WHAT IS THIS BULLSHIT?

I am all for keeping the streak alive but this death march into the weekend will not stand.  I demand a voracious, broad based rally into the Labor Day weekend.

For those of you just tuning in, the Nasdaq futures are on an epic streak of neutral prints.  Today is the ninth consecutive neutral day.  You may be asking yourself, “What is a neutral print, and why does this ‘Raul’ fella care?”  I shall lay forth both answers, and more, for you, the investor class to sop up like a crumbled farm biscuit.

Neutral prints refer to the way a day session pans out.  The range of the first hour of trade is considered the initial balance.  We spend the first hour of trade digesting the overnight session and working through any MOO [market on open] orders.  After that, a way of gauging directional conviction of the higher time frame [i.e. anyone whose positions last longer than a local scalper/daytrader] is to mark which side of the initial balance range breaks.  If we break both initial balance high and low, the day is considered a neutral day.  The only variation we can see once we have gone neutral is a neutral extreme where price closes near either session high or low.

Neutral days are a low probability occurrence.  My [somewhat] dated study shows them occurring about 23% of the time.  The odds of printing a second consecutive neutral session are low as well, about 21%.  When neutral days also tend to occur also interests me.  They often happen at or near inflection points.  Therefore, they are the type of event that makes my trader senses tingle.

If you think about what happens on a neutral day, you begin to appreciate them even more.  The market is enticing both higher time frame buyers and sellers to interact with the market.  They are both being aggressive, and neither is making any headway.  All the posturing and shoving isn’t yielding any results.  But lots of compression is built into the market–fuel for the next move.

Now take that combustible fuel and multiply it 9x, and you have our current situation heading into the holiday weekend.  What a jungle.

So bull or bear, you gotta be asking yourself, “Do I feel lucky?”  Well, do ya, mutha fucka!? [Say the first part like Dirty Harry, the second like Sam Jackson]

Anyone who went forth and procured equities this week has been deemed a ne’er-do-well by the soulless algorithms who have decidedly turned a cold cheek to the equity complex.  Ahead of the holiday weekend, it is my duty to bring you market commentary.  I have been summoned from my phone booth and it is with a heavy heart I bring somber news.  The equity complex is going to rehab.

I like pleasuring myself to stock market gains as much as the next fellow.  Each day I strive to rattle my bones by pressing risk right to the edge of intestinal tolerance.  When the sword of youth swings in your favor, ignorance helps you boldly traverse hazardous landscapes–sashaying down urban streets clutching a heater, pressing your life savings into leveraged ETFs, and consuming a variety of high-grade stimulants.  Eventually the way of the hedonist catches up and you either die or go to rehab.  But you must preserve your legacy by all means necessary.

The stock market is a complicated derivative of man.  We attempt to understand it with numbers, and its movements represent the collective actions of its participants.   The greatest quantity of participants are long.  They are long via money they chipped away from corporate boulders one meaningless hammer swing at a time.  They are invested in its continued success and only check on the drug addicts of Wall Street a few times a year.  They are concerned with the recent behavior.  I am too.

The good news is the common investor is worried.  If these recent actions didn’t yield 5-6 phone calls and 20 letters from friends, enemies, and family then I would wonder if death is our market’s fate.  No, instead investors were hit with a wake up call.  Unbridled gains have been put on hold.  The fastest horses have been stabled and we now share the town mule.

This will take time.  Let the children re-acclimate to school.  Soon adults will return to their maniacal pursuit of happiness via spending hundreds of dollars on Halloween costumes and party favors.  This is when they’ll begin neglecting their troubled teen (the stocked market) and all hell can break loose again.

Nasdaq futures started the after hours session with a sharp knife lower after closing near the daily low. Price then spent most of the time grinding lower. At 8:30am Non-farm Payroll data yielded a sell signal on 3^rd reaction analysis and the subsequent action managed to push us into extreme 3^rd sigma range and volume session stats. Price managed to push down through Wednesday’s lows and down below the open gap left behind Tuesday.

The only other economic event scheduled for today is the Baker Hughes rig count at 1pm.

Yesterday we printed a neutral extreme down. It was the 8^th consecutive neutral day and started with a gap up and 2 way trade. After sellers closed the overnight gap buyers worked higher before stalling at an interesting LVN left behind on 8/31. From there we pushed lower the rest of the day.

Heading into today, my primary expectation is for early liquidation action. Look for sellers to press their overnight momentum off the open to target the 9/1 low down at 4118.25. A bit of probing finds buyers and 2-way trade ensues heading into the holiday weekend.

Hypo 2 buyers push into the overnight inventory and work on closing this overnight gap. Look for a ‘check back’ to the NFP ‘crime scene’ up at 4188. If sellers are not present here then we continue higher to test value area high 4211.50. Struggle and churn, then perhaps a full gap fill up to 4228.25.

Hypo 3 grinder session, in and around 4200.

Levels:

The ocho friends, we have officially printed eight consecutive neutral days.  It truly is painful to see.  I am grateful all cycles are complete and I can sashay to the sidelines because this madness is just too much to bear.  This all reminds me of my favorite casino strategy.

I hate casinos, first off.  They are the last place people in Detroit are allowed to smoke indoors and boy do they.  Next, they’re filled with the lowest lifeforms on the planet, myself included.  When I go to a casino, it is because the destination was packaged into some other ‘event’ by my ‘friends’.  By event I mean I am probably inebriated and therefore a trouble making grifter.  I needed an activity to keep me busy while my friends donated hundreds of dollars to MGM Grand. Enter: the house bet.

Go to a craps table, wait for someone to successfully make two passes while shooting the dice.  Then bet the don’t pass line.  What are the odds they make three consecutive passes, right?  If they made a third pass, double down and bet don’t pass on the fourth round.  It usually pays out.  It takes a while to occur, and it kills almost every excited craps table.  Yep, that asshole.

But it has a clear limit.  You do not double down again on the fifth pass.  You do not take personal vendetta against the roller.  You leave emotions out.  Streaks are real.  Accept them and sleep better.

This is an epic streak, and if/when it finally comes to an end, we need to celebrate it somehow.

The cycle is officially complete, by the way.  Bears may now resume their feasting.

Nasdaq futures are priced to gap up into Thursday after a session featuring normal range and volume. Action normalized overnight after several volatile globex sessions. Price managed to hold the upper quadrant of yesterday after pushing deep into last Friday’s range—well up into its midpoint. At 8:30am Initial/Continuing Jobless claims and Trade Balance came out. The initial reaction to the data is a strong buy.

On the docket today is ISM Non-Manufacturing at 10am. We also have tomorrow morning’s Non-farm Payroll on the horizon, and it’s nearing due date is likely to have an impact on market action.

Yesterday, and I cannot make this up, we printed the 7^th consecutive neutral day. These are truly rare times. Price opened gap and sellers spent much of the morning working into the overnight inventory but buyers stepped in before the overnight gap could fill. From there were churned until The Fed released their Beige Book at 2pm. 3^rd reaction analysis yielded the buy signal and shortly after buyers were pushing into the market and sending us neutral. Then at the end of the day a strong wave of buying came in and nearly closed the Friday, 8/31 open gap, per hypo 2 from yesterday’s report.

Heading into today, my primary expectation is for buyers to squeeze up off the open to target 4322. From here I will look for responsive sellers and 2-way trade to ensue north of 4280.

Hypo 2 sellers work into the overnight inventory to close the gap down to 4259. From there look for sellers to target overnight low 4254. The profile gets a little slippery here but look for responsive buyers to defend yesterday’s close and two way trade ensues.

Hypo 3 sellers continue pushing down through 4250 setting up a liquidation down the zipper to target 4211.

Hypo 4 (today needs 4 hypos) strong buyers continue to push and test above last Friday’s high to target the open Thursday gap at 4332.50.

Levels:

Per the Weekly Strategy Session and this morning’s Nasdaq report we were looking for The Fed minutes to put some direction in the market.

Im looking for this bid to stick thru NFP Friday morning.  Check this morning’s post for targets.

Top pick: Le LULU

Nasaq futures are priced to gap up heading into Wednesday. The overnight session featured elevated range and volume but neither was extreme. Price was contained inside yesterday’s range in an overall balanced session. At 7am MBA Mortgage Applications came in much better than expected and at 8:15am the ADP employment change data was lower than expected.

Also on the economic agenda today are Factory Orders at 10am and the Fed Beige Book at 2pm.

Yesterday we opened to a big gap down with price well below the weekly ATR band (which is a wide one this week, due to recent volatility). Buyers worked into the market during the morning but stalled as they retested this bracket from below. Then, for the 6^th consecutive day, price managed to push neutral. There was a decent rotation off the low after cash close, during the settlement period.

The Nasdaq was the only index that managed to go range extension up yesterday, with the other three indices (SPX, DJIA, and RUT) printing the more basic normal variation down.

Heading into today we have a decent looking structure. My primary expectation is for choppy trade through the morning with price contained from around 4215.25 – 4164.50. Then look for clearer direction after the 2pm beige book.

Hypo 2 is buyers run a gap and go up. They have the edge slightly because yesterday’s neutral extreme gave short conviction and now we are gap up. Look for buyers to push up through 4215.25 and test above yesterday’s high 4228.25. If they aren’t knocked back, look for continuation higher to close the Monday gap up to 4262.50. Look for responsive sellers up near 4282.

Hypo 3 sellers work into the overnight inventory to close the gap down to 4159.25 then continue lower to test yesterday’s low 4118.25. If they can do this, look for a move down to 4080.

Levels:

Tape speed is slowing a bit so let’s talk about one of the least discussed matters of trading, how best to fuel your body while trading. Breakfast is easy—less is more, coffee. It will keep you sharp through the morning session without bogging you down. Lunch is a bit more complicated but critical and noobs always make fatal errors during this meal.

Foremost and weather permitting, lunch should be taken outside. Your eyes need time to look at something other than the screens 12 inches from your face. This will help slow the inevitable vision decay anyone committed to this vocation is certain to endure.

When it comes to meal size, again think less. Want to be in a painful coma when trading picks up at 1:30pm eastern? Eat a bacon cheeseburger with some fries and a coke. You will be an amorphous bag of fluid melting into you’re a/c cooled chair while I have eyes like laser beams and reflexes like an apex predator. Here are 3 steps toward a more powerful breakfast.

Step 1: Eat half the meal size you normally would. Stay hungry.

Step 2: Your meal should be low carb, high fat, and high protein. Usually a salad works. The darker the greens the better and be sure to toss in some chicken and/or beans. You may also want to eat a can of beans. If you have trouble digesting beans then chew a few bean-o tablets before your first bite. Boom, gastro solutions from your boy. Pro tip—rinse that disgusting can goop off your beans. If you want them saucy, add some grape seed oil and hot sauce.

Step 3: Drink water, nothing else. If you want to be fancy and have the mouth feel of a soda then drink Pellegrino or Perrier. I won’t look down my nose if you add a little lemon. If you must have a sweet drink, try a drop or two of stevia.

On the go? Chipotle bowl no rice with the stir-fry veggies. If possible, try to find and support a local Mexican eatery instead and order fajitas. Be sure to slap the tortilla shells onto the ground in disgust.

In an even bigger hurry? Medical marching pills. Buy a bottle of arginine (sp?) from your local GNC drug dealers (not recommended). Pre-workout is effective too.

Do you have a go-to lunch? Let me know in the comments below and I will judge you incessantly.

As cooler climes approach, consider the resurgent stream of ladies wearing high tech workout slacks ready to patronize your town or village.  Like schools of salmon, they will flood campuses covered in literally the greatest garment ever created.  A blessing to both men and woman, the form-fitting pants defy gravity and inspire their users to drink raw juice and contort their bodies into holy positions.  As excited as I am about the scenery, I am also eyeballing the September seasonality on Lululemon.  Historically, it is their second best month of the year.

Per the Exodus analytical engines, check out the stats LULU has thrown down in prior Septembers:

Note: Earnings are September 10th, so have a plan if you intend to squeeze into this stock.

Nasdaq futures are priced to open down over 100 points and well into ‘pro gap’ territory. By pro gap I mean any attempt to fade the big change in price would require professional resources and is large enough that we are unlikely to fill it. The volume and range both blew outside of 3^rd sigma—like we have not seen since last Thursday. Price began pushing lower from the close of regular trading and steadily declined all night.

On the economic calendar we have only one event today. At 10am we willvhear the ISM Manufacturing read. Keep in mind we have The Fed Beige book tomorrow afternoon and Non-Farm payroll data Friday morning.

Yesterday we printed a neutral extreme down. It was the fifth consecutive neutral day as higher time frame investors aggressively push this market around.

Heading into today, we are trading in some single prints meaning it is a fast zone. My primary expectation is for price to continue sliding lower to test 4130.25. Look for buyers to defend ahead of 4122.75 and push back up to around 4170 then two-way trade ensues.

Hypo 2 sellers push down through 4122.75 as panic ensues. Look for a move down to 4080 before buyers step back in.

Hypo 3 buyers push into the overnight inventory and trade up to 4200 before price rolls over and continues probing lower to target 4130.25.

Hypo 4 buyers push up through 4200, churn, then leg higher to close the overnight gap up to 4262.50.

Levels: