Cashed Out Some Nug

I just booked most of my NUGT position, leaving a runner in case everyone goes full on guns and shelter.  NUGT was the top seasonality performer coming into August, per Exodus Market Intelligence (EMI).  Tell me, again, why you’re not on the inside?

More later…

Nadaq futures are down coming into Thursday after printing an abnormal session overnight.  News flow accelerated overnight as pundits generously offered reasons for market moves.  The overnight range is 51.5 points thus far, well beyond the second sigma threshold on elevated volume.  During globex price briefly pushed up to about the midpoint of yesterday before rolling over and taking out yesterday’s low and pressing deep into last week’s range.  At 8:30am Initial/Continuing Jobless claims data came out and the initial reaction is buying.

There’s a big data dump scheduled for 10am including Existing Home Sales, Leading Indicators, and the Philadelphia Fed.

Yesterday we printed a neutral day.  The day started gap down outside of Tuesday’s range and pushed lower before responsive buyers showed up.  Post FOMC minutes buyers turned initiative and close the overnight gap up to 4543.25 then dried up and selling back to the mean ensued.

Neutral days are sessions where the high and low of the first hour of trade (initial balance) are breached.  They suggest higher time frame posturing and often occur at/near inflection points.  This one occurred in the middle of the range so it is difficult to gain an inflection point insight from it.

Heading into today, my primary expectation is for buyer to push into the overnight inventory.  Look for them to struggle to close the gap up at 4503.75 then sellers resume exploring lower.  Sellers target overnight low 4461.50.  Buyers need to defend 4456 otherwise look for a test below last Wednesday’s low at 4431.25.  Stretch target is 4400 century mark.

Hypo 2 sellers work in early buy struggle to capture 4456.  Responsive buyers push the overnight gap up to 4503.75 shut then set their sights on overnight high 4513.  Look for responsive sellers around 4520.

Hypo 3, chop and erosion.  Tight range trade in bottom quad of yesterday’s range with a slight downward bias.  Sellers capped at 4440 and two way trade ensues.

Levels:

When I finished all my research Sunday and the model generated its 3^rd consecutive short signal, I knew this was going to be a long week. No day feels longer than Wednesday. No day price action feels longer than the dreaded neutral day. Pair the two together and you have perfect conditions to blow up traders, long dick style.

To make matters worse, The Fed minutes leaked 15 minutes early. My proprietary (you can use it) 3^rd reaction analysis was tricky when this curve ball came whizzing in. Still it objectively yielded the buy signal and within minutes we were 30 Nasdaqs higher but neutral. Neutral days occur when price exceeds both the high and low print of the first hour of trade. They often invoke strong emotional responses from market participants. I had to quit reading my feeds because the urge go find some of you misanthropes and ‘start something’ was overwhelming.

Instead I adhered to market profile logic, and pressed MOAR shorts onto the table—reentering QID—and then took a nap. The typical play is to fade the second range extension back to the mean. Just last Wednesday this play full court sodomized me when a buy geyser erupted into the market. Thus, it was a bit harder than usual (no homo) to press my edge. But this is my job as a really, really, extremely talented trader. Take my edge whenever it presents itself.

So 3^rd reaction yielded the buy, and other ‘happenings’ have me on the trigger ready to book these shorts and flip long. But I will do so as I always do, slowly…then all at once.

The financial complex is fairly noisy today, yes?  Rate hikes, Greek Bailouts, and China banking foolishness, oh yes.  So I figured today is an important day to drop my switchboard on the Plebeian class.

We started the day in hypo 2 mode but conditions have softened a bit more than hypo 2 expected.  Market Profile is pretty wide open down here on the Nasdaq, but we are coming into key pivots on the Dow and SnP, therefore, like I have stated repeatedly (and this is more for my own subliminal benefit then anything) I have an open mind.

Watch for third reaction post FOMC minutes, and in the meantime here’s a codified version of all the current happenings:

Nasdaq futures are down a bit heading into Wednesday’s trade after an interesting overnight session. US markets followed China’s Shanghai Composite to an extent. Their index moved fast, falling more than 5% before reversing on rumors the People’s Bank of China could announce a 50-basis-point rate cut. Our session featured a slightly elevated range on normal volume. Price managed to push up above Tuesday’s mid briefly before rolling over and pushing deep into Monday’s trend day. Since then we are off the lows and the structure is balanced overall.

At 7am we had MBA Mortgage Applications and saw no reaction from the market. At 8:30am Consumer Price Index data was out and so far also is seeing a muted response. At 10:30am we have the weekly crude/gas/distillate inventory reports. However, investors are all eyes on The Fed who this afternoon (2pm ) will release Minutes from their July 28^th-29^th meeting. Participants will be parsing the language for any clues as to whether September will bring a rate hike.

Yesterday we printed a normal variation down. The session was slow with a slight downward drift and methodical. Buyers pushed into the overnight inventory but were unable to close the open gap from Monday before sellers stepped in. Sellers then worked down to test the value area high zones of the well-established value area that was below.

Heading into today, we are trading right at the VPOC of the well-established value area. My primary expectation is for buyers to push into the overnight inventory and close the gap up to 4543.25. From there look for them to continue higher but stall ahead of overnight high 4552.25 and roll over. Then look for sellers to work down to 4511.50 then 4505.50.

Hypo 2 sellers work lower off the open, push down into 4505.75 and exceed it briefly before responsive buyers step in and two-way trade ensues.

These two hypos are before the FOMC minutes. I expect the morning shuffle then action to quiet down as we enter wait-and-see mode. Then I will use 3^rd reaction analysis to assess direction into the weekend.

Levels:

There is little directional conviction to glean from today’s action. What we do know is markets are moving slow. A slow tape is conducive to working longs—usually in individual stocks and not the overall ‘market’.

The slow grind is also good for grinding 80-90% of your short dated call options into dust. Thus, as speculators bid adieu to the majority of this month’s paper, they can hold out hope that one or two wildcards might produce an egregious win (extra CBIS).

The house of Raul is thriving. Today’s tape allowed me to work the short side. The action was slow, but existent, and definitely favoring the bear. Pair this with hardened resilience to button pressing (avoiding fighting yesterday’s tape) and we are off to a good start.

Putting together a strong-beard week means getting through tomorrow afternoon’s FOMC minutes. My primary expectation is for prices to go lower after the news, but I have an open mind.

BIS is showing signs it will work, but ultimately this trade is wrong until biotech stocks begin imploding like they did 3 weeks ago.

My highest conviction investment, Tesla Motors, is a store of value, and the GARP index is holding up like a champ.

The key to improving my profits is to resist over trading. This temperance is more important than ever in a slow tape. Hit you levels, press your edge, then go sit by the pool and drink malt liquor.

Nasdaq futures are indicate slightly lower prices heading into Tuesday’s open. The overnight session featured and early push above Monday’s high print 4567.75 and up to the value area high established 8/10 before responsive sellers arrived and rolled the session over. The rest of the evening was spent working lower.

At 8:30am Housing Starts and Building Permits were released. The initial reaction to the data is buying. Investors will starting thinking about tomorrow afternoon’s FOMC minutes soon and this may cause us to enter a holding pattern.

Yesterday we printed what resembles a triple distribution trend day. The directional price action was not vigorous enough to classify the day as a bona fide trend day, but still a high conviction day. Buyers managed to close the open gap from 8/10 at the end of the session. Expectation was to see the session high exceeded, if only by a tick, today. The question now is whether the market profile trend day rule was satisfied overnight, of in instead we will revisit the high again soon.

Aside from last Tuesday, Tuesday has been a quiet day in recent history. Therefore, heading into today’s session, my primary expectation is for a slow session. Look for buyers to push into the overnight inventory and work higher. I am bearish however, thus I expect buyers to struggle to fill the overnight gap and price to roll over. There is a major value area below that I expect to behave like a magnet. Look for sellers to take out the overnight low then responsive buying from 4544.25 to 4535.

Hypo 2 buyers close the overnight gap 4564.75 and set their targets on overnight high 4573.50. Look for a continuation move up to 4592.75 then responsive sellers step in.

Hypo 3, liquidation takes hold and sellers push down to the VPOC at 4517.

Levels:

Today has done nothing to change my short bias.  First of all, a gap to start the week is never your friend.  If you were bearish heading into the open, you had to cringe at the decent gap down.  It was something we needed to deal with.  We did, that is good news.

Now we have a bit more unfinished business from 8/10.  A gap left behind in our hurry to trade lower.  This may need resolution before anything else happens.

Also, my goodness is this tape slow with the occasional accent of gregarious buying.  To short is to fight the tape.  I did not short scalp today.  Instead I will wait until the selling starts then start pressing the leverage buttons.

I did however re-enter BIS a few moments back.  Biotech will soon be the scene of the ultimate comeuppance—one that is written about for years.  The slippery slope of self enhancement has convinced baby boomers to bid these companies up to holy valuations.  Soon the gods will strike down this tower of Babel.  Estranged biotech investors will then scuttle back to their state sanctioned work and spend 30 more years building up their retirement funds.  Then, just as they see the golden horizon, the grim reaper will show up demanding his dues.

I am here to press my edge dammit, and it is a short edge until otherwise stated.  Good day.

Nasdaq futures are priced to start the week down a touch. The overnight session featured normal volume and range and printed a balanced market profile. Looking it a bit more closely at the auction shows a few interesting events. Price pushed higher initially, right up to where the surprise Thursday afternoon sellers showed up. Responsive selling was found again in the 4545 range. Price action is interesting to with the entire overnight session resembling a head and shoulders pattern.

The week kicks off with two low-impact economic events. At 10am the NAHB Housing Market Index data is due out, and at 4pm the Net Long-term TIC flows. Investors will soon shift their attention to Wednesday afternoon when the FOMC will release the minutes from their July 28^th meeting.

Last week index traders were taken for a wild ride. Price started the week with a big gap up and buying pressure most of Monday. Toward the afternoon the market showed signs of rolling over and Tuesday and Wednesday morning featured hard selling. By lunch Wednesday sellers dried up and in their wake came buyers who pushed us back through the range and closed a major gap. Thursday and Friday were grinder sessions.

Heading into today, my primary expectation is for sellers to work back into the tape. Look for sellers to take out overnight low and target 4468.25. Look for buyers in this area and two-way trade to ensue.

Hypo 2 buyers push into the overnight inventory to close the gap up to 4532.25. Look for buyers to continue working higher and take out overnight high 4546.25 to target 4572. Stretch target on the upside is the open gap at 4585.75.

Hypo 3 buyers sustain above 4500 and two way trade ensues south of 4540.

Levels:

If I see another iced soda with muddled mint and lemon I am going to smash it to the ground with my fist! You guys are too much. Every time we find a good thing you blow it out until I’m sick. Yes, summer has reached peak heat and everyone is out celebrating the climes with heavy amounts of alcohol and narcotics. That doesn’t mean you should too.

I attend some of the most obscene venues in the world—abandoned factories overrun by teens all hopped up on the latest cocktail of drain and toilet cleaner. Not for their company, but because I really enjoy the heavy vibrato of electronic trap music.

To fully understand what life with rose colored sunglasses is like, you need to observe these optimistic youngsters and their euphoric gazing at bright lights. The right amount of audio/visual stimulation inhibits seeing where you truly are—in a decaying industrial centre, an economic failure of grand proportions.

Try and see things for what they truly are. Wine? Rotten grape. Gold? A chunk of metal dug out of the dirt. And by all means heed caution this week—save the hopium for the weekend.  Exodus members, this week’s Strategy Session is published.  Navigate your way over to it now and feast your eyes on a recap of last week’s action and some actionable context for the upcoming week.