NASDAQ futures are coming into Tuesday pro-gap down after an overnight session featuring extreme range and volume.  Price worked lower, hard and fast overnight, trading down to the open gap left behind last Friday morning.

On the economic calendar today we have consumer confidence at 10am and a 4- and 52-week T-bill auction at 11:30am.  The Presidential State of The Union Address is at 9pm.

Yesterday we printed a neutral extreme down.  The day began gap down and after a choppy opening battle we went range extension down.  By late lunch we had traversed the entire daily range and gone up through initial balance high, making us neutral.  However buyers could not close the overnight gap and we worked back down into the lower third of the range, earning the neutral extreme designation.

Heading into today my primary expectation is for a gap-and-go lower, down though overnight low 6925.75.  Look for buyers down at 6918.50 and two way trade to ensue.

Hypo 2 buyers work higher and attempt a move back into the Monday range 6980.  Sellers defend here and two way trade ensues.

Hypo 3 stronger sellers trade us down to 6880.75 before two way trade ensues.

Levels:

Volume profiles, gaps, and measured moves:

NASDAQ futures are coming into the week gap down after an overnight session featuring elevated range and volume. Price worked up to a new record high before fading back down to 7000.  At 8:30am personal consumption expenditure data came out in-line with expectations.

Also on the economic agenda today we have Dallas Fed manufacturing activity at 10am, then a 3- and 6-month T-bill auction at 11:30am.

Last week the broad indices were volatile Monday, trading higher, consolidated from Tuesday-to-Thursday, then rallied into the weekend. Here is the last week performance of each major index:

On Friday the NASDAQ printed a double distribution trend day.  The day began with a gap higher.  Sellers stalled during an early attempt lower and we took out Thursday high.  Then after flagging along the highs a trend took hold, higher into the weekend.

Heading into today my primary expectation is for sellers to work down to 6987.75 before two way trade ensues south of 7021.

Hypo 2 buyers work into the overnight inventory and close the gap up to 7029.75.  From here they continue higher, up through overnight high 7047.25 before two way trade ensues.

Hypo 3 stronger sellers work down to 6962.25 before two way trade ensues.

Levels:

Volume profiles, gaps, and measured moves:

January is nearly complete. And then? February.

The trading model is bullish for a fourth consecutive week.  It is safe to say, in hindsight, that the model absolutely crushed January.  Which is nice.  While more-and-more rally skeptics voiced their concern about how far and high 2018 has already gone, the robots keep us on the right side of the tape.

Overall I think it makes sense to take some profits, but only if you intend to invest them somewhere else.  Like new windows for your house.  What is nice about investments in real estate is you can enjoy it.  The most you can do with a stock is take to Twitter and be a fan-boy.  Which is kind of enjoyable, especially with Tesla, because it is such a divisive concept.

There is a fed rate decision Wednesday.  The gambling halls in Chicago currently show a 96.4% probability of the target borrowing rate remaining unchanged at 150 basis points.  In my opinion they need to start hiking rates more aggressively, and pump the proverbial brakes, but it seems like we are really enjoying all this winning.  So it is not likely.

The March rate decision is a live meeting.  There is a 76.8% probability of a 25bp hike.

Because of the odd, mid-week ending of January, we will also have non-farm payroll on Friday.

All that important economic data is on top of us heading into a heavy earnings week.  Our tech overlords at Apple, Google, Microsoft, Amazon, and Facebook—AND Alibaba all report this week.

I spoke with a Google employee last night.  She is quite optimistic about the direction of her company.  She told me keep an eye on some specific parts of the business, but we were in the basement of a parking garage, crammed in an orange room filled with loud, repeating house music and cannabis smoke.  I think I may have caught a contact high, and I do not remember those specifics.

How’s that for a useless anecdote?

Through all the commotion of the upcoming week we have our quantitative signals to guide us.  They are calling for a calm drift.  We have Wednesday afternoon to watch as a pivot point.  And as always we have auction theory for clarity.  So we will do what we always do—take it one day at a time.

Raul Santos, January 28th, 2018

Exodus members, the 167th edition of Strategy Session is live.  Go check out a few caution signs we need to monitor next week.

What feels good about this week is, well everything.

I have learned to take the good with the bad and treat them all the same.  I refined what makes me feel good.  It is not financial gain.  It is physical pain, but that is irrelevant to my professional life.  What makes me feel good professionally is doing the right work.

