Product of Your Environment

This is the world we live in and it is built on hard work and a bit of luck.  All of these quirks of industry come crashing down when they take away your health.  My friends, that is exactly what is happening today.  The poisonous Ebola virus has breached our shores and we are now susceptible to 10s if not 1000s of fear dealers on cable news channels.  Thank goodness I do not have the cable.  But it gets worse, I am scheduled to obtain cable next week.  The horror!

With fear totally peaking there is only one intelligent move you can make.  Lock your doors and seal your windows.  Retrofit an air intake onto your home with carbon scrubbers and ozone generators.  Mount solar panels to your roof.  Guns, many guns.  And finally, any modern doomsday prepper’s setup isn’t complete without the latest two mods:

Natural gas generators and Tesla electric cars

As you can see, Elon is preparing to show us the D on October 8^th.  I imagine the sight of it will cause women to blush and men to turn green with envy.  Let them kill one another for their oil, your car will run on electric from your solar panels.  And just in case the sun never shines because you live in Detroit, the no brainer move is a large scale home generator from GNRC.  Natural gas is practically free.  If you dig deep enough in Michigan you find the stuff everywhere. Plus your neighbors will love the ambient hum.

This post is a call to action.  It is also a long winded way of telling you I started buying GNRC.  The short reason is the stock price has been obliterated, winter arctic vortexes are near, natural gas is cheap, Ebola is just another fear device, and no one is really hype about generators right now.

As you were

Nasdaq futures had another busy overnight session where volumes continue to run at an above average clip.  The main feature of the overnight session was a strong rotation of buying which began just before 5am and just above yesterday’s low of the session.  Synchronizing loosely with the move was economic news from the Euro-Zone where there PPI numbers came in a bit softer than expected.  At 7:45am the ECB announced it would keep its Bank Rate inline with expectations and as we approach cash trade Mario Draghi is speaking at a rate press conference which is stirring prices lower.  We have factory orders at 10am and our premarket seller is again active.

Since this chart took out a significant reference zone yesterday, let’s revisit the weekly chart of the Nasdaq composite.  Price is currently pushing below an area previously inhabited by sellers.  Thus, the market was not yet able to convert this resistance into support.  After rotating the gap zone and printing some long legged dojis we have decidedly pressed lower.  Bear in mind however, there are two trading days left in this week which might significantly alter the appearance of our current candle.  The long term trend is still up, however this small move could be the start of a neutral environment on the long term:

Intermediate term we have gone into seller control.  This can be seen as a series of lower highs and lows.  The question now is where this cycle will end and how the next leg will print.  There was a very complete feel to yesterday’s trade where we saw a very motivated move, a pullback around the midpoint, a secondary thrust, and then a corrective set of waves.  That daily move settled out a naked VPOC that was left behind at 3967.25.  That’s good news, the market is still auctioning in a very methodical manner.  An argument could be made that the turn is in, however the task of bulls is to prove their innocence because this timeframe is seller controlled.  I have noted the key price levels below:

Finally, I have noted the short term levels I will be observing on the following market profile chart:

I had the pleasure of sitting on my hands most of the day after stopping out of a few names and poking a quick trade with the @ragincajun.  Equity index prices imploded in the most orderly fashion imaginable.  The sell flow simply arrives at any and all attempts to rotate higher.

The blood is opening up opportunities for the patient and liquid trader.  The key and emphasis must be placed on patient.  There is no need to rush buy orders into the liquidation until you see the real heavy lifters enter.  We produced a most wonderful wave today in the Nasdaq, and although was hardly prepared to take advantage of it, the mere observation of the swing nature allowed a rather calm feeling to stay with me all session.

Have a look:

Also making for an interesting sideshow was the tumultuous move in this Ebola TMKR.  Nothing says capitalism like making a few bucks on feverous panic.  There was really nothing else garnering my interest.  This is a market that wants to head lower and its doing a good job of it.  Although we completed our wave lower intraday, I am just hanging out and waiting for a bit more purposeful buying.

Top of my priority list- buy some more TSLA shares.

Nasdaq futures are down to start the new quarter, and as we approach US market open prices are trading near yesterday’s low.  Late yesterday afternoon the markets were informed the Ebola virus had made its way into the United States.  Other overnight news included mixed manufacturing data out fo Europe, inline manufacturing data from China, and USA ADP Employment change coming in slightly better than expected.  The last four days we have had an aggressive seller working in the premarket session not long before cash open.  They are again active today.  At 10am we have ISM manufacturing as well as Construction Spending.  Energy traders will likely focus on the Crude Oil and Gas/Distillate Inventory numbers at 10:30am.

Furthermore, German Bund futures ripped through prior all-time highs this morning which resulted in a powerful reaction lower in German equities.  Macro conditions are running high however the correlations have not significantly impacted individual equities yet.   And as we approach cash open the Russell is attempting a slight bull divergence on the very short term timeframe.

Again visiting the long term chart of the Nasdaq Composite, we can see prices are in a zone where sellers initially held us down.  Since then, we broke higher, rotated through the dot com gap, and are now retesting the zone from above.  This long term timeframe remains buyer controlled and in a support zone.  Long term bullish:

The intermediate term is balanced with a slight downward bias.  This balance will be 33 sessions old today and we can see a pattern of lower highs and lows emerging.  With the open gap below sellers have something to shoot for.  Thus the intermediate term is neutral-to-slight-bearish:

Finally, the short term came into overlapping balance yesterday verse Monday.  The auction yesterday was very clean and methodical and balanced.  As we are set to open near the low of the session, we will have a fairly early indication of whether prices are trying to head lower or instead accepting and continuing higher.  I have highlighted the price levels I will be observing on the following market profile chart:

There you have it, anther quarter in the books and it was a doozey.  We saw everything from new tech to the uprising of our fellow man in China, the hands who build new tech.  Yet there is still more to come, another freight train barreling down the tracks.  Are you in its way?

Said train is your ego, the source of your emotional indecision and impulse.  The more you begin to understand it, the better you can see how big a beast it is compared to your more logical and academic self.  You ego can curb stomp your intelligent face with its elephant boots.

These are fast market conditions at quarter end.  The macro tides are bigger than you might have ever seen depending on your experience level.  Now is not the time to increase your average trade size.  In fact, reducing trade size might be enough to knock your ego down a few pegs and start your back on the path to operating these markets.

I have done very little this week and last.  Committing to anything longer than a few hours is a challenge.  Look at yesterday’s pick, Zillow, poof, practically dead out the gate.  Perhaps the same will happen to today’s pick, AMZN.  I can’t worry about these external events because I have no say in how they pan out.  I can control risk and continue taking the trade setups that have worked for me in the past.  The rest is fate as they say.

The Russell looked exceedingly weak all session.  There is a new happening about the market where rips are fantastic opportunities to liquidate upon.  Every rally has been met with strong supply.  Someone wants out.  You call it ‘rebalancing’ I call it, get me the F out of the stock market.  Fortunately it has only resulted in one highly correlated dump off so far.  Tomorrow could change that.  Or, it could do the exact opposite.

Listen, I will discount any and all fear mongering associated with Israel, Uncle Vlad, or the USA.  But when Hong Kong unrest heats up, I take note.  These people are untested for many 100 years.  They always bend the knee to their commie overlords.  What if they don’t this time?  Every skirmish of my lifetime would pale in comparison to an Asian battle.   Meanwhile they all ‘enjoy’ watching Jack Ma earn more than the last 200 generations of their friends and family.  Some will feel empowered, others rebellious.

Thus, I am cautiously neutral.  Funds have been shifted into my futures account where I intend to be much more intraday until we see some resolution.  As for my October risk, it is Martha Stewart committed, if that makes sense.

Stay nimble my friends.

Nasdaq futures are surprisingly firm despite bad economic news out of Europe overnight.  Perhaps taking a page from the QE playbook in the United States, index futures rallied overnight on weaker-than-expected CPI , Employment Change, and Retail Sales to name a few.  Volume and range are running at a normal clip unlike yesterday and prices are currently set to gap up and out of yesterday’s range.  On today’s docket we have Chicago Purchasing Manager index at 9:45 and Consumer Confidence at 10:00.  Fed’s Powell is set to speak at 10:45 but is likely to be a low impact event.  After hours we have China Manufacturing PMI numbers.

Yesterday we looked at the weekly candle chart and observed how the long term remains buyer controlled as we thoroughly auction an old gap zone.  Today let’s look at the monthly volume profile chart which shows an interesting structure on the month.  We tested lower to the lowest volume point on last month’s chart and sharply rejected away.  The overall structure of this month is a robust distribution of acceptance.  If we are to move higher from there, there would be a sold structure beneath us:

Even though we are questioning the longevity of intermediate term balance, it remains in place as we enter today’s trade.  For sellers to hold onto their edge inside this balance, we likely need to see prices roll over and take out yesterday’s intraday higher low at 4021.75.  This move would be the first step toward accomplishing a lower-lower trend continuation.  A range and price gap still remains below which might entice the move.  There MCVPOC is just above current prices at 4066.  This liquidity is likely to act like a magnet as we trade nearby.  I have noted these observations as well as key LVNs below:

Finally, I have noted the key short term levels I will be observing below:

Today the stock price of GoPro, an American innovation in wearable technology, went apeshit to the upside.  This euphoric action ushered the simple class onto their soapbox to decree from their mountain of Twitter followers.  At this point in the cycle, you are either in the “camera on a stick” or “late to the party but screw it there’s blow” category.  And that is okay, this is how markets are made.

You might think I feel a sense of missing out.  After all, I sold just shy of seventy two.  This assumption couldn’t be any further from the truth.  I made a call months ago, executed it, and participated in the lion’s share of this gain.  However, I am a long term bull on GoPro and look forward to the day you decide to cast these shares into the dumpster and declare them broken.  There I will be, like a greasy banana peel, slipping you to the ground and ensuring I milk another 2% out of your liquidation.

And in the meantime, I will spot the next big thing before most.  My first GoPro was procured from an infomercial on Nickelodeon.  My ear is always to the streets bro.

Yes, there is competition flooding into the marketplace and playing catch up.  If you do not expect that, then you have never witnessed the birth of a fantastic product.  Copy cats have to chase the early market adapter while they innovate to bigger and better widgets.  Or in the case of wearables, smaller, much smaller.  I know most of you homos love your American Football.  Just imagine the boner you would obtain from watching a point-of-view helmet cam on your fantasy quarterback man crush?  It’s coming baby, will you?

As GoPro refines their product to smaller and smaller scales, the company will grow revenues to a robust, almost surreal size.  They are innovation in technology, never discount that.  As for applying valuations, good luck.  Wrapping your mind around the total addressable market (TAM) is a fool’s guess.  Don’t be a fool.

If you are chasing this sucker higher, have some risk in place. I salute your form and wish you good fortune.  Make the ‘intelligent’ short sellers walk the plank, mate.

Waves really kick up at quarter end, and as much as I am yearning to be back in the index futures arena, these conditions could vanish.  In the past when conditions perk up, I abandon my intermediate term stock swing strategy for long term while my energy is focused on day trading.

This time around I intend to do a little of both.  There are essentially two types of day entries to trading.  There is the longer swing trade, which can occur intraday, and then there is the scalp.  When working a hypothesis, that is a swing trade.  The entry into a swing starts with a price level in the hypothesis.  As we travel further from the entry and closer to the target, all you can do is scalp.  My plan is to have 3-4 setups in stocks I am watching for the day and when an intraday swing is setting up, enter both the stock and futures.  Too many times a hypothesis move occurs but the stock I choose does not participate.  Conversely, many times a stock I choose will start to work while my futures entry stops out as the market continues.

This is the proverbial chicken before the egg conundrum.  What moves first?  Stocks then the market or vice versa.  One would think stocks would move first then the index because stocks are the underlying value of the index but it does not always work that way.

Today I picked up Zillow once the buyers emerged.  What turned out to be a wonderful swing hypothesis (see primary hypo-morphed-to-hypo 2) was wasted.  It was the proverbial kick in the butt to return to active futures swing/scalping.

When the tide shifts, it is our job to read the currents and adjust.  If the Nasdaq keeps this speed up one would be negligent to not pursue the opportunity abound.

Sellers dominated the globex trading session overnight by sustaining a downtrend throughout trade.  Sources suggest the unrest in Hong Kong may be weighing on investors’ minds as we start the week.  However what matters most is the fast approaching month end.  This month saw shifting tides across the macro spectrum and as that money sloshes around bigger waves occur.

If you recall, we discussed a gap on the Nasdaq Composite chart which dated back to April 2000.  When the dot com hysteria came tumbling down it included a quarterly gap down which never filled.  When we came into the gap at the end of last August prices ripped through to the other side in a scant two weeks.  Since then we printed three hammers with the wicks increasing in size as uncertainty grew.  Then last week we fell back down through the bottom of the gap before finding buyers in a zone where sellers were initially defending.  This is how an uptrend works, until it doesn’t.  I have highlighted these long term observations below:

Intermediate term, we have been monitoring a balance which developed, showed sell side imbalance, moved lower and corrected itself back into symmetry, made new highs confirming the balance but also possibly a failed auction, and since then we are showing signs of a downtrend.  If we make a new low, and especially if it entices more supply into the market, we could very easily transition into a seller controlled intermediate-term timeframe.  See below:

Finally, drawing our eyes in close to the short term auction, I had made some modifications to the profiles to show us a clear picture of the auction.  Thursday was the most sell flow I can ever recall seeing since becoming intimately involved with the Nasdaq futures around March this year.  It was 3 straight hours of relentless selling.  When responsive buyers did emerge, printing two impressive 12.5 point and 10 point rotations, each was sold into.  It took six more 10+ point rotations to stabilize the market.  However, the market did stabilize on the short term, and the resulting print is an enormous long liquidation, b-shaped profile.  Then Friday we popped out of the low balance and printed what amounts to a short squeeze P-shape.  As we come into cash open, the overnight sellers have rejected the small upper value and put us back inside the lower balance zone.  How we navigate this region early on will offer us objective clues into short term direction.  I have highlighted the key price levels below:

Much of what I write is a test of sorts to query the subconscious of like-minded peers who carry on similar pursuits to my own.  Put simply, we communicate.

After not giving my BABA trade enough risk space, I was stopped out about 0.05 from the current all time low.  Now I watch from the sidelines a bit like Smeagol.  Late in the afternoon I put forth the proposition that someone needed to 300 the ‘Jack Ma’ offer at $90 per share.  Regardless of whether the seller at $90 was Jack Ma, this is a perfect demonstration of round number psychology.  And this one is huge.

Our friends in the Far East are vital.  Grossly outnumbering us, owning all of our debt paper, they’re beating us at our own game.  But we still have something they don’t—the best financial system, a real stock market. This is biggest IPO [sic].  People are suddenly realizing you don’t have to buy a shipping container’s worth of goods to outsource that shit.  Cotton is headed lower, they know it, where else do you anticipate us purchasing are clothing from?  Los Angeles?

Eyes are on BABA, busy eyes who can only monitor bigger ideas, like $10 dollar increments, especially an increment just below the wonderfully curved $100.

This is how psychological levels work.  Nothing I stated above matters.  The world exists however we choose to project upon it.  But trading with good form is just cold, dead, numbers and us, we are just bags of rotting flesh.  Try to see it.

Have a great weekend friendos