Working The Levels

Oil continues to throw down a methodical auction, moving from one reference point to the next. Heading into today, we are on the top end of the weekly range and bulls will have to muster some real strength to keep the commodity moving higher on the week.

Keeping prices above $51 is likely to bode well for the bull cause. Likewise, if sellers can pivot the market below $51 we likely see a quick reversion back to the MCVPOC at $49.13.

These levels are highlighted below:

The Fed had my back this afternoon, and their Beige Book put a bid in oil prices, effectively generating broad confidence amongst risk takers. My book reversed a cool down three percent on the day to finish a mild thirty one basis points lower.

During the sit I suffered one casualty. BTE not only did not participate alongside the oil rally, it slipped. Losers will not be tolerated. It goes to show the mixed nature of this industry group.

GoPro exists simply to frustrate. We all know a flood of competition is chasing this first-to-market mover. But they’re tech and for some reason I keep a space in my heart for technological ideas born in the USA. Thus I bear the burns of this twisted trading instrument.

Apple seems to hold the keys to the market. The Nasdaq is grabbing headlines, Apple is a major piece of the Nasdaq, and Apple is coiled up tighter than the inside of a baseball. Watch how this one breaks to have an idea about where the market is headed.

Oil and Apple—everything else is just a distraction.

In other news, SINA might just have what it takes to put me through to the second round of iBankCoin’s March Madness tournament. It is time for the Far East to rise!

The Beige Book is due out at the top of the hour and markets are clearly waiting to see it. The consensus is The Fed sees signs of economic activity slowing down. Here are a few other important things to keep on your radar when the information hits the wires:

Bad weather – look for mention of harsh weather conditions leading to a slowdown in economic activity. See how this affects energy-related trades, especially crude oil.

Cheap oil – watch for a mention of Texans taking a hit on these low oil prices

Strong dollar, aka cheap oil – watch oil

Here are the key short term levels in oil:

My book of ice cubes is sitting on a salty sidewalk on a sunny day. Despite the hard bounce on the indices and despite my stocks only being down a few percentage points from entry, my call options are taking a fucking hammer to the dome.

The only logical presumption is that the numbers being relayed to me by the brokerage are fake—some kind of attempt to shake my bones up. BUT KNOW THIS, I have endured worse and kept my cool for the sake of objectivity.

There are some odd cross currents. The inventory build in oil was enormous which is quiet bearish, yet our first level of support held. The forsaken ones, BABA and GPRO are rallying.

You may think your homie Raul is putting a hurt on the Nasdaq this morning, what with the way its whipping around. I will have you know, I am not, I am merely watching. There were some early signs that I should back off right at the open and I obliged. I have much work to do before I can trade days like this with conviction.

This is day two of a weak morning, and day two of a strong rebound. We are coming into a seasonally strong period to close the week and the Beige Book is coming up today while the monthly NFP is on the horizon. I am quite long, and in sandwich mode until more information is made available.

Top picks: DE and GPRO **dodges incoming tomatoes**

Range and volume picked up slightly compared to recent weeks but still is well within the confines of normal. Price spent most of the overnight session pushing lower but flattened out before taking out yesterday’s low.

Yesterday we opened gap down and buyers were unable to fill the gap. Instead sellers stepped in just beyond the VPOC 4470 and began pressing lower. They managed to take out Monday’ low and pressed below last Friday’s low before finding responsive buyers. Once found, buyers pushed back up abpve the mid to close the session down slightly.

This morning we head ADP employment change which came out a bit worse than expected and saw a muted reaction in the futures. Ahead on the docket is Fed Evans talking economics at 9am, ISM Non-Manufacturing Composite at 10am, Crude/Distillate Inventories at 10:30am, and most important Fed Beige Book at 2pm.

Heading into today, my primary expectation is for buyers to work into the overnight inventory early on and press for a gap fill up to 4457.50. From there I will look for yesterday’s sellers to become initiative and work lower through yesterday’s session low 4432.50 to take out the weak/double low at 4429.25 and target the NVPOC at 4418.

Hypo 2 is buyers hold yesterday’s low and work higher to close the Monday/Tuesday gap to 4478.75.

Hypo 3 is a drive down off the open, take out weak/double low 4429.25 early and press down through the LVN at 4413.

Levels are highlighted below:

After seven attempts lower from the highly trafficked VPOC, the market is now for a third day drifting up and away from the scene.

The $51 level has been the scene of responsive buying twice in recent history. Early on my primary expectation is for buyers to probe above the recent high and target $51.545. Otherwise a second scenario would be sellers whacking prices lower to start the return to MCVPOC $49.10.

Here’s a picture of the intermediate term traffic jam:

When prices go up, our job is to determine whether the market has done a good job finding sellers. If it has, then it can trade lower. Today we opened gap down, and had a sharp move lower which may have looked somewhat alarming on the surface.

Structurally, sellers had a lay-up profile structure to work with, the “zipper” aka single prints left behind yesterday. There was certainly some higher time frame selling this morning, but it was almost instantly met with higher time frame responsive buying. Now we have a battle.

I was rendered useless mid-day by allowing the optometrist to dilate my pupils. It didn’t seem like a big deal while I was at Costco (aka heaven) but when I returned home I could not see any of the numbers or words on the screens. Talk about some perspective—be grateful for your sensory abilities.

The economic calendar is quiet this morning but the week is back-loaded with events. Keep in mind Fed Chair Yellen is speaking around 8pm this evening about bank regulation. We also have ADP employment data tomorrow morning before the open.

Yesterday the Nasdaq opened gap up to start the week and sellers were not quite able to fill the overnight gap.   Instead buyers stepped in and made a strong drive up early on. Shortly after we went range extension up before falling back to the MID which lined up with the value area high from 2/26. Buyers then executed a second wave of buying, a completion wave. Overnight price has been drifting lower and spent several potions of the globex session trading 1-time frame down.

Heading into today my primary expectation buyers to push into the overnight inventory early on and target a gap fill up to 4478.50 then 2-way consolidation between 4478 and 4463.50.

Hypo 2 is sellers continue to push during the open, take out 4463.50 to test 4460.75. If no responsive buyers show then look for a fast push down the single prints to take out Monday’s low 4449.75. Look for responsive buying at 4447.25.

Hypo 3 is we push up through yesterday’s close 4478.75 and continue pushing higher prices.

Levels are highlighted below:

Oil went for a slow grind higher overnight only to be smacked down early this morning. The responsive seller took action ahead of yesterday’s high $51 and pushed us right back to the LVN at 49.84.

I sincerely hope that as I continue to track this commodity you begin seeing the value behind viewing market behavior like an auction. The compliance to value is oil has been nothing short of impressive these last several weeks.

This week has been no exception—the confluence of value area high and micro composite high volume node around $51 was the key reference point for the reversal.

The thick ‘gravitational pull’ of the micro composite point of control continues to behave like a magnet for price down at $49.13.

The Gaussian curve formations show the levels.

Heading into today my primary expectation is for sellers to use this early momentum to target the MCVPOC at $49.13. The level I am more interested in for signs of responsive buying is $48.875, the value area low of 2/26.

Levels are below:

Let’s not kid ourselves—chasing momentum has been a selective endeavor. One cannot simply spray and pray for 1 or 2 winners. That game is break even, at least the way I am playing it. But the winners can still pay down the losers and pay the trader who is refined and selective and has some clear expectations.

If you’re finding the market is not hitting your mark, perhaps temper your expectations just a tad.

I am often working a new idea. When you spend a big chunk of your time objectively observing the minutia of an auction you develop subtle insight into it. It is divine, but often you have to develop new tools and strategy as you go because what works one week is tapioca pudding the next.

Some people go mad over the uncertainty of it all. But if you develop some core fundamentals, boulders, then build around them you can express yourself creatively and see immense benefit.

My newest avenue is working 8:30am data announcements. Like this morning’s Personal Consumption figures. The market is often docile before stocks open, yet you know there is an elevated likelihood for news to bring in order flow. Therefore, you sit and watch for a setup to try and grab onto a wave before it flows in.

A few times this leads into trading through the open with a position on which will spur even more order flow. If you have some confidence trading the opening swing, you can earn an honest living by 10am.

Then, if you choose, you can spend the rest of your day roaming the streets collecting cans, explore other business opportunity, talk with family and friends, etc. Life choices become are real necessity, not just something you dreamed about from your prison cell (cubicle).

If I can make more money in 2 hours then I used to make in a week, why work the entire day? That’s just greed.