A picture beginning to emerge but the water is still muddy

I stepped aside last week because my signals were crossed. IndexModel, which is built on auction theory, was flagging bearish while Exodus was bullish. The signals generated by these two systems are the rocks I stand on when trading NASDAQ futures, which involves so much leverage it is the financial equivalent of cliff diving in shallow waters. If my footing is off, then I refuse to jump. No one can make me. I can think and fast and wait.

Those are times when I like to stand on my head and stare a the world from that uncommon perspective. Anyhow, the signals cleared up over the weekend. I’ve regained my systematic footing and spent all morning fortifying my logical constitution with three hours of sunrise research. Here are my findings.

Thank you for your time.

There is uncertainty down at the gambling halls in Chicago.

It may seem like I joke around too much, Elder Raul often scoffs that I am, “Always joking around,” when the going gets tough. But the Chicago Mercantile Exchange is a giant gambling hall and you cannot convince me otherwise. Just like Las Vegas makes a book around sporting events, so too are odds placed on FOMC meeting outcomes, via the CME’s Fed Funds futures (say that five times fast). Trading can be gambling, if you go about it like some barstooled jackal. Trading can also be a business, like buying a rail car full of mangoes on Sunday and selling them all by Friday. Anyhow, I watch Fed funds futures closely, have for years, and this week the bookies at the CME are having a hard time making a book on the FOMC rate decision. The CME even felt the need to add a little yellow warning to the data, here is a screenshot:

Say what you will about Janet Yellen (QUEEN), when she was sitting at the helm of the Fed, telling long wandering grandma stories and handing out Werther’s Candies, investors had zero uncertainty with the Fed. The bankers were transparent and calm and non-reactive. Now they are led by Jay Powell, who is like a puppet on arm strings held by the President and his CEO friends and foot strings manned by all the private equity goons he is in cahoots with. With Pinocchio in charge, the Wednesday afternoon rate decision is as hot of a scheduled economic event as we’ve likely ever had. I will be watching the third reaction closely, and “going with it” into the second half of the week.

NEXT

Gold is not a safe haven.

Some would say I am a fox, sure, but I am not here to trick you into burying your gold in the field of miracles. I don’t want your gold and you shouldn’t either. It has no purpose and its value is relegated mainly to fashion. If I want to invest in fashion I buy Gucci.

Keep an open mind.

I have never liked the oil and gas sector. Their actions have destroyed much of the planet, and I’d like to see them all put out of business by Our Dear Leader Elon. And they likely will be, but it will take time, more time than I have been allotted as a mortal. My job, as a speculator, is to extract as many fiat american dollars as possible from the global financial complex and convert said fiat into real assets—land as far north and at as high an altitude as my constitution allows. Said land will be earmarked for development, using steel and concrete and brawn, to create a compound of sorts, for hoarding actual important things like heirloom seeds, quality hooch and firewood.

I think we are seeing a generational buying opportunity in energy and I may take to the equity markets this week and secure a position. I spent some time researching the area this morning and came up with two names, one domestic and one in the emerging markets. The greatest emerging market, of course, is China. PetroChina reports earnings Thursday. I am waiting to hear back from my China correspondent ROBERTO BREGANTE before taking action, but the plan I am setting up is to buy half my position before earnings, and half after.

Domestically I like WES, but for fucked sake, they’re operating in my beloved Rocky Mountains. I’d like to see them become a going concern and then a nonexistent concern. But I may buy some of their stock in the meantime.

Recent comments

Guys (ladies?) you showed up in the comments of my last two posts on dealing with huge losses and wins. I am humbled by your feedback and grateful for the opportunity I have here, standing on my humble little soapbox and talking greasy about making money. Becoming a proficient speculator is an ongoing process. I intend to be the finest speculator this world has ever seen. That said, those posts were an exercise in consistency. In eastern philosophy they have a saying about chopping wood and carrying water. You still have to do the things you did to be successful (enlightened) even after success (failure?) happens.

phoenix your comment resonated with me the most. Excellent observations about the physiological changes that take place after a huge win. I experience many of the same, and they tell me something very important. That if I were to draw a line with “overcautious” on one end and “overconfidence” on the other, with calm and nonreactive in the middle, I am dangerously skewed towards the overconfidence end. Historically, this is when I’ve made the most expensive mistakes in my career. So what do I do after a huge win? Chop wood and carry water. Stay off the phone, take no business meetings and definitely stay away from anything that can execute a trade.

That’s all for now. I am bullish into quad witching OPEX, but will move slowly while the ape men bash each other about with bones and stones.

I am the crocodile.

Raul Santos, March 15th, 2020

Exodus members, the 277th edition of Strategy Session is live. Check out the NASDAQ transportation index. It will tell a story this week.

Now I will follow-up my entry on dealing with a huge win with the tactics for dealing with the opposite extreme outcome, a huge loss. Huge losses ought not come from one trade, that is just senseless. However, sometimes the whole shit house goes up in flames and despite all your planning you lose big time. Here is how I deal with a huge loss.

Clean something. Cleaning can be a mindless task, yet some find meditation in dish washing. What I find in cleaning is the ability to flow between deep contemplation, where I am completing my cleaning task despite my mind being hard at work sorting through some mental gymnastics or psychological sore spot, to back meditative, where I am simply doing my task and thinking of nothing else.  Contemplative to meditative, and back again, over and over. Sorting an old junk drawer and throwing most of it away can be quite refreshing and mindful.

Sharpen the axes. There is always work on the farm. By farm I mean where ever you conduct your trade or business. I need things that take me away from the desire to trade for a few days. Nothing satisfies my intellectual mind like updating my statistical studies, which is something I do quarterly and even sometimes less often. I resharpen my algorithmic trade entry systems by refreshing all the data. I also sharpen actual cutting axes. And the knives in the kitchen. Now I am ready again for fast work.

Do something left-handed. This could be anything. If you are cleaning like some impulsive freak, you can switch to waxing the bleach onto your surfaces with the left, or vacuuming with the left. This helps keep your muscles and bones in balance so you don’t end up looking like Quasimodo in your fifties. I like skateboarding goofy. Nothing crazy. Just go out onto the nature walk and do some long, controlled, kick pushes. It does wonders for the mind.

Pull weeds.

Call an old relative or homie. Nothing provides perspective like talking to an old person, especially a foreigner. They’ll remind you what truly matters.

These are my methods of handling a huge loss. They have been developed over the years. A much younger and more eager Raul would sit and stare at the computer screens, worrying. Do you know what all that worrying added up to? Nothing but a few more greys in my beard.

What is your favorite method for dealing with a huge loss?

I will not be trading the futures today, therefore I will pen an entry I’ve meant to log for some time. Here is how I deal with a huge win.

Stay calm. There is no need to react. Before any trade or investment is made a plan ought to have been formulated, where you pull up a price chart and mark where your trade is right or wrong and where or when you will close the position. Take my massive win in Tesla. I have stated numerous times that not a single share will be sold until the 1000 handle. Has TSLA printed 1000 yet? No. Therefore no action is required. Maybe I accumulate more shares soon.

Clean something. Whenever there is a big change to the numbers on the screen showing how much I am worth to bankers, I start cleaning. Not tidying. Full on cleaning. Pull the oven out and clean up all the crumbs behind it. Scrub the floors and walls like you committed a crime. Use caustic sodas and acids (not at the same time!) to break all the built up residue off the range. Take the baking pans in the back yard and hose them down real nice, then throw at least one pan into the trash—the one you cannot admit to loving or one you blew out attempting some Martha Steward recipe. Purging low use or thrashed kitchenware is good for the soul.

Read a book. Preferably fiction. Most of my business oriented homies pigeonhole themselves into the self help and non fiction case study genre of reading. This is not good for the mind. Explore the works of a famous writer, like Kurt Vonnegut or Herman Hesse. Read the whole bloated Douglas Adams series if you can suffer through that much rambling British humor.

Dig hole. As mentioned before, there is no sense taking action simply for the sake of action when it comes to investing and trading. Your job is to formulate a plan and stick to it. Instead of digging a proverbial hole in your finances, dig a real hole in the ground. This will serve to ground you, and also you can do something cool once you have a kick ass hole, like bury a 5-gallon bucket full of newspaper scraps.

Pull weeds. It is nearly that time in the north where every orifice of dirt will spring to life with unwanted plant life. Work these weeds out of your life, and feel the same unwanted thoughts pulling free from your mind.

These are my methods of handling a huge win. They have been developed over the years. A much younger and more eager Raul would sit and stare at the computer screens, worrying. Do you know what all that worrying added up to? Nothing but a few more greys in my beard.

What is your favorite method for dealing with a huge win?

NASDAQ futures are coming into Wednesday gap down after an overnight session featuring extreme range and volume. Price drove lower until about 9pm New York. From then onward price chopped along the top side of 8100, forming a distinct shelf along the way. At 8:30am CPI data came out in-line with expectations. As we approach cash open, price is hovering below Tuesday’s midpoint, right along the 8100 level.

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

Yesterday we printed a neutral extreme up. The day began with a gap up. After a two way auction sellers stepped in and close the overnight gap. From here buyers stepped in and returned price back up to the midpoint. We chopped along here until late in the day then we ramped higher, pushing neutral and closing near high of day for a neutral extreme print.

Heading into today my primary expectation is for buyers to work into the overnight inventory and close the gap up to 8329.25, From here we continue higher, trading up through overnight high 8357.25. Look for sellers up at 8400 before two way trade ensues.

Hypo 2 sellers gap and go lower, trading down through 8000. Look for buyers down at 7900 before two way trade ensues.

Hypo 3 stronger sellers trade down 7800 before two way trade ensues.

Levels:

Volume profiles, gaps, and measured moves:

NASDAQ futures are coming into Tuesday pro gap up after an overnight session featuring extreme rang and volume. Price briefly worked lower overnight, trading just a few ticks below the Monday low around 6pm New York before forming a failed auction and reversing higher. Around 7pm price spiked back to the Monday midpoint, and by 2am price was up beyond the Monday high. Price went as high as testing into the lower quadrant of last Friday’s range before finding sellers who rejected a move into the range. As we approach cash open, price is hovering along Monday’s high.

On the economic calendar today we have a 3-year Note auction at 1pm.

Yesterday we printed a normal variation up. The day began with a pro gap down and selling drive lower. The selling managed to close an old gap left behind on October 23rd of last year and halt the market for 15 minutes before a sharp responsive bid stepped in and we formed an excess low. The rest of the morning was spent rallying back up to the weekly ATR band. Sellers were here (the band also aligned with recent swing lows) and the afternoon was spent giving back most of the morning gains. We ended the day below the midpoint.

Heading into today my primary expectation is for buyers to gap-and-go higher, trading up through overnight high 8346 to tag the 8400 century mark. Look for sellers up at 8481 and two way trade to ensue.

Hypo 2 stronger buyers close last Friday’s gap up at  8506.50 gap before two way trade ensues.

Hypo 3 sellers work into the overnight inventory and close the gap down to 7951.75 setting up a move to take out overnight low 7814.25. Look for buyers down at 7761.25 and two way trade to ensue.

Levels:

Volume profiles, gaps, and measured moves:

NASDAQ futures are coming into the week pro gap down after an overnight session featuring extreme range and volume. Globex kicked off Sunday night with a gap down an drive lower, the price action being spurred by news that the Sauids are planning an all-out price war in the oil markets along with continued coronavirus uncertainty. We hit the circut breaker around 5:30am New York and have been halted since. As we approach cash open, I am unsure, but it appears we will open below last week’s low, putting us in the range of late-October prices.

On the economic calendar today we have 13- and 26-week T-bill auctions at 11:30am.

Last week began flat and then with buyers active. Said buyers worked higher through Tuesday before we chopped sideways midway through Thursday. Then sellers stepped back in and reversed much of the weekly gains. There was a strong ramp late Friday afternoon. 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 pro gap down. Buyers drove higher during the first hour of trade and then managed to press range extension up. Buyers however were unable to reclaim the microbalance set up during the mid-week chop. Instead responsive sellers (responsive relative to Friday open, initiative relative to Thursday close) stepped in and reversed the day’s range, pushing into a neutral print. Then late in the session we ramped to a new high of day and closed near it.

Heading into today my primary expectation is for sellers to gap-and-go lower, trading down to 8000 before two way trade ensues.

Hypo 2 buyers work into the overnight inventory and trade up to 8188 before two way trade ensues.

Hypo 3 stronger buyers trade up to 8200 and sustain trade above it, setting up a run to 8481 before two way trade ensues.

Levels:

Volume profiles, gaps, and measured moves:

Well lads, my reservoir of deep insight is tapped for now. I suppose I laid it all out last Sunday. I came back to work last week and did okay. My ass was handed to me trading NASDAQ futures Wednesday, but then I pulled a sick win late Friday. There weren’t many pockets of strength last week, but my 10-year grocery investment theme was validated, both via Kroger and Costco earnings.

The way attorneys and other financial alligators crawled out of their holes and attacked Robinhood on Monday disgusted me, and reminded me why I spend much time bathing in mountain rivers and otherwise firming up my constitution for a simple life on the land. Bankers and attorneys make me sick. A polluted lot, and while I make a decent living trading these financial markets, I need to be ready to leave it all behind when my soul no longer can tolerate being around these misanthropes. Or am I the misanthrope?

Life is a mirror.

Boy oh boy, this Sunday’s update is off to a cheery start. Thank you for your time, rant over. Back to the markets.

Call me superstitious, but seeing a Friday the 13th on the horizon before the Ides of March AND a quad witching OPEX has me feeling cautious.

And let’s not forget [let’s not forget, dude] that Monday is a full moon.

It looks like the markets are setting up to make new lows (full disclosure: I have been wrong before). The way I see it playing out, is a rally to start the week. Something to draw in some FOMO dip buyers, then Thursday the selling starts, accelerating into Friday and printing a real horror show candle into the weekend.

I still have a swing trade on in TQQQ. I do not waffle into and out of Exodus system trades. I trade them the way the system itself generates its statistics, 10-day hold. This week, the 10-day cycle ends on Thursday, close-of-business, and perhaps that data point is a major factor in my forecast for the week.

It could go the other way, weakness early in the week, scaring people into selling off risk, looking real bleak, then bottoming Thursday before absolutely destroying bears Friday.

Both of my forecasts are based on the idea of whichever move begins the week being reversed near the end of the week. They could both be wrong.

Writing this all out only serves to solidify something I realized while preparing the Strategy Session—I do not have a clear read on the tape. There is nothing wrong with admitting that. I will tread lightly this week. You won’t find conviction from me, just an ape man sitting on the riverbanks, listening to the wind.

One of the biggest challenges I had to overcome as an independent hustler and financial market trader is the desire to work. To do something for the sake of feeling productive. Often times the best course of action is doing nothing. I satisfy my monkey brain by digging holes in the back yard or busting concrete with a sledged hammer. Much better than forcing trades and losing thousands.

Some old Italian fella found my posting on Craigslist and asked if I can save his enormous coy pond. It is the size of a modest in ground pool. It’s a hideous mess, having been neglected for four or five years. You can tell it had some magic to it perhaps several years ago (he painted an elaborate cinder block waterfall a nice blue and embossed it with golden fishys) but I had to be frank with him. I told him I could come smash it into bits, fill the hole with the rubble, then smooth it over with about 15 yards of top soil. Some jabronies quoted him ten stacks to do the demo. I told him I could do it for three.

So maybe he takes me up on the gig. I don’t know, frankly I don’t care beyond wanting to help a nice old Italian man move on to a more suitable home and wanting all his boulders for my back yard and having some grunt work to keep me busy.

I work hardt.

So that’s it. Long term investments are validated and won’t be touched. I have a swing trade to close out. I will be treading very lightly in the futures markets heading into the Ides of March. And if it is the will of the gods, I’ll have some grunt work to keep me busy for a few days and some boulders for my back yard.

Recent Comments

Juice – I can do my best, and do. I still think the outcome of all these efforts is beyond my control. Fate, is inevitably determined.

Exodus members, the 276th edition of Strategy Session. Check out the story the PHLX semiconductor index is telling. I am bearish.

NASDAQ futures are coming into Friday pro gap down after an overnight session featuring extreme range and volume. Price worked lower overnight, uni-directionally traversing to a new low of week. At 8:30am Nonfarm payroll data came out stronger than expected. As we approach cash open, price is hovering near last Friday’s midpoint.

On the economic calendar today we have consumer credit at 3pm.

Costco earnings bested analyst expectations and the firm saw same store comps stronger than expected amid coronavirus fear-based purchasing. Shares are down -1.5% in pre-market trade.

Yesterday we printed a neutral extreme down. The day began with a gap down in range right at the Wednesday VPOC. Buyers worked into the overnight inventory but could not fill the overnight gap. Instead responsive sellers (responsive relative to Thursday open, initiative relative to Wednesday close) stepped in right at the U.S. airstrike of Iran level and reversed the intra day gains, pushing us neutral. We then closed near session low, in the lower quad of Wednesday’s range.

Heading into today my primary expectation is for buyers to work into the overnight inventory and trade up to 8581.25.  Look for sellers up at 8584 and two way trade to ensue.

Hypo 2 sellers gap and go lower, trading down through overnight low 8337.25 to tag 8300. Look for buyers down at 8294.25 and two way trade to ensue.

Hypo 3 stronger sellers trade down to 8258.25 before two way trade ensues.

Levels:

Volume profiles, gaps and measured moves:

NASDAQ futures are coming into Thursday gap down after an overnight session featuring extreme range and volume. Price worked lower overnight, unidirectional rotating down through the majority of Wednesday’s range, but staying within the cash range. As we approach cash open, price is hovering in the lower quadrant of Thursday’s range.

On the economic calendar today we have durable goods and factory orders at 10am and 4- and 8-week T-bill auctions at 11:30am.

Major retailer Costco is set to report earnings after the bell.

Yesterday we printed a double distribution trend up. The day began with a gap up and two way auction. Sellers were unable to close the overnight gap before buyers stepped in and worked price higher. Said buyers tagged the Tuesday nVPOC then chopped along the midpoint until early afternoon when price squeezed higher. This move had some follow thru late in the day, but we ended up printing an inside day, with the entire range staying inside of Tuesday’s range. We ended near session high.

Heading into today my primary expectation is for sellers to gap-and-go lower, trading down to close the gap at 8581.25 before two way trade ensues.

Hypo 2 buyers work into the overnight inventory and close the gap up to 8895 then continue higher, up through overnight high 8909.75. Look for sellers just above at 8921 and two way trade ensues.

Hypo 3 stronger buyers set up a move to 9000.

Levels:

Volume profiles, gaps and measured moves:

NASDAQ future are coming into Wednesday gap up after an overnight session featuring extreme range and volume. Price worked higher overnight after briefly poking below the Tuesday cash low by a few ticks. This failed auction set the stage for prices to work higher all night, eventually probing a big beyond the Tuesday midpoint. As we approach cash open, price is hovering along the Tuesday mid.

On the economic calendar today we have ISM-non manufacturing/services composite at 10am, crude oil inventories at 10:30am and beige book at 2pm.

Super Tuesday saw Democratic contenders Bernie Sanders and Joe Biden split most of the vote.

Yesterday we printed double distribution trend down. The day began with a gap up that sellers quickly resolved with a open drive lower. Sellers struggled to reclaim Monday’s value area high, a double top print, ushering in buyers who drove price up to 9000. This all happened in the first hour of trade. We then formed a sharp excess low and went range extension down. After a checkback to the daily midpoint, price again rotated lower, eventually dipping down into the lower quadrant of Monday’s range. Buyers were active throughout the rotation but we ended near session low.

Heading into today my primary expectation is for seller to work into the overnight inventory but cannot close the overnight gap. Instead buyers step in around 8624 and work higher, trading up through overnight high 8809. Look for sellers up at 8888 and two way trade to ensue.

Hypo 2 sellers work a full gap fill down to 8581.25, setting up a move down through overnight low 8508.25. Look for buyers down at 8500 and two way trade to ensue.

Hypo 3 gap and go higher, trading up through 8888 and sustaining trade above it, setting up another run to 9000.

Levels:

Volume profiles, gaps, and measured moves: