Mon Jan 28, 2019 10:21am ESTComments Off on Ignore $CAT
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 (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.
Mon Jan 28, 2019 8:53am ESTComments Off on Last Friday’s intra-day progress erased, here is the Monday trading plan
NASDAQ futures are coming into the final week of January gap down after an overnight session featuring elevated range on extreme volume. Price worked lower overnight, erasing all the intra-day upside progress seen last Friday but sustaining trade inside the final day’s range. As we approach cash open, price is hovering near last Friday’s low.
The U.S. government has been funded for three weeks.
On the economic calendar today we have a 6-month bill and 2-year note auction at 11:30am followed by a 3-month bill and 5-year note auction at 1pm. The big tech earnings don’t start until after-market-close Tuesday (Apple).
Last week started off with weakness Tuesday after a market holiday Monday (MLK). Wednesday had early strength that was faded lower. Thursday marked time before we went gap up Friday and rallied to close at high of week and essentially unchanged for the week. The last week performance of each major index is shown below:
On Friday the NASDAQ printed a normal variation up. The day began with a gap up and two way auction. This eventually gave way to buying which drove price up into the prior Friday’s range before coming into balance.
Heading into today my primary expectation is for sellers to gap-and-go lower, trading down to 6700 before two way trade ensues.
Hypo 2 buyers work into the overnight inventory and close the gap up to 6789.75 then continue higher, up through overnight high 6797.50. Look for sellers up at 6800 and two way trade to ensue.
Hypo 3 stronger buyers trade us up to 6822.50 before two way trade ensues.
One of the things I like to demonstrate from my tiny, generally overlooked blog is how we can interpret the world around us in a meaningful way and then understand what to expect during the upcoming trading week. Think of these Sunday entries like a five day weather forecast. Like a meteorologist, I interpret mathematical models and layer in current events to create an objective outlook.
Is it always right? Goodness, no. How boring would that be?
All it is is a consistent way of approaching a task that can seem confusing and for most, downright impossible—to trade for a living without losing all you fucking money.
I chose my foundation stones wisely. I observed my elders, the greats willing to share their hard earned lessons. I emulated them for years, then I lopped off parts that didn’t suit my style, built tools that did fit my approach, and came to the markets every week with a real effort to be better.
But enough self-aggrandizing. I am nothing, nobody. I matter very little. Even though I’ve navigated these last six weeks with near perfection, the market can stop making sense in an instant.
Next week the stock market snaps back into action.
You need to be ready to hear key information from the real leaders of the known world. We have earnings coming out of Apple, Microsoft, Facebook, Amazon, and the sweetest boy—Tesla. These earnings and the reactions to them are far more important than the national crisis at our southern border, the rioting french, Roger Stone, or any other geopolitical bullshit. These are our immortal rulers and they will determine the fate of the NASDAQ 100.
Just as important is the Federal Reserve. They are the only part of the US Government worth taking seriously. On Wednesday, they will announce their benchmark borrowing rate. The gambling halls down in Chicago are currently pricing 98.9% odds that rates will remain unchanged. However, there is a press conference scheduled afterwards and we will here from Jay Powell. This is likely to put some direction onto the tape. Then, because the month ends in a sloppy mid-week manner, we will have Non-farm payroll data Friday morning. NFP will put some excitement into the early Friday tape, then I expect everything to fizzle out as participants drop dead from exhaustion and turn their attention to Super Bowl betting, allowing the algorithms to coast market prices into the weekend.
The models are calling for a sideways drift. The signal I am referring to is code named ‘extreme Rose Colored Sunglasses’ [e(RCS)]. The model is prepared as part of the Exodus Strategy Session. The signal name is derived from past observations of what the stock market has done when it has triggered. In most instances of e(RCS) the stock market has drifted sideways, life has been good, everything has taken on a lovely tone as if looking at the world through rose colored lenses. The caveat is, the model doesn’t know about all the upcoming tech earnings, nor does it know Jay Powell is speaking Wednesday. I still trust e(RCS) and will be pressing long bets until at least Wednesday afternoon, but if you want to take your cues from something more observable on your own time, then look no further than the PHLX semiconductor index.
I wrote about the ‘overplay for the underlay’ setup this index had two weeks back. I filed that entry under the ‘spoonfeeding’ category, which I don’t use often. You guys really have no idea how seriously I take blogging. Again, doesn’t matter. WHEN USED PROPERLY, the categories feature of a Word Press blog will show you other entries logged under that category in the ‘RELATED ARTICLES’ section below the current entry. This stuff matters to me, and when I spoon feed you ingrates a tier-one set-up, I like to link it to the other tier-one setups I’ve spoonfed you in the past.
What matters is that any one of yous can use any number of free websites or broker plaforms to monitor the PHLX semiconductor index and you should. It will tell the whole story. It told the story at the beginning of October’18 when it broke down from a very clearly established consolidation pattern. It told the story two weeks ago with the overplay for the underlay, and it will tell the story next week. What do I expect? I made this handy chart so even my special needs readers know where I stand:
Between trading the opening bell and loathing the pity party for unpaid government employees, I will be keeping a close eye on this index. At some point it will tip its hand and everything else will follow.
Through all the big earnings, the SOX.X will tell the story. Through all the US Government bullshit, the SOX.X will tell the story. Through the coldest bite of jack frost, the SOX.X will tell the story. Say it with me, the SOX.X will tell the story. You can literally ignore every other happening in the whole world and have a good sense of how to make money in the stock market. In fact, you’ll probably have quite a bit more clarity than your fellow competitors who find themselves neck deep in BULLSHIT.
So don’t take it from me or my bullish e(RCS) model, just watch the semiconductor index. It has told the story for a very long time. If you want some extracurricular reading, check out my December 2017 blog entry where I lay out the exactly what I see happening as we enter the roaring ’20s.
ciao ciao, kiss kiss and kind regards
One last thing—Tom Brady is an incredible athlete and Bill Belichick is a rock-solid leader. Anyone hating on the New England Patriots doesn’t admire dedication and hard work and probably doesn’t hold themselves to a very high standard. I don’t even watch football. I just respect a true competitive spirit.
Fri Jan 25, 2019 8:57am ESTComments Off on NASDAQ gap up into Friday, back to where the week started, here is the trading plan
NASDAQ futures are coming into Friday gap up after an overnight session featuring elevated range on extreme volume. Price worked higher overnight, trading up to a new weekly high. As we approach cash open price is hovering at the week’s high.
Durable goods orders were supposed to come out at 8:30am and new home sales at 10am but the government shutdown has delayed the release of this data.
Yesterday the NASDAQ printed a normal variation down. The day ebgan with a gap up and small push higher. The rally was contained inside of Wednesday’s range. We chopped out for the rest of the day, riding long the composite volume point of control.
Heading into today my primary expectation is for buyers to gap-and-go higher, trading up to 6772.50 before two way trade ensues.
Hypo 2 stronger buyers trade up to the open weekly gap at 6792.50. Look for sellers up at 6808.75 and two way trade to ensue.
Hypo 3 sellers work into the overnight inventory and close the gap down to 6675.50. Look for buyers down at 6655.25 and two way trade to ensue.
Thu Jan 24, 2019 8:59am ESTComments Off on Jobs data strong, NASDAQ marking time, here is the Thursday trading plan
NASDAQ futures are coming into Thursday gap down after an overnight session featuring extreme volume on elevated volume. Price worked sideways overnight, trading inside of the Wednesday cash range. As we approach the open, price is hovering along the daily midpoint. At 8:30am Initial/Continuing jobless claims data came out stronger than expected.
Also on the economic agenda today we have markit composite/manufacturing/service PMI at 9:45am, Leading Index at 10am, Crude Oil inventories at 11am, and 4- and 8-week T-bill auctions at 11:30am.
Yesterday we printed a normal variation down. The day began with gap up. An early attempt higher found responsive sellers ahead of the upper distribution of Tuesday’s doulbe distribution trend down. Sellers took control of the tape, closing the overnight gap and continuing down through the Tuesday low before a bid stepped in. We ended the day near session mid.
Heading into today my primary expectation is for sellers to work into the overnight inventory and close the gap down to 6663.25. From here we continue lower, down through overnight low 6653. Look for buyers down at 6572.25 and two way trade to ensue.
Hypo 2 buyers work up through overnight high 6706.50 setting up a move to target 6745 before two way trade ensues.
Hypo 3 stronger buyers trade us up to 6768 before two way trade ensues.
Wed Jan 23, 2019 8:59am ESTComments Off on Economic data delayed, here is the Wednesday NASDAQ trading plan
NASDAQ futures are coming into Wednesday gap up after an overnight session featuring extreme volume on elevated range. Price worked higher overnight, trading up beyond the Tuesday midpoint before settling into balance. As we approach cash open, price is hovering along the Tuesday mid.
There were several economic data points scheduled for release today including advance goods trades balance, building permits, business inventories, construction spending, factory orders, housing starts, the monthly budget statement, and net long-term TIC flows. None of these data will be released due to the government shutdown.
Yesterday we printed a double distribution trend down. The day began with a gap down as we began the trading week, with price opening just along last Friday’s low. Sellers engaged early on and pushed us lower. After a tight battle early on, the market succumbed to selling pressure and began to explore lower prices. Price traded down into last Tuesday’s range before discovering a responsive bid and two way trade ensuing.
Heading into today my primary expectation is for buyers to gap-and-go higher, trading up to 6724.50 before two way trade ensues.
Hypo 2 sellers work into the overnight inventory and close the gap down to 6654. Sellers continue lower, down through overnight low 6638.25. Look for buyers down at 6600 and two way trade to ensue.
Hypo 3 stronger buyers trade us up to 6748.50 before two way trade ensues.
Tue Jan 22, 2019 8:58am ESTComments Off on NASDAQ down a quick -50 into the MLK-shortened week, here is the NASDAQ trading plan
NASDAQ futures are coming into Tuesday gap down after an overnight session featuring elevated range on extreme volume. Price worked lower overnight, trading down near the gap left behind last Thursday before finding a bid just above it. Since then price has stabilized and as we approach cash open, price is hovering inside last Friday’s low.
US markets were closed Monday in observation of Dr. Martin Luther King Jr. Day.
On the economic calendar today we have existing home sales at 10am followed by 3- and 6-month T-bill auctions at 11:30am.
Last week markets rallied. The week began with Monday weakness that was bought but not with any sort of vigor. The vigor came Tuesday with a gap up and drive higher. Wednesday marked time before another vigorous round of buying Thursday. Friday the buying continued. Eventually it discovered responsive sellers and we settled into the weekend off the highs. The last week performance of every major index is shown below:
On Friday the NASDAQ printed a normal variation up. The day began with a gap up that selelrs pressed into. Said sellers were able to reclaim the Thursday range but could not close the overnight gap before initiative buyers (initiative relative to Thursday’s close, responsive relative to Friday’s open) stepped in. Said buyers then drove higher, trading up into prices unseen since 12/13 before finding responsive sellers. Said sellers took price back down to the daily midpoint. Buyers defended the mid and we ended the week up above it.
Heading into today my primary expectation is for buyers to work into the overnight inventory and close the gap up to 6792.50. I expect it to be a slow trek as buyers encounter supply at 6750, 6771, and again at 6787. Look for sellers up at 6800 and two way trade to ensue.
Hypo 2 sellers gap-and-go lower. Sellers take out overnight low 6721.25 early and it trigger a move down to 6705.25 before two way trade ensues.
Hypo 3 stronger sellers trade us down to 6675.50 before two way trade ensues.
Happy Martin Luther King Junior day everyone. MLK had the crazy notion that people should be kind to each other instead of being mean and miserable, so they killed him. His bravery and kindness helped us start down a path to equal rights. The civil rights he stood for are still being challenged today. His calm and reasonable voice continues to resonate in the hearts and minds of our young nation’s people.
I listened to the Joe Rogan/Mike Tyson podcast this morning and suggest you do the same. It’s a trip to hear Tyson reflect on his old self. He is brutally honest about who he was but not able to step back into his competitive mindset at all. He cannot so much as start jogging because he worries it will reawaken the ego that drove him to some incredibly dark places. For some people, complete abstinence from an activity or place or drug is the only option for self-preservation.
I’m reading The Hitchhiker’s Guide To The Galaxy right now. It is a wonderful book that leads the reader to contemplate the purpose of living, and while doing so keeps the tone light and playful.
I went to an old, restored movie theater last night in Detroit and watched Easy Rider. The way Peter Fonda’s character is treated in some areas of the rural south is a disturbing reminder of the mentality still present in many parts of the country—that anyone different looking is bad. Jack Nicholson’s character explains that Americans will talk about freedom all the time and expound how the policies of the United States allow for it, but the second they see someone who is actually free it scares the shit out of them. Especially if the ones who are free choose to live differently.
The future is decidedly feminine. Look at the Pantone color of the year. Or last years. Or how the mid-term elections played out. Our democracy and the perceived freedoms of consumerism have expressed a desire to move away from masculinity. Not because masculinity is bad, it isn’t, but because for some other reason that, if I’m being honest, I don’t truly understand.
I’ve never assigned too much energy to understanding why something is the way it is. All I ever concern myself with is being in a position to benefit from the way things are. I find tools that seem helpful and, I go to work. I write, poorly, but it helps me gather my thoughts. I teach the fundamentals of investing and trading to anyone in Detroit who will come to my meetups. It forces me to distill fifty blog entries into 10-15 minutes of talking. This helps me solidify the most important principles of my approach so they don’t crack under pressure.
Next week is a bye week for the stock market. OPEX is behind us. No major tech companies are reporting earnings. The IndexModel is signalling calm conditions for a second consecutive week. The government is shut down. No major economic meetings or releases are taking place.
I’ll be trading, long only. If we have a gap down inside the prior day’s range, I’ll be working that gap fill. Other trades I will take include targeting the overnight high or range extension up. My primary expectation is for a calm drift clean through Friday.
It seems like all the manufactured hostility is sort of frozen. Perhaps it is because a large part of the country was just blanketed with a fresh coat of snow. I dunno. Maybe it’s all the time I’m spending in 110 degree yoga studios. Again, I dunno. All I know is all my context points to next week being a bye week for the stock market.
Exodus members, the 218th edition of Strategy Session is live, go check it out!
Fri Jan 18, 2019 8:49am ESTComments Off on NASDAQ up near weekly high heading into Friday, here is the trading plan
NASDAQ futures are coming into Friday gap up after an overnight session featuring extreme volume on elevated range. Price worked higher overnight, slowly auctioning its way back up to the Thursday cash high. As we approach cash open, price is hovering just below Thursday’s high.
On the economic calendar today we have Industrial/Manufacturing production at 9:15am followed of U. of Michigan’s primary reading of January sentiment at 10am.
Yesterday we printed a double distribution trend up. The day began with a gap down and push lower. Sellers discovered a responsive bid right at Tuesday’s naked VPOC 6646 and the auction began working higher. The overnight gap filled, then we went range bound along Wedneday’s VPOC. Later in the day price jolted to a new weekly high and despite finding responsiev sellers just up above the 12/14 high, we ended the day in the upper quadrant—in a newly formed distribution.
Double distribution trend up.
Heading into today my primary expectation is for buyers to gap-and-go higher, closing the 12/13 gap up at 6772.50. Look for sellers up at 6803.25 and two way trade to ensue.
Hypo 2 sellers press into the overnight inventory and close the gap down to 6720 before continuing down through overnight low 6710. Look for buyers down at 6700 and two way trade to ensue.
Hypo 3 stronger buyers sustain trade above 6800 setting up a move to target 6820 before two way trade ensues.
Thu Jan 17, 2019 11:29am ESTComments Off on “Overplay for the underlay” on semiconductors
Yesterday we looked at the pivot level the NASDAQ transportation index is trading at. Transportation bears are being pressured today after buyers received newfound conviction from the $CSX earnings. Now let’s turn our attention to the real driver of stock market gains—the PHLX semiconductor index. It has the classic overplay for the underlay* set-up.
After successfully setting up the overplay for the underlay, semiconductors are catching a bid off the old triangle consolidation. Pretty straightforward stuff here folks—if buyers defend here we are likely to see a sharp move higher. If not, probably more chop. My gambles and bias say we go higher. Yours should conform to your own damn research and bias. Trade accordingly.
-RAUL SANTOS, JANUARY 17th, 2019
*Writer’s note – you will not find the ‘overplay for the underlay’ trade setup in any published books on technical analysis. It is a term taken from the streets of Detroit, for when a dude pretends he’s not interested in something, like a real thick girl, until everyone’s attention has moved away, then he sweeps in and presents himself as a beta cuddle/sex slave.