I Killed A Badger Once

The markets are in slow motion.  Pull up a chair because I have a troubling story to tell. Dachshunds are vicious little monsters. They were bred by Nazis for killing ground varmint. The quality of a dachshund is determined by their body-to-foot ratio, how smooth their coat, and the length of their ‘flag’.

The schnitzel-eating Germans call a dachshund tail a flag because these dogs are designed to go into a hole and latch onto varmint.  At this point you grab the dog by the tail and pull her and marmot or whatever out.  The better the flag, the easier it’s seen and able to be grabbed.

Anyhow I love these dogs, and my modern dachshund Momo is no killer:

One cold morning, just after buying my house I came outside to a raucous.  Bruno (the uglier of the two dogs above) was going insane and Momo was eye-to-eye with a badger twice her size.  Some deep canine instinct convinced my dog she could take out this massive creature.  I had to intervene, otherwise I would be left with thousands of dollars in vet bills or worse, a dead dog.

Long story short I grabbed a steel rake and bashed the badgers skull in, rake tongs first.  It was horrible.  The poor thing’s tail spun in circles like a helicopter for 10 seconds (it felt like 10 years).  It was the worst act I have ever commited.  I’m not a killer.  I hate killing and lately I’m finding it difficult to eat meat.

This is why I know I cannot hunt.  Every year my friends ask to me join them on their murderous hunting campaigns.  I would rather eat grass then hunt my own food.

I gave the badger a proper Italian burial.  I wrapped the carcass in cheese cloth soaked with extra virgin olive oil (squeezed by the nuns of Tuscany) before lowering the body into a deep hole.  His little body rests beside my grape vines now.  The dogs were fine.  Actually, I think they liked the whole event.  They are nasty little fuckers.

Nearly all month, or at least since ripping off the lows, the Russell industrial average has been pinned sideways. While the NASDAQ and others enjoy gratuitous gains, the little Russell is locked into balance.

You may be asking yourself, “Why has this been happening Raul? Why won’t they set Snake Plissken free?” Listen to me, we are at the composite high volume node! This is the most traded price level going back over two years. Look:

The market likes this level. Sellers and buyers agree this is a fair price at which to exchange Russell tickets. And until a catalyst comes along we will keep trading at this level. HOWEVER, when a catalyst does come rolling in, it will cause a grandiose discovery phase to ignite.

Every trade has a buyer and a seller. When price compresses it creates boundaries. When we leave those boundaries half of the participants will be proven wrong. Their actions fuel discovery. This is auction theory 101, class is in shesh, and I am your sexy and mysterious teacher (no homo).

I ventured off the mother ship yesterday and went deep into the bush. Coming off big FOMC wins it always behooves me to step back and check myself, before I wreck my hard earned gains.

But from high atop a tree the one thing that stands out to my eye is the ascending wedge seen on the daily chart of the NASDAQ. You can see it on Facebook as well.

Facebook led us into the rally so keep an eye on it. My take: we explode higher from this wedge. Per the TOS mobile app:

</a

Per the $IBB, the biotech industry just responded to the first level I was watching for sellers.  Now I am sitting here considering the short.  There is an old axiom I hold dear however, which states, everyone always shorts the first rip too soon.  Plus, this is just a fib retracement level–not a real level…if such thing exists.  Check it:

Either I miss a solid entry here or I avoid taking heat when we ‘check back’ to the Hillary tweet which is my conviction level.  Either way biotech is the best short opportunity I see in the market right now.

The NASDAQ futures are lower as we head into cash open after a globex session that featured an elevated range on normal volume. Price spent most of the session working lower before coming into balance on the topside of our 3-day micro-composite, which is about the same level as the midpoint of the range yesterday. At 8:30am several data were released including Initial/Continuing Jobless Claims, Annualized GDP, and Personal Consumption. The initial reaction is flat.

Coming up today, we also have Pending Home Sales at 10am and Natural Gas Storage stats at 10:30am.

Yesterday we printed a neutral extreme up day. Price opened gap up and worked lower to kiss the micro-composite volume point of control (MCVPOC) around 4620 before finding responsive buyers (responsive relative to the open, initiative relative to the micro-composite). From there we worked higher into the FOMC Rate Decision.

The FOMC rate decision introduced a hard sell into the market which traded right down into the value area low of the well-established market profile structure we were monitoring before again finding responsive buyers. Third reaction yielded the buy and we rallied higher to close the Apple earnings gap from last quarter (7/21/15, 4668.25) and tag the upper ATR bracket at 4675.25.

Heading into today, my primary expectation is for sellers to make an early push down through overnight low 4642.75 to target 4637.50. From there look for responsive buyers who work up to 4661 before two way trade ensues.

Hypo 2 buyers push into the overnight inventory and close the gap up to 4673.25. Look for the buying campaign to continue, testing above yesterday high 4678.25 and stalling out and finding selling up near 4680.

Hypo 3 sellers advance down through 4637.50 to target 4628.75 before two way trade ensues.

Hypo 4 liquidation takes hold, sellers press down through 4624 and sustain trade below. This sets up a secondary leg to test yesterday session low 4600.50 effectively unwinding the post FOMC rally. This move could continue down to 4580 if speed accelerates.

Levels:

Well I just made my week. Making ends meet has been tough with volatility completely absent so I was really looking forward to the action this FOMC rate decision would bring.

We had a well-defined profile established heading into the event and when the first reaction took us right to the value area low I was there to fade. What a solid level—it hardly took any heat but hey, market profile is just another passing fad. That orange TPO is how babies are made:

Trading my levels is the one thing I do well. The other is 3^rd reaction analysis, which yielded the buy.  That shelved RCS entirely and allowed me to press some longs for more than just a scalp.

And now I can be the lazy man I was destined to be.   I will be watching GoPro earnings after the bell whilst eating a bathtub full of cheesed doodles.

You may have noticed an absence of Twitter commentary from me yesterday. You may have thought, “That is odd, isn’t it a top three holding for this Raul fella?”

I was angry, not because the stock was down but, because men took to their podium (via the Twitter platform, of course) and said stupid things. They said things that were detrimental to the investor class. They were detrimental because they came from a position of perceived authority. Fodder like this, from a BLUE CHECK-MARKED PUNK:

TWTR is crashing.

— Jay Yarow (@jyarow) October 27, 2015

I have been looking for a reason to unfollow this miscreant for months. I am a patient man, gagging on information at times to test my stoic grit, but knowing wholeheartedly that some people have detrimental life intent.

I did not heroically add Twitter shares this morning. The position is already an oversize ‘ticket out the ghetto’ long. However, and let this echo across the northern hemisphere, I am extremely optimistic about Moments, Periscope, and all other things of the Twitter variety.

It is the best. It will always be the best, thing, ever.  Now leave me to my ritualistic FOMC preparations.

Equity futures traded higher on the globex session with a bulk of the overnight rally fueled by the Apple earnings announcement. Price managed to make a new 3-day high on the news before settling into balance. At 7am MBA Mortgage Applications came out lower than expected which introduced some selling to the tape. At 8:30am Advance Goods Trade Balance data was better than expectations. No reaction so far to it. Heading into cash open, price is sitting just above the session high from yesterday.

At 10:30am we have crude/distillate inventories, but the high impact event is scheduled for 2pm when the Federal Open Market Committee with make their rate decision.

Yesterday we printed a normal variation up day, the second this week, with price slowly drifting higher. The last three sessions overlapped enough to merit drawing a microcomposite (shown below on volume profile chart).

Heading into today, my primary expectation is for sellers to push into the overnight inventory and close the open gap down to 4632.50. From there look for sellers to continue pressuring the tape down to the micro composite volume point of control (MCVPOC) at 4621 before two way trade ensues. From here look for buyers to work higher to target overnight high 4651.75 and the gap Apple left behind last quarter up at 4668.25.

Hypo 2 buyers hold above yesterday’s range and go take out overnight high 4651.75 then close the Apple gap up at 4668.25. Look for responsive sellers up at 4675.25 and two way trade ahead of the FOMC minutes.

Hypo 3 sellers accelerate down though 4620 to take out overnight low 4613.75. Look for responsive buyers at 4604.

Levels:

The ultimate biotech comeuppance is an inevitable inevitability.  Soon this fantasy industry, home to drug dealers and turtlenecked liars, will be the scene of apocalyptic ruins.  The bones and entails of investors will be strewn about rural streets like thanksgiving giblets.

No industry can be spared in our ongoing silent correction.  That’s why whenever my model has a short bias [currently in week 4, feel free to heave a rotten pumpkin at me] I stalk the biotech short.  Last week I was short biotech via BIS with impunity from the bull market siege.  I closed it Friday from a Spirit Airlines seat [Ticker: SAVE, minced meat today].  I have been ferreting in and out of BIS with success but without putting on a proper sized position because I want to short from higher.  Dammit man, these things take time.

But for the patient speculator, the one who doesn’t grow impatient during a slow tape, there comes an opportunity so great, so ripe for the picking, that it will look easy in hindsight.  Simple, perhaps, but certainly not easy–especially if you brain gets in the way [read: brain books].  

Remember how we treat news driven events?  We expect price to revisit them.  Maybe not right away, but without doubt eventually.  Well, Hillary fired her buck shot square in the chest of biotech right around $IBB mark $354.  Do you know what everyone is going to be doing when we rally up to $354?  Think ticker tape parade and endless streams of snarky tweets from the IvanTheK’s of the world.  A real orgy of self-serving braggiato.  Do you know what I will be doing?  Shorting the pants off that move.  You should too.

So as the planets align and the moon shoots a white beam onto the graves of the dead, I am burning wide thickets of sage and casting a chant-like prayers to the universe–Zenu, grant thee a robust biotech rally!

The market now appears fixated upon roasting longs ahead of Apple earnings this afternoon and an FOMC rate decision tomorrow.

Transports are on a nose dive. Oil stocks are back in the furnace. The NASDAQ is flat and entirely hinged on Apple. The Russell is probing the low end of its range.  Breadth is in the toilet.

My book is completely lit aflame and I am reminded why I should not pick stocks but instead GARP on dips by pressing one stupid button like a drunken chimp.

The largest holdings in my book are doing okay but one will report tonight and could effortlessly castrate me three ways to Sunday. The bird, a company ran by vultures. Meanwhile diversified plays like GEM and CNCR are holding up. I may just rotate into these hip new ETFs and focus entirely on picking off NASDAQ levels for less handles and more size.

It never feels like too many moving parts until they are turn against you. With unknown forces just beyond the horizon I am raising some cash to deploy elsewhere. Before doing anything, I think I will enjoy a hot beverage and some crisp autumn air.