Money flows up into beginning of November, here is Monday NASDAQ trading plan

NASDAQ futures are coming into the first day of November and the day before the presidential election gap up after an overnight session featuring extreme range and volume. price was choppy overnight, chopping around the unchanged level until about 4am New York. Buyers pushed price higher around then, driving up into the upper quadrant of last Friday’s range before encountering meaningful responsive selling. Sellers defended the 11,200 level, and as we approach cash open price is hovering a bit above the Friday midpoint.

On the economic calendar today we have ISM manufacturing at 10am.

Last week was choppy through Tuesday then we saw a big move lower Wednesday. Thursday was buyers attempting to reject the big sell but then Friday prices continued to slide lower. The last week performance of each major index is shown below:

On Friday the NASDAQ printed a double distribution trend down. The day began with a gap down near the Thursday low. A brief two-way auction saw buyers fail to press out of the lower quadrant of Thursday’s range. Instead sellers stepped in and drove down through the weekly low. The selling continued, unidirectional rotating down into the lower quadrant of the range from 09/25, a conviction buying day. Around 11:30am responsive buyers stepped in and worked a sharp rotation higher but were again overwhelmed by sellers. Sellers had price back on the lows by 3pm and we chopped along the lows until the end of the day when a ramp higher took price about a quarter of the way off the lows.

Heading into today my primary expectation is for sellers to work into the overnight inventory and close the gap down to 11,072.25. Look for buyers down at 11,054.25 and for two way trade to ensue.

Hypo 2 stronger sellers tag 11,000 then continue lower, taking out overnight low 10,981.75. Look for buyers down at 10,967.25 and for two way trade ensue.

Hypo 3 buyers press a gap-and-go, trading up through overnight high 11,211.50 early on and continuing up to 11,267.50 before two way trade ensues.

Levels:

Volume profiles, gaps and measured moves:

I suppose this is what we play for. Next week carries the promise of big opportunity for the speculative class. Stick to the plan. Press the winners. Cut the losses and manage risk and all that is sacred to the active trader. If the net sum of the action starts to feel too all-or-nothing step back. Remember the markets have been here longer than any of us and they’ll still be here long after we’re gone. There is nothing personal about the numeric representation of millions of humans and algorithms interacting. It is simply information. An instant feedback on whatever position you take. There is nothing wrong with standing aside and watching the big waves from a high perch. Here’s where we stand and what we’re up against.

Yesterday was a full moon and the final day of October. November is here and winter is pressing in fast. Early this morning we hit the daylight savings shift.

U.S. election Tuesday and by night we’ll likely see extreme volatility in the futures.

FOMC announcement Thursday and non-farm payroll Friday.

I made a professional effort to off-gas the steam built up in my system last night. I menaced the town until about 5am, dressed like some psychotic masked bear ghoul. This was after taking the niece and nephew around for trick-or-treating and screening out two, mind you, two pieces of fanatic christian propaganda from their sacks. The sleazy pamphlets were formatted to seem innocent, then half way in they cast shame. I resisted the urge to go back and knock the zealots’ teethes out, instead haranguing some internet stranger in the comments section of a Fly blog. Drank enough hooch to put an ache in my spleen and now I feel purged of my anger, physically depleted and pure of mind.

(We all have our rituals)

That is all I wanted to say. Oh one last note…IndexModel is flagging Bunker Buster. This signal tends to preclude an acceleration to the downside. I’ve had a notoriously hard time day trading it. Instead I’ve shifted my approach to using Bunker Buster signals as a time to accumulate shares of my top long-term positions. This week I will be making a few buys of Twitter. I will do my best to time these instead of overly focusing on catching the lows in the market.

When the risk is high we do things the same as always—start off with a morning trading report. Work open gaps in range. Other key stats. Then go back to the sidelines. Eat the elephant, or something like that.

Raul Santos, November 1st 2020

And now for the week’s Strategy Session. Enjoy:

I. Executive Summary

Raul’s bias score 2.3, medium bear*. Volatility increases as price accelerates to the downside. Look for markets to eventually form a sharp, excess low and eventually rally into the week’s end. Geopolitical risk is high with U.S. elections Tuesday. Also be aware of an FOMC announcement Thursday and Non-farm payroll Friday.

*IndexModel triggered a Bunker Buster signal. See Section V.

II. RECAP OF THE ACTION

Choppy through Tuesday then a big move lower Wednesday. Thursday saw buyers attempting to reject the big sell but then Friday prices continued to slide lower.

The last week performance of each major index is shown below:

Rotational Report:

Rotations bearish for a third week—full on risk off move away from equities.

For the week, the performance of each sector can be seen below:

Concentrated Money Flows:

Industry flows skewed extremely bearish. When this happens, we tend to see money flows continue lower for another week.

Here are this week’s results:

III. Exodus ACADEMY

Stay innately aware of emotions into this big week

Tuesday’s election is likely to introduce extreme volatility into the marketplace. There are other big events (FOMC meeting Thursday, NFP Friday) but the election is the main factor in next week’s action. There is no need to “catch” any part of the price action leading into and immediately following the action. However, the opportunity is high. If we can keep a cool head and focus on strategy execution there is potential to extract gains rapidly. Of course the opposite is true. Keep risk management at the forefront. Remember, the market will still be here long after the election. Don’t force the action. Take it one day, one trade at a time.

Note: The next two sections are auction theory.

What is The Market Trying To Do?

Week ended searching for sellers.

IV. THE WEEK AHEAD

What is The Market Likely To Do from Here?

Bias Book:

Here are the bias trades and price levels for this week:

Here are last week’s bias trade results:

Bias Book Performance [11/17/2014-Present]:

Semiconductors press into potential support, same for Transports

Markets fluctuate between two states—balance and discovery.  Discovery is an explosive directional move and can last for months.  In theory, the longer the compression leading up to a break, the more order flow energy to push the discovery phase.

We are monitoring two instruments, the Nasdaq Transportation Index and the PHLX Semiconductor Index.

Transports are nearing the bottom of their established range. This market is likely to catch a bid down in these levels. Otherwise we may begin a new discovery leg lower. The more likely outcome is to remain range bound.

See below:

Semiconductors kept sliding last week and are pressing into a support cluster. Primary expectation is for it to hold. If not, like Transports, we may see a shift into discovery down.

See below:

V. INDEX MODEL

Bias model is signaling Bunker Buster. This signal calls for volatility to increase, with price accelerating to the downside before eventually forming a sharp low and reversing higher.

VI. QUOTE OF THE WEEK:

“You will earn the respect of others if you begin by earning the respect of yourself.” – Musonius Rufus

Trade simple, love your discipline

NASDAQ futures are coming into the final day of October down -90 after an overnight session featuring extreme range and volume. Price dove lower during the settlement period Thursday afternoon, then continued steadily rotating lower through the night as investors reacted to several major earnings reports from Big Tech. The selling worked price down to a new weekly low, trading down to levels unseen since September 25th. Since then price has worked +200 off the lows. At 8:30am personal income and outlays data came out mixed, to slightly better than expected and as we approach cash open price is hovering in the lower quadrant of Thursday’s range.

The only other economic event today is consumer sentiment at 10am.

Yesterday we printed a double distribution trend up. The day began with a slight gap up and after a brief two-way auction buyers stepped in and drove price higher, rallying up into Wednesday’s midpoint before meeting any meaningful resistance. A battle ensued along Wednesday’s mid until about 1:15pm New York when buyers broke the intra-day range and drove up into the thin prices above 11,350. It was all buyers in control for the rest of the day, eventually taking out the Wednesday high by a few points before sellers re-engaged. Price was sort of fading off the highs into the close then, as noted earlier, price dove lower during settlement. We ended the session right on the mid.

Heading into today my primary expectation is for a choppy open. Look for sellers to move price down through the Thursday low 11,170.50. Look for buyers just below at the Wednesday gap 11,163.50 and for two-way trade to ensue.

Hypo 2 buyers press off the open, closing the overnight gap up to 11,322 then continue higher up through overnight high 11,339 before two way trade ensues.

Hypo 3 stronger buyers sustain trade above 11,300 setting up a run to 11,400.

Levels:

Volume profiles, gaps and measured moves:

Internet was a strange twist in the simulation. Over the last 3,000 years or so humans have experimented with a variety of ways to organize large groups of people to cooperate. Democracy has fought like hell to be the de facto, but we’ve spent the last 240 years here in the New World experimenting with it and it is safe to say not everyone is on board.

The big vote is coming up. Who Wants To Be A President is like a game show from hell. The N-95 mask verse the autocrat. Here in Michigan, there is a huge presence of upper-middle class scum, real greasy fuckers who’ve spent their entire life sprawling every which way out from Detroit, clearing nature and plopping down 4000 square foot hovels with three acre lawns. They don’t particularly like democracy. They want a king. Maybe they are kings of their petty domains, gunning down harmless woodland creatures for sport and otherwise growing fat and paranoid in isolation.

Capitalism is not perfect but it has enough components to keep us interested. It allows for autocratic leadership, democratic and other hybrids. When paired with internet, it allows non-traditional figures to rapidly rise to power. Not through mining precious resources or enslaving a presumed lower rank. Outcasts less interested in power and money and more in humanity, humble leaders like Jack Dorsey, now oversee some of the most crucial components of society—like the big bull horn aka Twitter.

“In a prosperous democracy that is also a society of winners and losers, any may without an equalizer or at least the illusion of one is by definition underprivileged.” – Hunter S. Thompson

Jack has been playing the slow game with Twitter, not even giving into the visceral demands for an edit button. How simple would it be to code in an edit button? Fuck you. Delete your tweet and start over. Not giving into the demands for an edit button is what separates the Jack Dorseys from lesser, more harmful leaders, leaders who’ve addicted themselves to the roar of a crowd.

I’ve withdrawn from conventional society long ago. A derelict futures trader, street charmer and vagabond operating on the fringe of society. Foraging for mushrooms and chasing snowstorms around the Rockies. I do not reside in some bourgeois cube, commuting to 50k worth of desk servitude. I roam with the outcasts, the career drifters and odd jobbers.

This fringe life allows a clear perspective on what is temporary—sovereign nations, borders, politicians and movements. And what is immortal—Google, Tesla, Microsoft, Twitter, Amazon, bitcoin and so on.

I couldn’t care less who is President, judge or sheriff. All that matters is quarterly earnings from Big Tech and the decisions and health of Big Tech leaders. They are steering the most crucial ships in this tumultuous simulation. Grown up hackers. Quite the twist, yes yes? Much more eloquent than anything Jerry Bruckheimer could conjure up.

Bullish Big Tech. Bearish Nations, U.S. fiat and anyone whose name is on a fucking lawn sign.

Raul Santos, October 29th 2020

NASDAQ futures are coming into Wednesday gap down after an overnight session featuring extreme range and volume. Price drove lower overnight, trading in a near unidirectional manner for the entire Globex session, starting shortly after closing bell Tuesday when Microsoft reported earnings. The selling accelerated overnight however. European markets were weak. The German DAX is currently pricing its 7th biggest down day of the year. At 8:30am U.S. goods trades deficit came out better than expected but did little to stem the wave of selling hitting early markets. As we approach cash open price is hovering above Monday’s low.

Also on the economic calendar today we have crude oil inventories at 10:30am, a 2-year note auction at 11:30am and a 5-year note auction at 1pm.

Yesterday we printed a normal variation up. The day began with a gap up that was quickly resolved during the open two-way auction. A second attempt lower was thwarted right before 10:30am, a few ticks below the Monday closing print. Low of day was in from there. Price was range extension up by mid-morning and after several hours of chop above the daily midpoint buyers ramped into the bell.

Normal variation up. Inside day.

Heading into today my primary expectation is for sellers to gap and go lower, trading down through overnight low 11,390.75 on their way to tagging 11,302 before two way trade ensues.

Hypo 2 half gap fill. Buyers work up to Tuesday low but cannot reclaim the 11,486 level. Choppy action along the lows.

Hypo 3 buyers work a full gap fill up to 11,593 then take out overnight high 11,604 before two way trade ensues.

Levels:

Volume profiles, gaps and measured moves:

NASDAQ futures are coming into Tuesday gap up about +50 after an overnight session featuring elevated range and volume. Price drifted higher overnight, drifting up beyond the Monday midpoint. At 8:30am durable goods orders came out inline with expectations, and as we approach cash open price is hovering above the Monday mid.

Also on the economic calendar today we have consumer confidence at 10am followed by a 2-year note auction at 1pm.

Yesterday we printed a double distribution trend down. The day began with a gap down in range, a sizeable one (about -100). Buyers quickly resolved the gap with an open drive up, taking out overnight high, closing the gap and briefly exceeding last Friday’s high before stalling out a few points below 11,700. After a responsive sell reversed the auction sellers quickly became initiative, reversing the open drive and putting us into an early range extension down. The selling continued throughout the morning and lunch, coming to a climatic end around 1:45pm when a sharp excess low formed. We were down in levels unseen since October 6th (three Tuesdays back) when we found the bid—right at the low volume node of the big market profile we built between 10/2 and 10/9. It was all buying from then on, and buyers managed to return price back near the midpoint by end-of-day.

Heading into today my primary expectation is for sellers to work into the overnight inventory and close the gap down to 11,500.50. Sellers continue lower, down through overnight low 11,478.25. Look for buyers down at 11,424.25 and for two way trade to ensue.

Hypo 2 buyers gap-and-go, trading up though overnight high 11,566 and tagging 11,600 before two way trade ensues.

Hypo 3 stronger buyers trade up to 11,700 before two way trade ensues.

Levels:

Volume profiles, gaps and measured moves:

NASDAQ futures are coming into the final week of October gap down after an overnight session featuring elevated volume on extreme range. Price opened gap down Sunday evening, rotating lower, bouncing once, then rotating lower a second time—taking out the Friday low. As we approach cash open, price is hovering inside Friday’s range, along the low.

On the economic calendar today we have new home sales at 10am followed by 3- and 6-month T-bill auctions at 11:30am.

Last week featured a big sell Monday. Downward pressure through Thursday morning then a minor relief rally into the weekend.

The last week performance of each major index is shown below:

On Friday the NASDAQ printed a neutral extreme up. The day began with a gap up in range that sellers drove down into on the open, quickly resolving the gap and continuing lower into the bottom quadrant of Thursday’s range. Price was choppy through about noon, pressing range extension down along the way but never taking out the Thursday low. The afternoon was all buyers. A steady rotation up eventually recovered the early selling and a new high of day way made near the close. Closed near the highs.

Neutral extreme up.

Heading into today my primary expectation is for buyers to work into the overnight inventory and take out overnight high 11,642 on the way to closing the overnight gap at 11,661. Look for sellers up at 11,700 and for two way trade to ensue.

Hypo 2 sellers take out overnight low 11,543 and tag 11,500 before two way trade ensues.

Hypo 3 stronger buyers trade up to 11,800 before two way trade ensues.

Levels:

Volume profiles, gaps and measured moves:

This weekend the whole pandemic really started triggering me. Your humble market practitioner and adventurer RAUL has survived some exterme-ose events in his day. High speed skateboard wrecks, scaling buildings without alerting the law-dogs, Hawaiian rip-tides, mountain plane crashes and so on. My thirst for adventure is rarely quenched. I thrive outside the comfort zone and sitting around watching the hecking Netflix is b-o-r-i-n-g. I need something higher octane or I risk the old mistake of seeking thrills in the financial markets.

Do you know how dumb it is to try and catch a jag from trading? I can most certainly assure you that will result in financial ruin.

Trading is trading is trading. You sit down. Plan your trades, trade your plan then you go eat lunch. There is nothing exciting about it.

I regularly salvage a day—going from down 5-600 bucks to ending up 1600. It does nothing to me emotionally or physically. I’d feel the exact same if the day ended right where it was initially, down -600. Money is merely a means to politely being able to say no to people. I can turn a trick just as easily downtown, or pour some cement or design a plant wall. Diversify your income streams lads. Do this as early and often as possible. It goes miles towards cultivating the indifferent strength of a hardened speculator.

Capitalism is the game. It is not perfect. But it rewards the callous. You don’t have to be a dick. You’re better off being a crocodile. Go experiment with looking like a log for a few days then snapping into high speed action—making to kill your prey in short order. Capitalism.

Switching over to Stocklabs from here on out. I had the pleasure of catching up with our dear pal The Fly last week via telephone. He gave me the grande tour and I’ll tell you what—StockLabs is the nuts and the shaft. Thursday afternoon, after closing out the SQQQ position taken early Monday, I’m sitting inside Stocklabs, on the Livefloor, watching sentiment in real time, and it became abundantly clear a bid was about to press into the market. The data is intuitive. I traded the bounce and that was it. I’m hooked.

This week’s Strategy Session looks mostly the same as any other one except now it is powered by Stocklabs. I may add some information to the report in the future, but for now I am tiredt.

I am bullish into month-end, into the full-moon halloween, and I am considering dressing up like some kind of real horror show and terrorizing the locals.\

As always, TBD.

Raul Santos, October 25th 2020

And now, the 309th edition of Strategy Session. Enjoy.

I. Executive Summary

Raul’s bias score 3.60, medium bull*. Expect a calm drift, perhaps with a slight upward bias. Then watch for GDP Thursday morning then big tech earnings Thursday afternoon to put some direction into the markets heading into the weekend.

*extreme Rose Colored Sunglasses [RCS] BULLISH bias triggered, see Section V

II. RECAP OF THE ACTION

Big sell Monday. Downward pressure through Thursday morning then a minor relief rally into the weekend.

The last week performance of each major index is shown below:

Rotational Report:

Rotations bearish for a second week. Key Tech sector under pressure while Utilities see strength.

caution bulls

For the week, the performance of each sector can be seen below:

Concentrated Money Flows:

Exodus [PPT 2.0] streamlines how we can research the individual behavior of each industry and how it pertains to overall market sentiment.

Using the Industries screen, we can filter for the Median Return [1 week] of each industry.  I have established an arbitrary -/+ 3% cutoff for qualifying industries of interest.

Money flows skewed bullish.

Here are this week’s results:

III. Exodus ACADEMY

Clear bullish bias into month-end

IndexModel is flagging eRCS bullish after being bearish last week. There are no other conflicting signals coming out of the Exodus quant. Clear bullish bias into month-end.

Note: The next two sections are auction theory.

What is The Market Trying To Do?

Week ended searching for sellers.

IV. THE WEEK AHEAD

What is The Market Likely To Do from Here?

Bias Book:

The following biases were formed using basic price action and volume profile analysis. By objectively observing these actual attributes of the market we gain a sense of the overall market context. To quantify the effectiveness of this approach, each of the 4 equity indexes (/ES, /NQ, /YM, and /TF) has been assigned a fixed long/short target using a standard 14-period ATR. Each week there will be an outcome of win, loss, or timed stop on all four indexes. The first bracket level hit is deemed the winner in the event that both sides are tagged. This will be tracked and included in the Exodus Strategy Session.

Here are the bias trades and price levels for this week:

Here are last week’s bias trade results:

Bias Book Performance [11/17/2014-Present]:

Semiconductors continue leg up, Transports continue balance

Markets fluctuate between two states—balance and discovery.  Discovery is an explosive directional move and can last for months.  In theory, the longer the compression leading up to a break, the more order flow energy to push the discovery phase.

We are monitoring two instruments, the Nasdaq Transportation Index and the PHLX Semiconductor Index.

Nothing new for Transports. They remain balanced.

See below:

Semiconductors are consolidating, slightly drifting lower, but there appears to be some logical support below and discovery up continues to be the call.

See below:

V. INDEX MODEL

Bias model is signaling extreme rose colored sunglasses. This bullish bias calls for a calm drift, with a slight upward bias.

VI. Exodus hybrid overbought

On Monday, October 5^th Exodus flagged hybrid overbought. This is a bullish cycle that runs through Monday, October 19^th end-of-day.

The performance of each major index thus far is shown below:

VI. QUOTE OF THE WEEK:

“All cruelty springs from weakness.” – Seneca

Trade simple, examine your anger

NASDAQ futures are coming into Thursday with a slight gap down after an overnight session featuring elevated volume on extreme range. Price was balanced overnight until about 7:30pm when a sharp sell-spike hit, likely related to some of the COVID-19 relief talks coming out. The move stalled just a few ticks above the current low print down at 11,585 which was set around 5am Wednesday. At 8:30am jobless claims data came out slightly better than expected, and as we approach cash open price is hovering in the middle of Wednesday’s range.

Also on the economic calendar today we have existing home sales at 10am, 4- and 8-week T-bill auctions at 11:30am and a 1-year TIPS auction at 1pm.

Yesterday we printed a normal variation down. The day began with a slight gap up.Sellers resolved the small gap during the open before a strong buy spike sent price up near the Tuesday high. This would be all the rally we could muster, the auction stalled and fell to a new low of day. The action was choppy, staying inside of Tuesday’s range, making time as investors wait to hear updates on the relief bill. The session ended with price smack in the middle of range.

Heading into today my primary expectation is for sellers to work down through overnight low 11,591 setting up a move to target 11,558.50 before two way trade ensues.

Hypo 2 stronger sellers trade down to 11,500 before two way trade ensues.

Hypo 3 buyers work a gap fill up to 11,695.25 then continue higher, trading up through overnight high 11,705.75 on their way to tagging Monday’s naked VPOC at 11,800.

Levels:

Volume profiles, gaps and measured moves:

NASDAQ futures are coming into Tuesday with a slight gap up after an overnight session featuring extreme range and volume. Price shot higher overnight, driving unidirectional up from closing bell until about 8pm New York. The rest of the session was spent balancing down in the lower quadrant until about 8am when sellers made a push out of the Globex range. At 8:30am housing starts and permits came out in line with expectations (which remain high). As we approach cash open, price is hovering in the lower quadrant of Monday’s range.

There are no other important economic events scheduled today. Some low-impact Fed speak is due out in the afternoon.

Yesterday we printed a trend down. The day began with a slight gap up. A brief open-two-way auction took place right along Friday’s volume point of control before sellers stepped in and drove down into the overnight gap and took out the Friday low in the same swoop. Initially buyers stepped in ahead of the Thursday (weekly) low however, and there was a battle along the lows until about 2pm when sellers overwhelmed the bid and the auction continued lower. Of note, the daily VPOC never shifted lower from those mid-day battle levels—it remains near last week’s low. The selling continued however, trading down right to the key fibonocci level right at 11,600, that we see if we draw a retrace from the the 10/6 low to the 10/13 high. We ended the session on the lows.

Heading into today my primary expectation is for sellers to work into the overnight inventory and close the gap down to 11,648.75. From here we continue lower, down through overnight low 11,633.50. Look for buyers down at 11,558.50 and for two way trade to ensue.

Hypo 2 stronger sellers press down to 11,500 before two way trade ensues.

Hypo 3 buyers work up through overnight high 11,753 setting up a move to tag the Monday VPOC at 11,800 before two way trade ensues.

Levels:

Volume profiles, gaps and measured moves: