Put simply the model is bullish into first week of June

Let me be the first to let you that June is a good month for active trading.  Why?  Distraction.

Summer has arrived in the economic power centers of the world.  Animals spirits are alive.  Love and lust are acting on the human spirit.  All the while ruthless capitalists are stalking their next prey.

And it really is that simple.  Either you keep your feet grounded, using whatever foundation you have for working, or you are eaten up by capitalists.

My only true friends in the battle for domination of the financial markets are raw interaction data and robots.  They are both immutable.  And with proper maintenance they equip me to be on the right side of June.

A few of you question my whole style and approach.  Believe me, I listen.  A harsh criticism can carry more insight than praise.  Do I feel anything when you call me garbage?  Not a wince.  At this level there is no room for emotion.  I need to execute. That’s all there is to it.  Thank you for even taking the time to read my work.

I realize the trade off with writing.  You are spending your time, which I consider finite and precious, examining my concepts.  This is not a responsibility I take lightly.

The models that guide my behavior are bullish into next week.  I was busy last week hustling and only traded the end of the week.  This week is different.  I am out for NASDAQs and will be working the long side of the tape.  You can work the short side.  And hopefully you find some opportunities to extract wealth while you are at it.  I will be working the long side.

Good luck out there.

NASDAQ futures are coming into Friday gap up after an overnight session featuring elevated volume and range.  Price worked higher overnight, slowly and insistently, keeping itself inside of the Thursday range.  As we approach cash open price is hovering near the weekly high.  At 8:30am non-farm payroll data came out better than expected.

At 10am we have a slew of economic numbers including construction spending, ISM manufacturing, ISM employment, and a few other low impact data points.

Yesterday we printed a neutral day.  The day began with with a slight gap down which was filled during the opening chop.  Then we worked lower, making a brief range extension down before discovering responsive buyers who traded us up to range extension up, putting us neutral.  Then we traded back down into the mean, then below the mean, closing in the lower quadrant.

Neutral.

Heading into today my primary expectation is for sellers to push into the overnight inventory.  Look for buyers ahead of the gap fill, around 7000 then a move higher to target 7032.75 before two way trade ensues.

Hypo 2 buyers gap-and-go higher, trading up to 7032.75 then sustaining trade here to set up a move to target 7039 before two way trade ensues.

Hypo 3 sellers work a full gap fill down to 6978.50 setting up a move to take out overnight low 6970.50.  Look for buyers down at 6855 and two way trade to ensue.

Levels:

Volume profiles, gaps, and measured moves:

NASDAQ futures are coming into Thursday with a slight gap up after an overnight session featuring normal range on elevated volume.  Price was balanced overnight before starting to slowly work higher this morning.  At 8:30am both PCE core and initial/continuing jobless claims data came out better-than-expected.

Also on the economic calendar today we have pending home sales at 10am and crude oil inventories at 11am.

Yesterday we printed a normal variation up.  The day began with a slight gap up and choppy trade which served to fill the overnight gap.  Then buyers stepped in and made a light push to range extension up before we drifted into the close.

Heading into today my primary expectation is for sellers to work into the overnight inventory and close the gap down to 6988.25.  Then we work higher, up through overnight high 7003.50 continue higher to target 7023.25 before two way trade ensues.

Hypo 2 stronger buyers work up up to 7032.75 before two way trade ensues.

Hypo 3 sellers work gap fill down to 6988.25 then continue lower, down through overnight low 6970.50 setting up a move to target 6954.75 before two way trade ensues.

Levels:

Volume profiles, gaps, and measured moves:

Happy Memorial Day lads,

Hopefully your weekend is going well and is serving to refresh your mind and spirit as we head into the impressive heat of summer, a season which continues to become more fierce with every passing year.

I have been living a fringe lifestyle, predominantly lodging myself in a van in the city, enjoying an authentic urban camping experience.  Detroit is alive with the steady thump of house music—a simple genre of music that resembles the sound of automation—here in a city that will continue to be on the cutting edge of autonomy and artificial intelligence.

I rose early this morning to return to mothership and run the IndexModel before the sun came overhead and made the main control station unbearably hot.  The model fired out a bullish bias heading into next week.

Therefore, come Tuesday morning, it will be our expectation that a calm drift will take hold, at least until Wednesday when the Federal Reserve tries to low-key modify the Volcker Rule, likely in a way to benefit bankers of the private equity variety.  That open meeting may tick volatility higher, but aside from their transparent acts of capitalism, the week is likely to be calm.

And hopefully you’re felling calm because it is hard to be wound up in this heat.  Goodness, 94 degrees on deck today.  The city holds that heat, with every surface from walls to ground, then it radiates like a convection oven.  But it is these very city centers that are being repopulated and rebuilt by the millennial generation.  From St. Louis to Philadelphia, the narrative of urban centers being cesspools of violent minorities is being upended by ambitious upstarts and opportunistic real estate developers.

Soon it will be the suburban setting, where people ran to in fear, shaken by the race riots, that will be less desirable for human habitat.  Funny how fear fueled a 35 year mistake, a wasteful sprawl of civilization that has destroyed hundreds of miles of productive farm land, all in the name of owning a stamp’s worth of the American dream.

But as always, time will tell, and our time here is brief, and this Memorial Day is already slipping behind me.   Therefore I must wish you well and be on my way.

MODELS ARE BULLISH

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NASDAQ futures are coming into Friday with a small gap down after an overnight session featuring extreme range and volume.  Price worked higher, making a new 7-day high before a sharp responsive sale stepped in around midnight and has continued to impress the market lower since.  At 8:30am durable goods orders came in below expectations.

Jerome Powell will start speaking at 9:20am on the topic of Fed transparency and stability.  This is likely to cause a bit more noise in the early morning trade.  We also have the final May reading of Sentiment from University of Michigan at 10am.

Yesterday we printed a normal variation down.  The day began with a small gap down which buyers quickly filled.  Then we went lower from there rapidly, before stalling ahead of the Wednesday low.  Then we rallied for the rest of the day but never pushed range extension up. Normal variation down.

Heading into today my primary expectation is for a choppy open.  Look for a move down to 6930.50 then buyers step in and close the overnight gap 6956.50 before two way trade ensues.

Hypo 2 buyers work right off the open, up to close the gap 6956.50 then continue higher, working up through overnight high 7003.75 before two way trade ensues.

Hypo 3 stronger sellers trade us down to 6871.50 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 elevated range and volume.  Price worked higher overnight, briefly probing into the 5/14 range before settling into balance.  At 8:30am initial/continuing jobless claims data came out mixed.

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

Yesterday we printed a double distribution trend up.  The day began with a gap down-and-out of the large value area that began forming May 15th.  Buyers drove higher off the open and after some two-way trade along the Tuesday low buyers became initiative and the market went trend up into the close.

Heading into today my primary expectation is for buyers to work into the overnight inventory and close the gap up to 6957.  From here we continue higher, up through overnight high 6975 before two way trade ensues.

Hypo 2 stronger buyers sustain trade above 6963 setting up a move to target 6989.50 before two way trade ensues.

Hypo 3 sellers press down through overnight low 6925.25 setting up a move to target 6900 before two way trade ensues.

Levels:

Volume profiles, gaps, and measured moves:

NASDAQ futures are coming into Wednesday gap down after an overnight session featuring extreme range and volume.  Price worked lower overnight, driving fast at times, discovering lower prices.  As we approach cash open the auction profile resembles a lowercase letter-b which suggests a long liquidation occurred—a temporary market phenomenon like a short squeeze but in the other direction. Price is hovering on the topside of a multi-day value area formed in early May and showing short-term balance.

The economic calendar is loaded today.  At 9:45am we have Markit manufacturing/service/composite PMI.  New home sales data comes out at 10am, crude oil inventories at 10:30am.  At 11:30am the US Treasury will auction off $26 billion in 52-week bills and $16 billion in floating rate 2-year notes.  Then at 1pm they will auction off another $36 billion in 5-year notes.

Then, at 2pm the Federal Reserve will release the minutes from their May 2nd meeting.

Yesterday the NASDAQ printed a normal variation down.  The day began gap up and after a brief 2-way auction sellers stepped in and closed the gap.  We spent most the rest of the day chopping sideways until some late afternoon selling made new daily lows.

Heading into today my primary expectation is for buyers to push off the open.  Look for sellers to reject a move back into the 5/18 low, likely defending at the open gap left behind at 6874.25.  Then look for 3rd reaction after the FOMC minutes to dictate direction into end-of-day.

Hypo 2 gap-and-go lower, press through overnight low 6829.75 setting up a move to target 6801.25 before two way trade ensues.  Then look for 3rd reaction after the FOMC minutes to dictate direction into end-of-day.

Hypo 3 stronger buyers work a full gap fill up to 6909.25 then continue higher, up through overnight high 6913.25.  Look for sellers up at 6925.25 and two way trade to ensue.  Then look for 3rd reaction after the FOMC minutes to dictate direction into end-of-day.

Levels:

Volume profiles, gaps, and measured moves:

NASDAQ futures are coming into Tuesday gap up after an overnight session featuring normal range and volume.  Price drifted higher overnight, slowly and methodically, and as we approach cash open prices are hovering in the upper quadrant of Monday’s range.

The only economic events today are a 4-week T-bill auction at 11:30am and a 2-year note auction at 1pm.

Yesterday we printed a normal variation down.  The day began with a gap up and driver higher.  Buyers stalled ahead of last Thursday’s high and price made a sharp move back down into last Friday’s range. Sellers were unable to close the overnight gap.  We worked back to the daily mid then another sell rotation came through, again unable to close the overnight gap.  Responsive buyers (responsive relative to the Monday open, initiative relative to the Friday close) stepped in at the end of the day and ramped us back to the daily mid.

Heading into today my primary expectation is for sellers to work into the overnight inventory and close the gap down to 6915.25.  From here we continue lower, down through overnight low 6908.75.  Look for buyers ahead of 6890 and two way trade to ensue.

Hypo 2 buyers gap-and-go higher, up through overnight high 6947.50 setting up a test of the Monday high 6957.  Look for sellers up at 6963 and two way trade to ensue.

Hypo 3 stronger buyers close the gap up at 6973.25 before two way trade ensues.

Levels:

Volume profiles, gaps, and measured moves:

This is what I was talking about Sunday when I said ‘where the rubber meets the road’.  Unless you held a position in the futures over the weekend, that 50 point gap up on Sunday evening was useless to you.  And if you appreciate your sanity then you probably don’t want to hold futures into the weekend.  For most of you the weekend is the only time you live your best life before returning to the servitude of your employer.

Being bearish into the week has had its perks thus far.  If you were trading Sunday evening the best rotation was down.

When cash session rolled around 9:30am New York bulls drove higher.  It was an impressive showing right off the rip and was cause to stand aside until we saw sellers of a comparable size and resource step in:

Buyers drive higher off the open doing their best to abandon this profile before it has a chance to fill in. Not stepping in front of this drive up https://t.co/Q94IBQtTwL

— RAUL (@IndexModel) May 21, 2018

It was sort of looking like a more aggressively bullish version of hypo 2.  Here is the text form this morning’s report:

Hypo 2 buyers defend ahead of overnight low 6898.75 setting up a move to take out overnight high 6947.75.  Look for sellers up at 6963 and two way trade to ensue.

We never made it to 6963 and by 11am were off the high and forming a mini-balance, which eventually broke lower and created the biggest rotation of the day.  Resourced sellers rejected a move out of a huge balance that has been building since last Tuesday.  Sellers then defended the daily midpoint setting up another hard rotation lower.

I did not trade the ‘throwback to the mid’ which I normally do, but I held a runner in hopes we would make a new daily low.  This was ultimately closed out right here at the close for a much smaller win.  Holding that intra-day runner is me being more aggressive.  This is what I was talking about Sunday, about pressing my bias.

Today my aggression did not pay.  Bulls pinged a few of the big names right at the bell and we spiked.  Look at 5 minute bars in names like Apple, Amazon, and to a lesser extent NVIDIA.

I was sending cryptic messages through StockTwits and Twitter, hoping to stoke some social tracking algo in my favor.  Aggressive desperation.  It should be noted I ate a small amount of pork yesterday. Sister RAUL prepared a shredded loaf of pig flesh and I had to try it.  I may have absorbed some of the rage and desperation the animal felt before its murder when I consumed its flesh.

Anyhow cash session was a draw.  If the recent history of bulls dominating GLOBEX continues, it is likely we drift higher overnight.  The picture over on the S&P is anything but bearish.  Bulls held their breakout:

But no matter how you observe it, the cash session was a draw.

Tomorrow’s cash session is, as always, TBD.  And you know which side I will be working at some point tomorrow morning.

It really feels to me that we are entering a holding patter ahead of Wednesday afternoon’s FOMC minutes and Friday’s Fed chaiman talk from Jerome Powell.

The excitement over ‘trade wars’ ending is a loose footing for making an argument, either way.  It is a mound of sand in comparison to the rock that is the Federal Reserve.

Look at the current /NQ profile.  You see what I’m seeing?

KEEP TRADING SIMPLE.  DISCOVER VALUE.  SELL ABOVE IT, BUY BELOW.

Selling is being absorbed and so far the buying is too.

trade accordingly

NASDAQ futures are coming into Monday gap up after an overnight session featuring elevated range on normal volume.  Futures opened gap up, with the behavior being attributed to news that ‘trade wars’ were on hold.  We then spent most of the evening working sideways before sellers stepped in.  Their attempt back into the Friday range was rejected by buyers.  As we approach cash open prices are holding about 20 points above the Friday high.

The economic calendar is light to start the week.  At 11:30am we have a 3- and 6-month T-bill auction.  There are no other economic events.

Last week was the third choppy week in a row.  Strong Monday, gap down Tuesday, then consolidation.  Meanwhile the Russell demonstrated divergent strength.  The last week performance of each major index is shown below:

On Friday the NASDAQ printed a neutral extreme down.  The day began gap down in range.  The morning was spent attempting lower but with sellers being absorbed on the bid.  Then we went up and closed the overnight gap before drifting into the lower quadrant by the end of the day.

Neutral extreme.

Heading into today my primary expectation is for sellers to work into the overnight inventory and close the gap down to 6874.25 before two way trade ensues.

Hypo 2 buyers defend ahead of overnight low 6898.75 setting up a move to take out overnight high 6947.75.  Look for sellers up at 6963 and two way trade to ensue.

Hypo 3 stronger sellers trade us down to 6832.75 before two way trade ensues.

Levels:

Volume profiles, gaps, and measured moves: