Sellers Reassert Themselves, NASDAQ Pro Gap Down

NASDAQ futures are coming into Tuesday with a big pro gap down. The session spent a few hours balanced before 3am when the selling came in and price began trending lower. Sellers managed to push us well below Monday’s close and all of last week’s range. As we head into cash open price is bouncing along the lower ATR band. Both range and volume are extreme 3^rd sigma.

The economic calendar is still light. At 9am we have House Price Index following yesterday’s miss in Existing Home Sales.

Yesterday we printed a neutral day. The market opened gap up, sellers worked the weekend gap closed to the tick (4326.75) before sellers stepped up. Price was unable to take out last Friday’s high before we faded lower and traversed the entire range. Then we faded back up to the mean by end of day. Monday was the 3^rd consecutive neutral day as higher time frame participants continue to push the NASDAQ around.

Heading into today, my primary expectation is for sellers to work a gap-and-go lower. There are some open gaps—one at 4228.25 and another at 4194 that are likely to behave as magnets. There is a ledge/weak low around 4227 which price may spill over causing an acceleration down to the 4200 zone.

Hypo 2 buyers work into the overnight inventory. Work up to 4280 but struggle to recapture Monday’s range low 4286.50 before sellers step back in and take out overnight low 4247.25. Look for a move to target the open gap at 4228.25 and a test, but failure to spill over the 4227 ledge before 2-way trade ensues.

Hypo 3 vigorous buying early on, take back Monday’s range low 4286.50 early setting up a full gap fill up to target 4310 before 2 way trade ensues.

Levels:

There is order to these markets. I know they seem noisy and chaotic, but every passing day proves to me how methodical this device is. A market exists to bring together as many buyers and sellers as possible. Price is the mechanism and volume is the measure of proficiency. Then you peel back a layer and see how the underlying components are behaving, constantly reminding yourself not to get caught in the minutia. My approach is tailor made for these somewhat choppy waters.

My levels are straight fire. Every time I take iBankCoin headline, someone rolls their eyes at my morning NASDAQ report. They call it dry and boring. It brings me joy how most people have no desire to understand the process behind trading. It means there’s lots of meat on the bone for me.

My models are coming of age. I remember 44 weeks ago how I excited I was to take over Weekly Strategy Session (now Exodus Strategy Session and better than ever). It meant more work, but it also meant accountability to my research. I wouldn’t just throw out picks all willy-nilly and come back next week with a clean slate, like a Catholic. Nope, I set out to build a model and show anyone willing to stick around when I was right or wrong.   It turned out I was wrong about a few ideas I had on trading.

I have a powerful set of tools. Algos, charts, quality data, and order flow. The mother ship is agile and picks up disturbances on the exchange seconds before others catch wind. Priceless seconds when it comes to execution.

The last month has treated me well. Today made me feel good about myself, just like Bluestar said it would. Now all I have to do is love the discipline I know and let it support me through Wednesday which, according the mystics is when the world will end.

As always, TBD.

You have to be an opportunist.  My model is nearing 50 weeks old, meaning it has nearly 50 samples, meaning it’s nearing statistical significance.  I, being the eager S.O.B. my mother birthed, have now taken it upon myself to press my newfound edge.

It’s real nice, 80% nice.

According to my edge, you just missed your buying op.  Targeting /ES 1991, the best year of my life.  I was 6.

I covered BIS, thanks Hillary.

Biotech is taking a hit moments after Hillary Clinton sent the following tweet:

Price gouging like this in the specialty drug market is outrageous. Tomorrow I'll lay out a plan to take it on. -H https://t.co/9Z0Aw7aI6h

— Hillary Clinton (@HillaryClinton) September 21, 2015

The Senator and hair icon sent this tweet out and my BIS went soaring. You know what I say—I don’t care about the why, only that what.

Nasdaq futures traded a wide but not extreme range overnight on elevated but normal volume.  Price managed to exceed Friday’s low, briefly, before pushing back into range and balancing.  Around 4am aggressive buying pushed in and worked price into the upper quad of Friday’s range before finding sellers and balancing out.  We are headed into the open with price hovering around pro gap territory.

This week’s economic calendar is relatively light compared to last week.  On the docket for today is Existing Home Sales at 10am.

Last week price worked higher all week into Thursday afternoon’s FOMC rate decision.  When The Fed delayed the rate hike investors reacted by spiking price higher.  By the end of the day the market rolled over and closed near session low.  Friday opened gap down and churned sideways.  The result was a flat-to-up market on the week.  Friday printed a neutral day.

Heading into today my primary expectation is for sellers to work into the overnight inventory.  Look for sellers to close the overnight gap down to 4326.75.  Then expect price to overshoot the gap fill and test down to 4308.50 before buyers step up and two way trade ensues.  Then look for sellers to target a test below overnight low 4297.75.

Hypo 2 sellers struggle to close overnight gap down to 4326.50.  Instead buyers defend around 4338 and continue working higher.  Look for a test above overnight high 4354.50 and a buyer target Thursday’s open gap up at 4366.25.

Hypo 3 gap and go up.  Take out overnight high 4354.50 early and set up the gap fill up to 4366.25.  After some churn price continues higher to target 4378.50.

Levels:

More than ever I need to tune out the media. Furthermore, I need foster the ability to listen to other people’s investing/trading opinions without jumping at the impulses they trigger. You’ll have to excuse my defense mechanism which is to aggressively challenge you. This mostly happens on Twitter and Stocktwits. If you come here, to my parcel of tier-one internet real estate, and leave a message—I will be rather cordial. But out on the streets I can be punchy.

I had a serious stat session yesterday morning. I woke up to organ pain. Organ pain is a fun thing that happens when you turn 30 and have about 10 years of binge drinking under your belt. Who needs an alarm clock when high blood pressure is blasting muddy fluid through your veins and arteries? Anyhow, I ran through 8 years of NYSE tick data, clean data from my homies at IQFEEd, and have made some interesting observations around the 3^rd sigma tick. It will require testing, but my initial plan is to call these extreme ticks “party poopers”.

I name things. I name statistical anomalies because then they are mine. I have a skittish rescue dog. She is sweet, but always scanning the room for escape routes.  I named her Momo, like those bastard stocks.

Then there’s my baby, Rose Colored Sunglasses (RCS) which nailed the correction. You guys sleep on your boy, so most of you paid no attention when I cried wolf. Perfect, I say. I do not analyze and blog in pursuit of applause or cackling tongues. I do it because I intend to be the best.

Exodus Members – this week’s Strategy Session is published. Check, check it out.

For the last three months I watched atrocious breadth in the REIT sector. They were completely abandoned as if real estate was dead and interest rates were on the rise. The more I watched it, I was like, “Dude, I need some REIT action.”

I already own a house, and after yesterday’s good news I plan to pull all the equity out and go buy another house to lever up on physical housing.  Make no mistake, we are entering the roaring 20’s and intend to be a rich man. Anyhow, I didn’t really see the need to add residential REIT exposure. Therefore, and with the help of Exodus, I chose DOC. This REIT owns stupid medical office space. These are ugly buildings where one sits for hours despite being “on-time” for their appointment. Doctors invest in this REIT because they’re weird and run in small circles and smell like antiseptic.

I’m not saying buy DOC. Go forth and cast your net into the REIT space on your own. We have 7 different REIT industries inside Exodus. Get in there, parse out the shit with the screener, and find the ones offering sick dividends with promising growth.

With ZIRP fastened in place by The Fed, demand for dividend stocks will increase. With interest rates held down real estate will continue to flourish, all kinds. With REITS left for dead, there are deals out there. These are ideal conditions for REIT exposure, IMO.

Note: I used as many acronyms as possible in this post, FTW

Nasdaq futures are pushing lower heading into September OPEX day, a quad witching day. The session was balanced mostly until about 6am when a wave of selling pushed through. Price managed to push down through Wednesday’s range and most of Tuesday’s range to put the index back to unchanged on the week. Volume is elevated but not extreme while range is in extreme territory.

On the economic calendar, we have Leading Indicators at 10am, Household Change in Net Worth at 12pm, and the Baker Hughes Rig Count at 1pm.

Yesterday we printed a neutral extreme down session. The morning started out gap down and price slowly drifted higher ahead of the FOMC rate decision. 3^rd reaction analysis yielded the buy signal and soon after price was pushing up. Just beyond the weekly ATR band sellers stepped in. We then traversed the entire daily range to close near the low.

Heading into today, my primary expectation is for buyers to work into the overnight inventory. Look for a move up to 4361.25 before sellers come in and two way trade ensues.

Hypo 2 sellers push off the open, take out overnight low 4318. Look for responsive buyers down at 4308 otherwise sellers move to target 4299 then two way trade ensues.

Hypo 3 sellers push hard, down through 4288, setting up a liquidation down to 4258.25.

Hypo 4 full gap fill trade up to 4366.25.

Levels:

Gentlemen, Ladies…I bring forth good news.  The Federal Open Market Committee received me well. I was offered a seat near the head of the table, naturally. What I proposed was a period of decadence that lasts no less then until Christmas time, a special time, when I hand feed the children butterscotch candies.

Society can now pursue their highest pleasure. Long live the consumer.

My work here is done. Please place me back into my phone booth. Good day.

I just received word that the venerable Jeremy Bentham will preside over this afternoon’s Fed meeting. He brings to the table several hundred years of voting experience. His radical allegiance to the dovish faction has often been questioned by reporters. Most recently he was quoted as saying, “Money and its availability is paramount if we are to bring forth society’s hedonistic satisfaction.”

Critics bring attention to his insistence on keeping a set of glass eyeballs in his trouser pocket for the last 10 years of his life. They find his commitment to preserving his body irresponsible and disgusting.  Nevertheless, his headless cadaver’s voting power is likely to sway the cast at the Federal Reserve to delay liftoff until next year.

Alas, stocks continue marching higher as we wrap up New York lunch. Have you had a satisfying meal? Hopefully you left room for the afternoon feast.