NASDAQ heading into final full week of August near ATH // here is Monday trading plan

NASDAQ futures are coming into the second-to-last Monday in August gap up after an overnight session featuring elevated range and volume. Price steadily ascended higher until about 10:30pm New York, gradually trading up near (but not exceeding) all-time-highs. Since then price has balanced up near last week’s high and as we approach cash open price is hovering right along it.

On the economic calendar today we have PMI composite flash at 9:45am followed by existing home sales at 10am.

Last week featured weakness early Monday which discovered a strong responsive bid and sent markets rallying hard into Monday’s close. Gap down Tuesday reversed much of the Monday gains followed by selling pressure through Thursday morning. Strong bidders reversed the auction Thursday morning and rallied price nearly back to unchanged by week’s end. The Russell 2000 was significantly weaker that the other major indices.

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 slight gap up inside Thursday range. Buyers stepped in after a brief open-two-way auction in range sending price up through the Thursday high before the overnight gap could be filled. Price worked up near the Monday open gap but did not exceed it before sellers stepped in and worked price back down to the daily midpoint. Buyers defended the mid and we bounced away from it, flagged along the daily high for a bit and then rallied back up to the high by end-0f-day.

Heading into today my primary expectation is for buyers to reject a move back into Friday high 15,098 setting up a move up through overnight high 15,153.50. Look for sellers up at 15,161 and for two way trade to ensue.

Hypo 2 stronger buyers take out all time high 15,172.25 on their way to tagging 15,200.

Hypo 3 sellers work down through overnight inventory and close the gap to 15,091.75 setting up a move down to 15,040.50.

Levels:

Volume profiles, gaps and measured moves:

Comments »

Bearish. Let’s be clear about that first. These next five trading days the models that dictate my actions are bearish.

They were bearish last Sunday also and I’m kicking myself for the errors I made last Sunday. You see, I was all hyped up on corn dreams, joyful at the prospect of hustling corn down in the hood whilst planting pumpkins. I was so keyed up on farmer’s stamina that made a very human error and improperly observed the data that was directly in front of me.

Then I exacerbated the issue by sharing my research online to you lads, the good folks of the iBankCoin metaverse.

I am not going to apologize. Regretful as it was I am here today with a clearer mind and the humility that I had to earn all last week.

Toiling like a damn junkie.

Building a farm will absolutely defeat you, physically and mentally at least 2-3 times during the development stage. It’s inevitable. So much work. So much planning. So many things have to go right and the whole time Mother Nature is indifferently throwing mystery and challenge at your vision.

Which is fine. I understand why folks packed up and moved to the cities 100 years ago. Farming is hard.  Anyhow I was all keyed up with farm vigor and corn aspirations (ended up clearing a little over 40 fiat american in corn money, lol) that I missed the signal coming out of IndexModel.

IndexModel was bearish last Sunday. It is bearish again today.

Historically when the model goes Rose Colored Sunglasses I would fire up the old doom tone and write a real horror-show of a blog entry, prophesizing the end of western civilization. These days I know better that the west is the best.

That said The West did take an L last week. The dang Taliban, man. They won. Or something. We kind of lost. I think.

Real life is not as absolute as your american football game. There is nuance. Kind of winning, kind of keeping up with the times. But the net sum of the events seems to skew to the negative side of the ledger for the good old united states and the west in general.

Or course these events bring out the general crazies. That doesn’t matter. What matters is we have some contextual reason to be cautious.

Then there’s all the data in this week’s strategy session. Cold truth. It is bearish also.

Then there’s overall sentiment which to this humble observer seems to be teetering on hubris. Folks regularly offer to pay me 6,000 fiat american dollars from my Twitter avatar.

Let that fact simmer….

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Long-time readers of this hear Humble Raul blog [HRb] know that I have been calling for the ’20s to be a period of economic prosperity the likes of which no living human has ever seen. Driven on the wings of artificial intelligence and automation. Daddy Elon said something so true and visceral during the AI conference last week. That robotics are simply distilled labor. So fucking true.

So you know that my longer term core belife is that we are in a period of major economic expansion. Expansion more resembling the curvature of Moore’s Law than linear. The West will continue to thrive and we’ll have to do EMPATHATIC things like provide humanitarian relief to any poor soul stuck in a static society like the fucking Taliban nation. Domestically we’ll have to offer universal basic income to everyone as more-and-more menial work is given to the robots.

This will all come to pass and I’ll still be sitting here. Farming some sophisticated set up and extracting fiat american from the global financial complex. Rippling muscles and a real smooth technique for the trade.

Bullish on technology. Bearish for the next five days.

As always, we’ll take it one day at a time. Be sure to drop by and read the morning reports.\

Okay for now.

Raul Santos, August 22nd 2021

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And now for the 352nd edition of Strategy Session, enjoy.

Stocklabs Strategy Session: 08/23/21 – 08/27/21

I. Executive Summary

Raul’s bias score 3.20, neutral*.  Sellers engage the tape early in the week, pressuring the markets lower. Then look for GDP data out Thursday to accelerate price to the downside and into the weekend.

*Rose Colored Sunglasses [RCS] bearish bias triggered, see Section IV

II. RECAP OF THE ACTION

Weakness early Monday discovered a strong responsive bid with markets rallying hard into Monday’s close. Gap down Tuesday reversed much of the Monday gains followed by selling pressure through Thursday morning. Strong bidders reversed the auction Thursday morning and rallied price nearly back to unchanged by week’s end. The Russell 2000 was significantly weaker that the other major indices.

The last week performance of each major index is shown below:

Rotational Report:

Third consecutive week with poor sector leadership. Energy hit hard.

bearish

For the week, the performance of each sector can be seen below:

Concentrated Money Flows:

Ledger skewed heavily to the negative side, affirming the major sell flows we observed six weeks back.

bearish

Here are this week’s results:

III. Stocklabs ACADEMY

More on context

Twitter is the ultimate gauge of sentiment for me, more than any other venue real life or online. I’ve curated my steam for the last 10 years to be mostly speculators and business owners. Risk takers.

These types of inputs can be noisy and I go through great lengths to ensure they don’t become harmful to my performance. There are really only a few things I am looking for:

Foremost is signs of over-confidence/excess. My greatest weakness in trading is overconfidence. It leads to the worst kinds of errors—missing a signal from the trading models and deviation from my plan. If you see it you be it and I’ve been seeing some overconfidence on the Twitterspehere. Talk of buying new  cars. Traders reaching new milestones in their equity curve. Wonderful accomplishments, no doubt, it brings me joy to see others do well in this game, but the talk makes me a bit uneasy.

A big part of this is coming from the crypto community which has just enjoyed a rather spirited rally away from the hard selloff that began back in March.

Anyhow, this sentiment, combined with all the other context we codify using Switchboard has me feeling quite bearish into month-end.

Note: The next two sections are auction theory.

What is The Market Trying To Do?

Week ended searching for sellers

IV. THE WEEK AHEAD

What is The Market Likely To Do from Here?

Weekly forecast:

Sellers engage the tape early in the week, pressuring the markets lower. Then look for GDP data out Thursday to accelerate price to the downside and into the weekend.

Bias Book:

Here are the bias trades and price levels for this week:

Here are last week’s bias trade results:

Bias Book Performance [11/17/2014-Present]:

Semiconductors look to be back in range

Markets fluctuate between two states—balance and discovery.  Discovery is an explosive directional move and can last for months.  In theory, the longer the compression leading up to a break, the more order flow energy to push the discovery phase.

We are monitoring two instruments, the Nasdaq Transportation Index and the PHLX Semiconductor Index.

Transports had a bit of a false start — breaking out from the downtrend only to be knocked back into it. This chart has lost some of its structure. It appears to be in a mini-balance of sorts with the intermediate-term trend being down.

See below:

Semiconductors lost their nearest support zone, a level that I expected to hold. Now the index appears to be back inside of its prior range and could be set up to traverse lower and test the bottom boundary.

See below:

V. INDEX MODEL

Bias model is Rose Colored Sunglasses bearish for a second consecutive week.

We had a Bunker Buster twenty-five weeks ago.

Rose Colored Sunglasses is a bearish bias that calls selling pressure throughout the week.

Here is the current spread:

VI. QUOTE OF THE WEEK:

“Keep focused on the step in front of you. Nothing else matters.” – Bear Grylls

Trade simple, execute one trade then the next

Comments »

NASDAQ futures are coming into the Thursday before option expiration down -100 after an overnight session featuring extreme range and volume. Price was balanced overnight until about 2am New York when sellers stepped in and drive price lower. The selling campaign took price down to levels unseen since mid July. At 8:30am jobless claims data came out better than expected and as we approach cash open price is trading down near the lows of July 21st.

Also on the economic calendar today we have 4- and 8-week T-bill auctions at 11:30am followed by 30-year TIPS auction at 1pm.

Yesterday we printed a normal variation down. The day began with a slight gap down. After a brief open two way auction buyers resolved the open gap and continued higher to briefly probe above the overnight high. Just before buyers could go range extension up, around 10:27am the poked above the daily high and the auction failed. This sent price traversing the entire daily range and into an early neutral print. Price sort of walked over the mid once more before sellers made a new daily low. There was one more check back to the mid around 2:45pm before sellers began their final selling campaign which would continue right up into the closing bell, closing on the lows.

Heading into today my primary expectation is for buyers to work into the overnight inventory and close the gap up to 14,851.75 before two way trade ensues.

Hypo 2 stronger buyers tag 14,892.50 before two way trade ensues.

Hypo 3 full on liquidation down through overnight low 14,710.50 early on setting up a move down to 14,600.

Levels:

Volume profiles, gaps and measured moves:

Comments »

NASDAQ futures are coming into the Wednesday before OPEX essentially flat after an overnight session featuring elevated range and volume. Price was balanced overnight. Balancing along the Tuesday midpoint. At 8:30am housing starts/permits data was mixed with starts below forecast and permits above. As we approach cash open price is trading just above the Tuesday midpoint.

Also on the economic calendar today we have crude oil inventories at 10:30am, a 20-year bond auction at 1pm and the FOMC minutes at 2pm.

Yesterday we printed a neutral day. The day began with a gap down in range and after a brief test higher at the open sellers drove into the tape, effectively tagging the Monday VPOC which had stayed down near the lows. Buyers reacted here, driving price to an early range extension up which was met with swift responsive selling. These sellers managed to press prices into a neutral print and down below Wednesday’s low. Low of day would print a bit after 1pm New York and we spent the rest of the session working back towards the daily midpoint, eventually closing slightly above it.

Heading into today my primary expectation is for buyers to work up through overnight high 15,028.25 before two way trade ensues.

Hypo 2 sellers press down through overnight low 14,951.50 on their way to tagging 14,900.

Hypo 3 full on liquidation down to 14,827.

Levels:

Volume profiles, gaps and measured moves:

Comments »

NASDAQ futures are coming into Tuesday with a gap down after an overnight session featuring extreme range and volume. Price briefly poked higher overnight, taking out the Monday high by a few ticks before falling about -50 off of it, balancing for several hours, then continuing to campaign lower. At 8:30am retail sales data came out much lower than expected. On that note, Walmart earnings this morning exceeded analyst expectations despite a -34% drop in profitability year-over-year, hit by tighter margins and higher expenses. The retail giant is -0.50% in premarket trade. As we approach cash open price on the NASDAQ is hovering a bit above the Monday midpoint.

Also on the economic calendar today we have industrial production and business inventories at 10am followed by a speaking engagement with Fed Chairman Powell at 1:30pm.

Yesterday we printed what can be best described as a neutral extreme up. The day began with a gap down in range and after a brief test higher that did not quite fill the gap sellers stepped in and drove lower. The drive saw price down through last week’s low on heavy volume and made an early range extension down before responsive buyers stepped in. The auction sharply reversed in the late morning, and began to campaign higher, steadily making its way back to the midpoint and then breaking through it on the way to pressing neutral, effectively closing the overnight gap and then closing on the highs.

Interestingly, value on the day never shifted off the lows, suggesting the market may be eager to revisit the lows.

Heading into today my primary expectation is for buyers to work into the overnight inventory but stall around 15,071 setting up a move down through overnight low. Look for buyers down at 15,000 and for two way trade to ensue.

Hypo 2 buyers work a full gap fill up to 15,134.75 before two way trade ensues.

Hypo 3 sellers press down through the Monday low 14,917.25 and tag 14,000.

Levels:

Volume profiles, gaps and measured moves:

Comments »

NASDAQ futures are coming into third week of August gap down after an overnight session featuring elevated range and volume. Price was balanced overnight, balancing along the lower half of Friday’s range. As we approach cash open price is hovering inside the Friday range, down near the lows.

On the economic calendar today we have 3- and 6-month T-bill auctions at 11:30am.

Last week we saw a steady, week-long rally in the Dow and S&P while the NASDAQ and Russell marked time. The last week performance of each major index is shown below:

On Friday the NASDAQ printed a normal day which is anything but. Happening a bit less than 20% of the time. The day began with a gap up inside range. Sellers quickly resolved the gap after a brief open two way auction. By 9:45 the daily low was in and price began to campaign higher rallying up near the weekly high but never exceeding it. Instead an excess high would form within the first hour of trade before the rest of the session was spent chopping the mid.

Heading into today my primary expectation is for buyers to work into the overnight inventory and close the gap up to 15,125.25. Buyers continue higher from here to take out overnight high 15,130 before two way trade ensues.

Hypo 2 sellers press down through overnight low setting up a quick tag of 15,046.

Hypo 3 stronger sellers trade down to 14,988.75 before two way trade ensues.

Levels:

Volume profiles, gaps and measured moves:

Comments »

Part of what I love about futures trading and farming is that you’re regularly forced to think three months ahead. All sorts of effort is spent these days to ground oneself in the present and I am here for it. That stated, I love when a good plan comes together.

Right now everyone is hot on corn. When was the farmer hot on corn? In May. I have corn coming out of my ears boys. This week I’m setting up a small farm stand on a moderately busy corner in the city to sell corn. The hustle is alive.

But if you think unmedicated hyperactivity disorder RAUL is going to just sit behind a table all day waiting to sell corn I dunno man maybe you’re unfamiliar with my style.

I have about 200 pumpkin plants here at Mothership that I will be transplanting in the coming days. The plan is simple:

Load the diesel truck with about 175 gallons of water, table, umbrella, corn and as many pumpkin plants as’ll fit. Stop at bank on way for 50 fiat american singles. Mosey on down to the farm. Set up table then go to work planting punkin. Stopping as needed to hustle corn.

Here’s the thing. I think sometimes we become so very out of touch with reality when we deal in the financial markets. It is very liberating to grow something from the ground that sustains you physically and financially. I doubt I would have been able to spend 700 fiat american per penguin jpeg if I didn’t also work the land. The dichotomy helps me.

So does pulling weeds. Working the land will humble even the most hyperactive lunatic. It will break the spirit and the body. Then the only choice is to go on the mend and plan your next campaign. On-and-on until this musty old meat sack called home finally kicks the bucket.

And that day comes closer with each moment.

There is one shot at immortality. Build great structures out of steel and properly graded cimento. Document the journey. Perhaps then man can achieve footnote status is some bibliography nobody reads.

“All I want to do is have some fun before I die.”

I believe that was Sheryl Crow.

That’s it for now. Top stock pick going into year-end is Twitter. Top crypto: ether. Top produce: corn baby.

Raul Santos, August 15th 2021

And now for the 351st edition of Strategy Session. Enjoy:

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Stocklabs Strategy Session: 08/16/21 – 08/20/21

I. Executive Summary

Raul’s bias score 3.50, medium bull*.  Calm drift, perhaps with a slight upward bias. Watch earnings of out Walmart Tuesday morning along with Powell comments in the afternoon to introduce a bit of direction to the tape. Then watch for a potential acceleration or pivot Wednesday afternoon once we hear earnings out of NVIDIA.

*extreme Rose Colored Sunglasses [RCS] bullish bias triggered, see Section IV

II. RECAP OF THE ACTION

Steady, week-long rally in the Dow and S&P while the NASDAQ and Russell marked time.

The last week performance of each major index is shown below:

Rotational Report:

Second consecutive week of leadership in all the wrong sectors. Tech still [barely] positive.

neutral

For the week, the performance of each sector can be seen below:

Concentrated Money Flows:

Ledger skewed slightly negative this time after being slightly positive on the prior report. Still we have not seen anything big enough to negate the major selling we saw five weeks back.

neutral

Here are this week’s results:

III. Stocklabs ACADEMY

Building context

One of the biggest challenges I had early in my trading was wrapping context into my actions. Context is a big word which encapsulates everything. Everything. Seasons, celestial alignments, policy, sentiment, news, industry, culture and more.

I codify it as best as possible. Ranking these type of things from 1-to-5, one being extremely bearish, five extremely bullish. Then over the years I made slight tweaks to the data, giving more weight to things that appear to be more important to stock market behavior.

This is not a perfect system, but it is the best way for me to consistently add a layer of context to my trades. I do this in excel. Here is a screenshot of the switchboard I build for trading the NASDAQ:

Note: The next two sections are auction theory.

What is The Market Trying To Do?

Week ended searching for sellers

IV. THE WEEK AHEAD

What is The Market Likely To Do from Here?

Weekly forecast:

Calm drift, perhaps with a slight upward bias. Watch earnings of out Walmart Tuesday morning along with Powell comments in the afternoon to introduce a bit of direction to the tape. Then watch for a potential acceleration or pivot Wednesday afternoon once we hear earnings out of NVIDIA.

Bias Book:

Here are the bias trades and price levels for this week:

Here are last week’s bias trade results:

Bias Book Performance [11/17/2014-Present]:

Semiconductors are the big context in the upcoming week

Markets fluctuate between two states—balance and discovery.  Discovery is an explosive directional move and can last for months.  In theory, the longer the compression leading up to a break, the more order flow energy to push the discovery phase.

We are monitoring two instruments, the Nasdaq Transportation Index and the PHLX Semiconductor Index.

Transports broke free from discovery down for the first time since the trend began back on June 1^st. Watch for buyers to defend their conviction buying day. If not we could see a major liquidation.

See below:

Semiconductors made that new high and have been consolidating since then. We are heading into the week with the PHLX resting atop prior resistance. Primary expectation is for buyers to defend this region setting up a new leg higher. If not, a quick move down through range. NVIDIA earnings due out Wednesday afternoon may decide the fate of this setup.

See below:

V. INDEX MODEL

Bias model is extreme Rose Colored Sunglasses bullish for a second consecutive week after being Rose Colored Sunglasses bearish two weeks back after being extreme Rose Colored Sunglasses bullish three weeks back after being neutral four weeks back after being extreme rose colored sunglasses bullish for the three weeks prior to that. Bias model was neutral eight weeks back after being extreme Rose Colored Sunglasses bullish bias for the three consecutive weeks prior after being neutral for the two weeks prior to that after being e[RCS] bullish fourteen weeks ago and RCS bearish fifteen weeks ago.

We had a Bunker Buster twenty-four weeks ago.

Extreme Rose Colored Sunglasses is a bullish bias that calls for a calm drift, perhaps with a slight upward bias.

Here is the current spread:

VI. QUOTE OF THE WEEK:

“If the world were a logical place, men would ride sidesaddle.” – Rita Mae Brown

Trade simple, accept irrationality

 

Comments »

NASDAQ futures are coming into Thursday essentially flat after an overnight session featuring normal range and volume. Price was balanced overnight, balancing along the lower quadrant of Wednesday’s range. At 8:30am jobless claims data came out in-line withe expectations and as we approach cash open price is hovering in the lower half of Wednesday range.

Also on the economic calendar today we have 4- and 8-week T-bill auctions at 11:30am followed by a 30-year note auction at 1pm.

Yesterday we printed a normal variation down. Price action was fast early on. Before the bell CPI data put a strong spike into the market and by the the opening bell rolled around there was a gap up in range. After a brief two-way auction sellers drove down into the gap and made short work of closing it. There was a brief battle at the UNCHANGED line before sellers resumed their campaign, effectively taking out the Tuesday low. We chopped along the lows for a bit, making an early range extension low before responsive buyers bid price back up into Wedneday range. We spent the rest of the session sort of chopping along the lower half of the days range, never revisiting the midpoint.

Heading into today my primary expectation is for buyers to work price up through overnight high 15035. Look for sellers up at 15,060 and for two way trade to ensue.

Hypo 2 stronger buyers trade up to 15,100 before two way trade ensues.

Hypo 3 sellers press down through overnight low 14,983 then continue lower, taking out Wednesday low 14,963. Look for buyers down at 14,936 and for two way trade to ensue.

Levels:

Volume profiles, gaps and measured moves:

Comments »

Good morning. No trading report today. Was positioned long ahead of the CPI print not because of the CPI print but because we had a gap down in range and gap down in ranges are my favorite set-up when we’re working with an extreme Rose Colored Sunglasses signal. Which we are.

Anyhow I bagged over 50 handles and that’s enough for me.

I am headed to the farm to toil. Intern Raul called in, down bad with a case of the VID. He has the lab report to prove it otherwise my jaded soul would think he just didn’t want to shovel mulch in 92 degree heat.

Which means I will be on the toil alone. Which again, is fine.

Cheers to good health and strong toils lads.

Raul Santos, August 11th 2021

Comments »

NASDAQ futures are coming into Tuesday with a slight gap up (~+20) after an overnight session featuring normal range and volume. Price was balanced overnight, balancing along the upper half of Monday’s range. As we approach cash open price is hovering right up near the Monday high.

On the economic calendar today we have 52-week T-bill auction at 11:30am followed by 3-year note auction at 1pm.

Yesterday we printed a normal variation up. The day began with a slight gap up in range and after a brief open auction in range sellers stepped in and closed the overnight gap. They pushed a bit beyond the gap fill before responsive buyers came in and formed an excess low that would mark low-of-day. We spent much of the session chopping along the topside of the daily mid before a late session rally pushed us into a range extension up. We ended the day flagging down off the highs a bit, but well above the mid.

Heading into today my primary expectation is for buyers to gap-and-go higher, closing the Thursday gap 15,161 on the way to making to probing above all-time high 15,172.25.

Hypo 2 stronger buyers rally to 15,200.

Hypo 3 sellers press down through overnight low 15,092.75 before two way trade ensues.

Levels:

Volume profiles, gaps and measured moves:

Comments »