Day after trend day calls gap up into question, here is the Thursday morning NASDAQ trading plan

NASDAQ futures are coming into Thursday gap up after an overnight session featuring extreme range and volume.  Price was balanced for most of the night session, trading along the lower quadrant of Wednesday’s trend before spiking higher around 3:30am.  The up move found responsive sellers right at Wednesday’s midpoint and since then we have paired back half the move.  At 8:30am advance goods trade balance data came out below expectations, durable goods orders came out above expectations, and initial/continuing jobless claims were better than expected.

Also on the economic agenda today we have pending home sales at 10am and a 7-year note auction at 1pm.

Yesterday we printed a trend down.  The day began with a small gap down.  Sellers stepped in right on the open, leaving the open gap behind.  A responsive bid was found late in the morning and we rotated right up to the daily midpoint before sellers became initiative and began to trend the market lower.  The selling continued clean through to end-of-session, pressing us down through the prior swing low and into price levels unseen since early May.

Heading into today my primary expectation is for sellers to work into the overnight inventory and close the gap down to 6838.50.  From here we continue lower, down through overnight low 6816.75 and then down through the Wednesday cash low 6785.75 setting up a move to target 6771.50 before two way trade ensues.

Hypo 2 buyers drive off the open, rejecting trade down below 6890 and working up through overnight high 6966.50 setting up a move to target 7000 before two way trade ensues.

Hypo 3 stronger sellers trade us down to 6700 before two way trade ensues.

Levels:

Volume profiles, gaps, and measured moves:

NASDAQ futures are coming into Wednesday with a slight gap down (as of 8:30am New York) after an overnight session featuring extreme range and volume.  Price briefly probed higher overnight, taking out the Tuesday cash high by a few points before rapidly descending to the Tuesday midpoint.  Then, around 6:30am a rapid rotation upward undid most of the overnight selling.  As we approach cash open price is hovering in the upper quadrant of Tuesday’s range.

We have a busy economic docket today, all medium impact events.  At 9:45am we have Markit service/manufacturing/composite PMI.  At 10am new home sales, 10:30am crude oil inventories, a 2-year floating rate note auction at 11:30am, a 5-year note auction at 1pm, and the Fed’s beige book at 2pm.

Yesterday we printed a double distribution trend up.  The day began with a pro-gap down and early drive lower.  Responsive buyers stepped in ahead of the current swing low (from 10/11) and starting campaigning higher.  Sellers initially rejected a move back into the Friday/Monday lows around 7100.  We balanced out just below them before ramping up through them in the afternoon, eventually closing the entire pro-gap by late in the day and closing near session high.

Heading into today my primary expectation is for buyers to work into the overnight inventory and close the gap up to 7141.  From here we continue higher, up through overnight high 7175.  Look for sellers up at 7183.50 and two way trade to ensue.

Hypo 2 stronger buyers press up to the 7200 century mark then sustain trade above it, setting up a move to target 7264.50 before two way trade ensues.

Hypo 3 sellers press down through 7100 setting up a move down through overnight low 7052.25.  Look for buyers down at 7009.50 and two way trade to ensue.

Levels:

Volume profiles, gaps, and measured moves:

NASDAQ futures are coming into Tuesday pro gap down after an overnight session featuring extreme range and volume.  Price worked lower overnight, uni-directionally working down into the 10/11 range, which is the day that we recently made a swing low.  As we approach cash open, prices are hovering near the midpoint of the 10/11 range.

On the economic calendar today we have a 4- and 8-week T-bill auction at 11:30am and a 2-year Note auction at 1pm.

Yesterday we printed a normal variation up.  The day began with a gap up that sellers quickly resolved in the first 30 minutes of trade.  Sellers were unable to take out the Friday low, instead discovering a responsive bid (responsive relative to Monday open, initiative relative to Friday close) which came in and worked higher, eventually taking us range extension up but ultimately settling into a choppy balance, with the rest of the day spent trading above the midpoint.  It was an inside day.

Heading into today we are way out of balance, and I expect the open to be violent.  Look for buyers to work into the overnight inventory and work up towards 7100.  Then look for sellers to reject a move back into the Monday low 7100.50 and two way trade to ensue.

Hypo 2 buyers regain Monday low 7100.50 and continue working higher to close the gap up to 7154.75 setting up a move through overnight high 7160.25.  Look for sellers up at 7184 and two way trade to ensue.

Hypo 3 gap-and-go lower, down to 7000 before two way trade ensues.

Hypo 4 full-on liquidation, look for buyers down at 6933.50.   Stretch targets to the downside are 6921.25, 6906, 6900, then 6854.75.

Levels:

Volume profiles, gaps, and measured moves:

NASDAQ futures are coming into Monday gap up after an overnight session featuring extreme range and volume.  Price worked lower Sunday evening, briefly trading below last week’s cash low [established Monday] before discovering a strong responsive bid.  The rest of the globex session was spent rotating higher, uni-directionally.  As we approach cash open price is hovering near Friday’s midpoint.

On the economic calendar today we have a 3- and 6-month T-bill auction at 11:30am.

Last week began with a choppy Monday, a normal day which is rare.  Then Tuesday say a gap up and trend higher.  Wednesday held the gains in choppy trade but then most gains were given back Thursday.  Friday attempted to rally but was rejected and we closed above, but near the week’s low.

On Friday the NASDAQ printed a double distribution trend down.  The day began with a gap up and and drive higher.  The drive stalled before the first hour [initial balance] and responsive sellers stepped in.  They erased the morning drive then quickly closed the overnight gap.  The rest of the day was spent chopping along the lows.  The market briefly took out Thursday’s low during the chop but could not sustain trade below it.

Heading into today my primary expectation is for sellers to work into the overnight inventory and close the gap down to 7107.75.  Buyers step in here and two way trade ensues, eventually working back up through overnight high 7176.75 by end-of-day.

Hypo 2 buyers gap-and-go higher, sustain trade above 7188.25 setting up a move to target 7200.  Stretch target is 7263.50.

Hypo 3 stronger sellers close overnight gap 7107.75, then take out last Monday’s gap 7076.25 on their way to taking out overnight low 7057.  This sets up a move to target the 7000 century mark.

Levels:

Volume profiles, gaps, and measured moves:

Listen lads, I haven’t had the best go at things when I rely solely on my intuition.  My intestinal fortitude is perhaps too strong from a childhood spent eating spoiled meats and other fermented oddities.  The wiggly worms of my past must have infiltrated my DNA and mutated it to make me some kind of man-wolf-beast who regularly craves ultra-violence and extreme risk.  Year-after-year of hitting my head on cement or lopping off tens-of-thousands of dollars from my trading accounts broke me of my disgruntled ways.  Eventually I became a beta human, submitting myself to the will of my robot overlords and listening to their commands without question.

The result? I consistently make money trading.  Hallelujah.  I am more empathetic to elderly and unattractive humans—two human sets I used to run circles around in a sometimes cruel manner.  I think aggressive white men are a pox on society and deploy a krav maga approach to demeaning them both physically and mentally.  Waiting slowly, until the absolute necessary moment, then causing grave harm to their person.

I trade in a similar fashion.  Every trade is precluded by a Weekly Strategy Session to form bias, a morning report to build context and define working price levels, an algorithm to signal ideal entry conditions, and a special software to display order flow on the fly.  Wait, wait, wait.  Then attack with the ferocity of a crocodile.

Apex predator flow.  Crocodiles haven’t evolved in 3 million years.  They can sit in a puddle of mud, rarely ambulating, for as long as four years.  Waiting for an unlucky cloven-hoofed beast to slip into the kill zone that WHACK! ROLL! Feast.

Anyways, I have reasons to be bullish until November 1st.  The contextual overlay I have after preparing the Exodus Strategy Session has me feeling like this cycle will be a test of stoic grit.  That being said, there are a few contextual caveats that may bode well for the bulls.  Namely the semiconductor index.  It sure seems like this vital piece of the rally pie is coming into the week on the low-end of an established range:

If ‘the market’ still believes in the valuations we’ve enjoyed for much of 2018, then this level is likely to be defended.

I am going to be bullish this week until otherwise noted.  Whether or not this is the right side of the tape to be on, as always, is tbd.

Exodus members, the 205th edition of Strategy Session is live, go check it out!

NASDAQ futures are coming into Friday gap up after an overnight session featuring extreme range and volume.  Price worked sideways overnight, bouncing around below the midpoint of Thursday’s trade.  As we approach cash open price is hovering along the midpoint of Thursday.

On the economic calendar today we have existing home sales at 10am.

Yesterday we printed a double distribution trend down.  The day began with a gap down and drive lower.  Initially, the price level high lighted in hypo 3 of the morning report [7207] was defended by buyers, but a second move into it saw sellers overtaking the level which triggered a liquidation.  Price continued rotate lower until tagging the 7100 century mark where two-way trade ensued.

Heading into today my primary expectation is for buyers to gap-and-go higher, trading up through overnight high 7196.  Look for sellers up at 7200 and two way trade to ensue.

Hypo 2 sellers work into the overnight inventory and close the gap down to 7139.25 setting up a move to take out overnight low 7135.50.  Look for sellers to accelerate the action down, working to fill the open gap at 7076.25 before two way trade ensues.

Hypo 3 stronger buyers sustain trade above 7200 setting up a move to target 7263 before two way trade ensues.

Levels:

Volume profiles, gaps, and measured moves:

One observation I forgot during last night’s muse is the relative strength showing up in three names (FD: I am invested in all three) that I consider to be ‘the old guard’.  These are immutable legends; immortal entities revered and feared as much as the ancient gods once were.  Goldman Sachs, Walmart, and AT&T.  I have been noticing their divergent strength during our current sell-off:

My initial interpretation is that the risk cycle has either been reset or is in the process of being reset, with investors rotating back to quality after abandoning their high-risk saas, cryptocurrency, and pot speculations.

A reset of the risk cycle is a positive sign for the health of the stock market, if that is in fact what this small observation is alluding to.

As always, tbd.

Wanted to drop a quick blog tonight.  I have not been doing much night blogging.  Lately I read at night, sometimes consuming a hundred pages of fiction at a time.  It keeps me off Twitter, but I wanted to drop a quick blog and share some observations I’ve made over these last few days while also touching upon some of my favorite ways to pass the time during a drawdown.

It has been tough being bullish since October 4th, especially since we nailed the turn lower one week prior.  When I was on the right side of the action, betting short intra-day and carrying an SQQQ position trade, my visibility was much better than it is today.  I have written extensively about failed auctions in the past, and we certainly are operating in failed auction condition on the NASDAQ futures.  These false breakouts have lead to months of chop in the recent past, but the recent past has also seen them negated by a strong uptrend.  Nevertheless, we again have failed auction conditions and that is good reason to be cautious:

The Exodus hybrid oversold signal that triggered at close-of-business Thursday, October 4th is complete after ticking out 10 trading days.  This signal is what turned me bullish right after being short biased during the first week of Q4. Here is the final performance of each major index over the course of the cycle, as represented by their most popular ETFs:

Party poopers.  These are third sigma NYSE TICKS.  I wrote about these many moons ago.  Here is a link for more background.  We had a series of third sigma positive NYSE TICKs these last few days.  Those are bullish day of, bearish afterwards.  They have had me super cautious:

Having a long bias has taken its toll on me these last few weeks.  I just wanted to write an honest blog and admit that this has been a hard tape for me too.  Trading is quite simple but it certainly is not easy.  When I go into a drawdown I rely on some of the hardest learned lessons of trading.  The ones no mentor can truly prepare you for.  The battle for your mind, for your confidence.  When I am going through a rough patch, it is my hard set risk parameters that keep me from blowing up.  I am grateful to have established daily loss limits and weekly loss limits well in advance of being on the wrong side of the tape.

Losses are part of the game.  It is important that you have routines to keep you from becoming trapped in a rut.  I tend to back away from the markets and focus on other important matters.  One of my favorites is cleaning.  But not just normal cleaning.  Deep dive cleans of furniture or appliances or part of the yard.  I also kicked off my snowboarding ‘prehab’ program last week, which seeks to diagnose and correct major muscle imbalances in my body.  This can significantly reduce the risk of injury when I am hurling myself down the sides of America’s steepest mountains later this year.

What else…I made a bone marrow soup today.  What a primal experience.  I rarely eat animal flesh.  But humans were bone eaters for a very long time.  Back when we were relegated to our proper place in the food chain, somewhere in the middle, we often ate what was left of an animal carcass after the apex preditors had their fill.  That often meant eating bones and marrow.  I think it is a fantastic idea to have these types of inputs.  My very elementary belief is that by consuming the connective tissue around the bones, I will thus strengthen my own connective tissue, further preparing my body to be launched off of tree covered side hips high up in the air.

Anyhow, stay safe out there.  Remember, the stock market was here long before us and will be here long after we are gone.  There is no shame in stepping back to reboot the mind before stepping back into what I truly believe to be the most competitive arena in the world.  High finance, baby.

Keep it simple, keep it tight.

NASDAQ futures are coming into Thursday gap down after an overnight session featuring elevated range and extreme volume.  Price worked sideways overnight in a balanced session.  As we approach cash open prices are hovering along Wednesday’s midpoint.  At 8:30am Philly Fed and Initial/Continuing jobless claims data came out all better-than-expected.

Also on the economic agenda today we have a 30-year TIPS auction at 1pm.

Yesterday we printed a normal variation down.  The day began with a gap down and drive lower, with sellers pushing nearly to the Tuesday midpoint during the first hour of trade. Then, much like Tuesday, the market briefly went range extension down just after 10:30am before discovering a responsive bid.  The rest of the session was spent working back up through the daily mid then chopping along it, eventually ramping higher near end-of-day but not pushing neutral extreme.

Heading into today my primary expectation is for buyers to work into the overnight inventory and close the gap up to 7313.  From here we continue higher, up through overnight high 7317.50.  Look for sellers up at 7348.25 and two way trade to ensue.

Hypo 2 stronger buyers trade us up to 7375.50 before two way trade ensues.

Hypo 3 sellers gap-and-go lower, trading up down through overnight low 7262.25.  Look for buyers down at 7207 and two way trade to ensue.

Levels:

Volume profiles, gaps, and measured moves:

NASDAQ futures are coming into Wednesday gap down after an overnight session featuring extreme volume on elevated range.  Price worked higher overnight, taking out the Tuesday high before rotating down.  As we approach cash open, price is hovering inside the upper quadrant of Tueday’s range.

On the economic calendar today we have housing starts/building permits at 8:30am, crude oil inventories at 10:30am, and FOMC minutes at 2pm.

Yesterday we printed a trend up.  The day began with a gap up and drive higher as buyer rejected an early attempt to trade back into Monday’s range.  Then, late into the first hour of trade sellers made a second attempt into Monday range which very briefly pressed the market range extension down.  However, this second rejection by the buyers triggered a trend up which continued all the way into closing bell.  The action was accented by a squeeze higher during settlement.

Heading into today my primary expectation is for buyers to work into the overnight inventory and close the gap up to 7357.50.  From here we continue higher, up through overnight high 7368.50.  Look for sellers up at 7374.25 and two way trade to ensue.  Then look for the third reaction after the 2pm FOMC minutes to dictate direction into end-of-day.

Hypo 2 stronger buyers sustain trade above 7375 setting up a move to target 7400 before two way trade ensues.  Then look for the third reaction after the 2pm FOMC minutes to dictate direction into end-of-day.

Hypo 3 sellers gap-and-go lower, sustain trade below 7300, setting up a move to target 7271.75 before two way trade ensues.  Then look for the third reaction after the 2pm FOMC minutes to dictate direction into end-of-day.

Levels:

Volume profiles, gaps, and measured moves: