Morning Nasdaq Report

Nasdaq futures are set to gap up as we head into a fresh week. Volume is running normal and range is elevated a bit above normal, but overall it was an orderly auction. Price managed to push down into the upper quad of Friday’s range before finding buyers who worked up into last Wednesday’s value.

Heading into today the economic calendar is quiet. At 10am month-over-month Factory Orders are out, a medium impact number. However, most of the weight will be on Friday’s Non-Farm Payroll data, with Wednesday’s ADP employment change and Thursday’s Initial/Continuing jobless claims serving as appetizers.

Last week the Nasdaq managed to make a new contract high on Monday before rolling over and spending most of the week trading lower. It wasn’t until late Thursday afternoon that buyers emerged with enough conviction to entice initiative buyers onto the tape.

Heading into today, my primary expectation is for buyer to push a bit higher, but stall out around 4484.50-4490. I will look for sellers to close the overnight gap down to 4467.50. If buyers aren’t found here then continue lower to test below overnight low 4457. This could lead to an acceleration, especially if we trade below 4445.

Hypo 2 buyers push up through 4490 and grind higher to target 4517.

Hypo 3 we chop and build value between 4489 and 4457.

Levels:

With temps on the rise and sports captivating Americans like never before, beer stocks are looking good. It was good to see America punch the face off of the Philippine congressman. Our nation must be entertained and will forgo feeding their family proper nutrition in exchange for barrels of beer and pay-per-views.

Soon boats will be filled with inebriated jackasses looking to take advantage of the promiscuous implications of being at sea.

There’s more going on, sure, like the complete and total destruction of social media and mobile phone stocks. So keep an eye on the clowns still sporting a stupid valuation in this space. They will be corrected.

Weekly Strategy Session subs, I’ve toiled away in a boiling hot office all weekend to present the finest ideas, forged in the furnaces of the mothership, with the implicit intention of banking coin.  Enjoy.

Was that the most orchestrated bit of horror we’ve seen or what? Here we are, May the first, everything has changed.

Everything.

The concerns of yesterday have entirely vanished. Bulls came to their post this morning, batted back a few trace arrow bullets, and then everyone went to the golfing course for some recreational cannabis and alcohol.

Note: Exodus nailed the oversold mark on semiconductor ETF $SMH yesterday, to the day, another win for the space magician’s brain. If you’re not trading with robo support, I have no sympathy for you, you will succumb to the caprices of other robots.

It won’t take much now lads, to trigger a chase, v-shaped winship, I can feel it in me bones.

Top picks: EXAS and Financials (any bank or bank like entity, but cappuccino to my head,  I’d say FAS, JNS, and C).

After nearly two weeks of globex volume running hot, last night comes around, and the action is completely benign. Nasdaq futures are up overnight on a range that’s high-end normal on low volume.

There’s a news dump at 10am, including ISM Manufacturing, Construction Spending, ISM Prices Paid, and University of Michigan’s final Confidence read for April.

Yesterday most closely resembled a trend day down. It may constitute a triple-distribution trend day, if such a name existed. Toward the end of the session buyers came in, about halfway into the 4/20 range. If you recall, 4/20 was two Mondays ago, and we started with a gap up and ran all day—in essence it was a conviction day.

So we have two combating forces here which will tell the major story going into the weekend. Market Profile theory states that any entry in the direction of the trend on a trend day is a risk-free entry into the following session, meaning, we are likely to at least go one tick below the trend day low in the following session. The other force is the proclivity of a conviction day to be defended.

Heading into today, my primary expectation is for a choppy open until we hear the economic data points at 10am. After, I will look for sellers to push into the overnight (and late-yesterday afternoon) inventory and test their conviction. If sellers can trade below 4409 I will look for them to test yesterday’s low 4386.50.

Hypo 2 is we muddle around north of 4400 in choppy, two-way, Friday trade.

Hypo 3 is we gap-and-go, demonstrating some v-shape tendencies. Look for responsive selling up at 4452.

Hypo 4 is we test higher early on, to 4432, then reverse and continue working lower to test Thursday low 4386.50. If liquidation takes hold look for a gap fill down to 4349.50.

Levels:

You may be wondering to yourself, this Raul feller seems to have an idea what’s going on, but Sam Hill if I know what it all means.

It reminds me of a Bruce Lee quote:

“It’s not the daily increase but daily decrease. Hack away at the unessential.”

I have been doing lots of hacking away lately. Over the last several weeks, I cut my day trade types from nine to three, and I may even go down to two.

But there are a few things I cannot do away with. One is the Weekly Strategy Session score. Each week the auctions taking place in the major indices are scored and amalgamated with Exodus. Thus, once a week, I distill thousands of stocks and the broad markets into one, little, number. HACK.

It tells a story. This week it said be patient in hunting longs, and only scalp on the long side, don’t try and be a hero. Pair that with my trade types, and I have a robust approach to trading the market that only requires my action 2-3 times per day.

Don’t think I’ve escaped this week unscathed though. I bear the wounds stopped losses. Today’s cuts were CHGG and the FAS long I was working.

My other tool, Market Profile, it has me a bit leery. The footing below is soft. We may have seen enough from buyers at the close to turn this thing, but it marks the 4^th time this week they’ve had to catch a knife. They need to hold this one, flip it, and start poking holes in the bears ASAP.

Four down days in a row here, off contract high, in the Nasdaq. It hasn’t been entirely orderly either. There have been flashes of order flow. At first, bulls were combating with equally responsive aggression. They did so three times.

But here we are, on session low again.

Dove le bulls?

Nasdaq futures are lower overnight. Sellers managed to extend the range just a touch beyond first sigma, doing so on normal volume.

The first thing that jumped out this morning was the overnight profile structure, a lovely lowercase-b check it out:

It was even more pronounced before the 8:30am data. This type of profile suggests a long liquidation took place. A long liquidation is a temporary phenomenon where order flow is created by stops being run. This type of print, in the context of a bigger uptrend, tends to occur at-or-near the inflection point—a welcoming development on the weak week.

Heading into today, my primary expectation is for buyers to fill the overnight gap, pushing trade up to 4478.75. From there we will see if they can take out the overnight high just above at 4479.50. Overall I’m looking for sellers to defend the region from 4485-4490 and two way trade to ensue.

Hypo 2 is buyers push through 4490 and sustain trade above it to set up a leg higher to target Tuesday’s gap up to 4515.50.

Hypo 3 is sellers continue working lower, take out overnight low 4452. Look for responsive buyers at 4442.50 then 4433.

Levels are pictured above.

Watching OA pull the proverbial rabbit, a set of short dated call contracts exploding in value, is always exciting. Congrats again. If you’ve never seen this guy at work, I urge you to come inside the Pelican room and do so.

It’s important you develop your own ideas though. Even if you’re trading alongside your mate, you should have a plan. The more reason behind it, the better, because your wit and willpower will be tested, promise.

I had the RCS short signal coming into the week. I took Zillow weekly puts. When the broad market move I was seeking materialized my Zillow stayed put, making the puts seem silly. I offered to sell them all day yesterday. No takers.

Fortunately they looked worse today, as did the market, and I managed to sneak out with a win. Awesome. I also took a wonderful entry into /NQ_F using the morning levels and a bit of breadth mojo. All actions are very precise, which is how I like to trade the futures.

Bulls could not quite seal the deal today. They needed to sustain above 4490, IMO, to regain the edge. I’m still cautious.

Nasdaq futures are lower overnight on a slightly elevated range but normal volume. Price drifted lower for much of the night session and the selling accelerated after the GDP data came out much weaker than expected.

Heading into today, we are on the cusp of a pro gap. However, due to the large range printed yesterday, we are still set to open inside prior day range.

Yesterday we saw Monday’s selling accelerate down into the Thursday/Friday gap and fill it before finding a strong responsive buyer. Once found we spent the rest of the morning trading higher before fizzling out about half way into Monday’s range.

On the agenda today we have Pending Home Sales at 10am, Crude Oil inventory at 10:30am, and the FOMC rate decision at 2pm.

My primary expectation this morning is for buyers to push into the overnight inventory. If they can push through 4500 then look for a gap fill up to 4515.50 before we quiet down and wait for the FOMC.

Hypo 2 sellers drive down off the open to test yesterday’s low 4471.75 and if they break through look to test 4459 and if that cannot hold then a liquidation trade may take hold.

Levels:

Order flow was heavy today, let’s start with that. Not overnight, but from the opening bell there was a flurry of action taking place. This week is huge, the rotations are huge, and the crescendo is scheduled for tomorrow.

The weekly strategy signaled a short and I was skeptical of it, coming only two weeks after the prior signal. It merited respect, nonetheless, and to a certain extent, thus I envisioned how it might play out:

Checking back to the #NQ_F Thurs/Fri gap early next week is my dream trade.

— Raul (@IndexModel) April 25, 2015

The essence of the idea is to see the weakness play out early in the week, adhering to the signal, but ultimately being a trap, due to the overwhelming health of the market.

What do I mean when I say health? Industries are taking turns with strength. On a higher level, sectors too. Healthcare may start seeing money rotate out (it might not) but the funds are going elsewhere—last week to Technology in a big way, this week Materials.

But ultimately we need to see how Financials perform after tomorrow’s FOMC Rate Decision. The S&P and Dow showed divergent strength. If they intend to demonstrate leadership, they best do so with unabashed confidence and supremacy.

Either way, I will be prepared to trade these powerful markets to finance my Twitter investment.

Finally, Exodus is live. The gods are dancing naked on the beach, pleased by man’s accomplishments. Congratulations to The Fly, the team of engineers, and the supercomputers (always show gratitude to the robot overlords).   This is a huge asset—an integral weapon designed to devastate financial markets with unparalleled offense and utility. Don’t hesitate to ask me how to works.