Research, plan, execute.

This was an important week, but I woke up late Monday.  The Sunday football had me all fired up. Bill Belichick is someone I admire, and seeing him take another set of athletes to the Superbowl gives me hope that I will have a long trading career if I do my job.

But the real fun was seeing the birds trounce those primitive norse men.

Through it all I forgot to set my alarm.

So I woke up late Monday.  Missing the opportunity to write a NASDAQ trading plan before opening bell threw me completely out of whack.  Suddenly everything else I needed to do this week started swirling around in my head.  It was overwhelming.

Just then I took a mental break.  I sat down in the office.  Turned off all the monitors.  Left the phone in the kitchen and folded a standard eight and a half by eleven piece of paper in half four times.  This yields the only size to-do list one can effectively tackle.

And I wrote down everything I need to do this week.  I took Monday off from trading.  I did not force myself to sit down and use my gut, or instinct, or whatever to go swing some trades around.

That was something I used to do.  It lost me lots of time and money.

I sat down and wrote a to-do list.  Then I starting knocking out the most enjoyable tasks.  The low-hanging fruit.

On Tuesday I traded.  I  cleaned up the overnight high before lunch and went back to work on the to-do list:

Primay hypo completed, all we were looking for was that move up through ONH. what's for lunch? https://t.co/wGqi7X8Sim

— RAUL (@IndexModel) January 23, 2018

Tuesday night I had an awesome Meetup downtown and made some real connections with people who I think will become better observers and traders.

Wednesday I nailed the trade up through overnight high THEN pivoted and rode a fast rip lower and went back to work on my to-do list:

Let history show that I was kind to my robots and we coexisted in peace??‍???

https://t.co/tomo41plAa

— RAUL (@IndexModel) January 25, 2018

Thursday I nailed the gap trade fast and magnificently and then worked on my to-do list:

??OMG I just slayed the open. Fuk. Primary hypo complete ? #nq_f https://t.co/2M2iR64sYT

— RAUL (@IndexModel) January 25, 2018

Friday, today, I pivoted to hypo 2 and slowly rode the trend higher:

Sellers had their shot, came into the open on right side of tape. Now it's looking like hypo deuce. Omaha Omaha https://t.co/vlAaZSADgf

— RAUL (@IndexModel) January 26, 2018

And now it is time to return to my to-do list.  There are a few items left and I scratched a few new items in the corners.  I may not even complete the whole list this week.  But the process of stopping—of sitting down and writing all the seemingly overwhelming tasks on paper, with pencil, on an eight and a half by eleven piece of paper folded in half four times—saved my entire week.  And I am happy that I stuck to an old habit that helps to clarify my thoughts and take proper action.

I am grateful I took a stop.

I like to think a week like this would make coach Belichick proud.  Not that that matters.

Meanwhile my quantitative portfolios are all at record highs and outperforming the S&P 500.  These truly are good times.  So much winning is occurring.

I know the inevitable snap back is just around the corner, like a hard northern wind just after passing beyond a building.  Don’t let it blow you over.  Keep you feet on the ground and stay balanced.

Have a great weekend everyone.  I am grateful for the connections I make here.  It means a lot to me that you guys share my work, and hopefully it finds someone who needs help with their approach.  Everyone takes a different path to consistency and sometimes it helps to emulate some of the traits they see in others.  Eventually, with experience they can begin creating their own recipe.  They become less of a cook and more of a chef.  But we can always go back to being a cook again if someone is more experienced and a worthy mentor.  And I hope people read my work and realize that it takes patience.

Raul Santos, January 26th, 2018

NASDAQ futures are coming into Friday gap up after an overnight session featuring elevated range and volume.  Price worked higher, balancing out in the upper quadrant of Thursday trade.  At 8:30am advance goods trade balance, GDP, and durable goods all came out below expectations.

There are no other economic events today.

Yesterday the NASDAQ printed a normal variation down.  The day began with a gap up that sellers quickly drove down into.  Then, after a poking through overnight low a responsive bid stepped in and two way trade ensued.  Late in the afternoon the market went range extension down.

Heading into today my primary expectation is for sellers to work into the overnight inventory and close the gap down to 6930.75.  From here we continue lower, down through overnight low 6925.75 before two way trade ensues.

Hypo 2 buyers defend ahead of 6945 and we go higher, up through overnight high 6972.  Look for sellers up at 6996.75 and two way trade to ensue.

Hypo 3 stronger buyers gap-and-go higher, sustain trade above 6998.75 and push us to record highs to end the week.

Levels:

Volume profiles, gaps, and measured moves:

NASDAQ futures are coming into Thursday gap up after an overnight session featuring extreme range on elevated volume.  Price was balanced overnight, until about 3:30am New York when a strong rally took shape.  At 8:30am initial/continuing jobless claims data came out mixed.

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

Yesterday we printed a neutral extreme down.  The day began with a slight gap up and two way auction.  After very briefly going range extension up, sellers defended 7000 and then pushed down through the entire daily range.  The selling accelerated though lunchtime, briefly tagging the naked volume point of control from Tuesday before a responsive bid stepped in and two-way trade ensued.

Heading into today my primary expectation is for sellers to work into the overnight inventory and close the gap down to 6932.50.  We continue lower, down through overnight low 6921.50 before two way trade ensues.

Hypo 2 buyers defend ahead of 6960 and we work higher, up through overnight high 6987.25.  Look for sellers up at 6996.50 and two way trade to ensue.

Hypo 3 strong buyers gap-and-go higher, sustain trade above 6998.75 and thrust back to record highs.

Levels:

Volume profiles, gaps, and measured moves:

Coming up for air.

We are in the midst of our first long liquidation of 2018.  Before sellers gained control we pushed higher and cleared out the globex high.  Markets rarely top out during extended trading hours.

Not that we know if we are topping out.

What we do know is sellers took control after a big round number on the NASDAQ behaved like a wall:

Man, 7000 was a wall #nq_f

— RAUL (@IndexModel) January 24, 2018

Listen, I have been bullish all week.  I was still bullish this morning.  But what the robots have been saying recently had me ready to pivot.  The robots have been saying some shit.

Like Sunday, January 14th when they said a big red day was coming:

you will notice that in every instance there has been a few more days of rally, like 2-to-5, then a couple big red candles.  THOSE RED CANDLES, those are distribution days.  A futures trader can make a few month’s worth of gains on those days if prepared to do so.

Or Monday, January 22nd when the Exodus 10-day bullish cycle completed:

Bullish cycle complete, here is the Tuesday NASDAQ trading plan

Yesterday, close-of-business marked the completion of a 10-day bull cycle that began on Friday, January 5th.

The surface of my desk is a balmy 76 degrees according to a laser thermometer.  There are various alerts singing out of the speakers of Mothership like, “POWER POWER,” and “warning…”

These are good days.  The renkos are dialed in, the impulses are seeing carry through.  A fast tape.  NASDAQs are coming quick.  And going.

The robots said a long liquidation was coming in 2-to-five trading days.  It happened in seven.  And only 2 days after the latest bull cycle completed.

If we can cut our inputs down to only the cold and dead and logical—what these robots tell us—and assuage the use of empathy and frustration and love for other parts of life, then we can morph our vision into something designed specifically to process information and act.

This is a much less confusing path to domination of the financial markets.  The robots are our only true friends in competitive finance.  Our companions.  Our amigos.

Loyal, focused, robots.

I am grateful to my robot sidekicks.  Let history show that I was kind to my robots and we coexisted in peace.

Raul Santos, January 24th 2018

NASDAQ futures are coming into Wednesday gap up after an overnight session featuring elevated range and volume.  Price was balanced for most of the globex session before breaking higher early morning.  At 9am house price index data came out slightly below expectations.

Also on the economic docket today we have manufacturing/composite/service PMI data at 9:45am, existing home sales at 10am, crude oil inventories at 10:30am, a 2-year floating rate auction at 11:30am, and a 5-year note auction at 1pm.

Yesterday we printed a short squeeze shaped, normal variation up.  The day began with a gap up and drive higher.  It quickly went range extension up then flagged sideways for the rest of the day.

Heading into today my primary expectation is for sellers to work into the overnight inventory and attempt to regain the Tuesday high 6975.  Look for buyers to reject a move back into the range and work us up through overnight high 6995.50 before two way trade ensues.

Hypo 2 sellers work a full gap fill down to 6965.50 then continue lower, down Look for buyers down at 6978 and two way trade to ensue.

Hypo 3 stronger sellers take us down to 6961.25 before two way trade ensues.

Levels:

Volume profiles, gaps, and measured moves:

Shortly after knocking my head pretty good on the cement last summer I received an email from Stocktwits asking if I could be their community organizer in Detroit—my beloved home town—a place surrounded by a massive fresh water reserve.  And being only 24 hours off my deathbed I was experiencing the clarity one achieves when fate comes knocking.  I knew what had to be done.

The purpose of our Detroit Stocktwits Meetup is to liberate the small-to-medium investor from all the charlatans that plague the finance industry.  And also to cut away senseless fees using the latest tools in fintech.

My favorite investing method right now, hands down, is to pair Exodus and Motif to build a quant strategy that dominates the financial markets.  Our latest installment in the quant book is up +8% year-to-date, beating all other major indices.  Look:

And despite all my encouragement that normal small-to-medium investors stick to passively allocating to this type of quarterly strategy, they still want to know more about active trading.

What am I supposed to do?  Not share everything I have learned about active trading these last 9 years?  COME’ON…

SO WE GONE TALK ABOUT ACTIVE TRADING.

And it is going to make people uncomfortable.  Because the first thing I will tell them is how much money they are likely to lose whilst learning.  Hopefully they lose less than I did.  That is my goal.

If you have followed this blog for any amount of time then you know what tools I like for active trading, but I shall list them again, for any new readers.  It is a few more than two, so here we go:

• quality raw data – DTNIQ feed
• market profile charts – Ninja trader with the fin-alg TPO add-on
• automated trading and candle charts – MultiCharts
• home made tools for context/bias – switchboard and my trading model
• reading and interpreting order flow – Bookmap
• optional – audible order flow – Tickstrike
• news alerts – Benzinga Pro

Listen, I constantly refine and simplify my approach.  The less clutter, the better.  I trade one instrument, NASDAQ 100 futures.  If I can eliminate a tool or expense, I do. I need all the above tools to consistently receive and interpret what is happening in the world.

As useful as those tools are for me, you could sit at my trading desk with all the same inputs and have your jaw clean knocked off your face.  It is like sitting in the cockpit of a Formula 1 race car—there is no way you will drive like Mario Andretti.  What takes people far longer to cultivate is a winning mentally.

This takes time.  It took me a long time.  And I still do dumb shit sometimes.  The key to this game is staying power.   We are going to talk about the habits and lifestyle choices that, for better-or-worse, help you stay in the finance game for a long time.

Here is the thing.  I am just getting started.  I have another solid 50 years of trading and investing ahead of me.   That is a long time to learn and grow and advance my vocation.  The markets have existed long before me, and will continue to exist long after I am gone.

So I trade less now.  Only when the best opportunities surface.

Like those 20 points up we took off the open Tuesday morning.  That was a lay-up trade.  We had a plan, we had a directional bias, and we had a high probability target (overnight high).

Anyways listen.  We are meeting in the hood tonight, down in Corktown, by the rubble of old Tiger’s stadium to talk active trading.  If you want to ask any questions remote, I am going to go live on Instagram around 6:45pm eastern.  Go follow my account now @vincalim to receive an alert when I go live.

Here is a link with all the information in case you are nearby and want to come hang out:

ANNOUNCED: RAUL to host Detroit Meetup. Topic? Active Trading

If your goal is to dominate the financial markets from a position of confidence, then join us Tuesday evening at Brew Detroit.  Or remote.  Together we shall liberate ourselves from the Goliaths and roam the planet FREE, no ones master, no ones slave.

NASDAQ futures are coming into Tuesday flat after an overnight session featuring elevated range and volume.  Price made a new record high overnight before settling into balance.

Yesterday, close-of-business marked the completion of a 10-day bull cycle that began on Friday, January 5th.  Here is the performance of each major US index over the 10-day period, as represented by their major ETFs:

The economic calendar is light today.  We have a 4-week T-bill auction at 11:30am and a 2-year Note auction at 1pm.

Yesterday we printed a trend up.  The day began with a gap down in range.  Buyers quickly closed this then drove higher all morning, briefly resting during lunch, then continuing their campaign for the rest of the day.

Heading into today my primary expectation is for price to work higher, up through overnight high 6958 before two way trade ensues.

Hypo 2 test down to 6900 before two way trade ensues.

Hypo 3 tight chop from 6945-to-6917.

Levels:

Volume profiles, gaps, and measured moves: