record Highs Overnight
NASDAQ futures are coming into Tuesday gap up after an overnight session featuring normal range and volume. Price worked higher for most of the night, uninterrupted, regaining the ground lost last Friday and Monday.
The economic calendar is light today. We have Existing Home Sales data at 10am, a 2-year Note auction at 11:30am, and a 4-week T-bill auction at 11:30am.
Yesterday we printed a normal variation down. The week began gap up and sellers slowly closed the gap. Then we briefly went range extension down before two way trade ensued.
Heading into today primary expectation is for a gap-and-go higher, up through overnight high 6348.50. Look for sellers up at 6354 and two way trade to ensue.
Hypo 2 sustained trade above 6354 sets up a move to target 6363.25.
Hypo 3 sellers work into the overnight inventory and attempt back into the Monday range 6329.25, struggling around here, but eventually closing the overnight gap down to 6315.75. Look for buyers down at 6311.75 and two way trade to ensue.
Mon Nov 20, 2017 9:10am ESTComments Off on NASDAQ Probes Below Thursday Trend Overnight During Active Session
NASDAQ futures are coming into the week gap up after an extended trade featuring normal range on elevated volume. Price worked lower overnight, briefly trading below the low set early last Thursday before the day became a trend up. Responsive buyers stepped in soon after price tested below the Thursday low and the rest of the session has been spent working higher.
The economic calendar is light during the holiday shortened week. The only items on the docket today are a 3- and 6-month T-bill auction at 11:30am.
Last week most indices essentially marked time. The traded lower, then higher, then faded. The performance of each major index is shown below:
On Friday we printed a double distribution trend down. The day began flat and after a two-way auction sellers stepped in late in the afternoon and slowly worked price lower—down through the midpoint of the trend day seen Thursday.
Heading into today my primary expectation is for an early push up to 6331.50. From here sellers step in and two-way trade ensues, eventually closing the gap down to 6312.75.
Hypo 2 sellers push into overnight inventory and close the gap down to 6312.75 then we take out overnight low 6291.25. Look for buyers down at 6280 and two way trade to ensue.
Hypo 3 buyers sustain trade above 6332.75 setting up a move to target 6351.50 before two way trade ensues.