We’ve had several instances of overlapping profile development recently, and it made me miss my old school market profiles.  So I’m bringing them back, yes yes, very exciting.

Thursday featured a large gap lower that was steady accumulated all session only to be followed by Friday’s holiday tape which also gapped lower and was accumulated all day.  Friday’s profile was contained entirely inside Thursday’s which is aka an inside reversal pattern.

I wanted to merge the two profiles into one after seeing their volume characteristics.  Once I’ve done so, I get a clear picture of the auction that took place at these prices, and the relevant levels to monitor.

I also split the big selloff into the early distribution and the change.

I’ll be monitoring the following levels as we open up this morning:

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Whoever made the decision to schedule Memorial Day here was on to something. The placement of this much needed rest is divine. I spent the weekend decorating the graves of my losing trades. Most trades receive a solemn salute for their service. For others, I stopped and observed for what seemed like hours, with deep introspective of the events that led to the loss.

I reviewed every trade taken in the S&P this month. If only ironically but perhaps like a little galactic wink, there have been 99 trades. A blanket of inpatients was strewn over the field. And from the review a glaring bit of clarity emerged. I must stick to my plan. I have two data sets, one with trades taken according to my plan and the rest.

Check check it out:

Pretty good numbers on the planned trades. Something to build on, no doubt. But the thing is, I really like my unplanned trades, even though the numbers suggest I should NEVER trade anything outside my plan. So I hardcoded a nuance into The Plan which lets me have my cake and eat it too. The rule is inspired by the feedback I received from you guys and I appreciate your thoughts. Kudos gentleman, behold! Literary logic to protect my ass:

I will only trade other pictures (like profile support/resistance) if I’ve earned risk capital and with a ‘one round elimination’ format meaning trades can only continue to be taken if the prior trade was correct.

To break it down, I have to only trade my plan until I’ve earned profits. If at that point I really need to take an unplanned look, I have one shot to do so. Not two, or three like Friday. I always build risk into my trades and must be willing to forfeit 1/2 my daily gains if the unplanned trade is wrong. If it’s a winner, and I want to take another, the same rule applies.

Planned trades can be taken any time. Even after a failed unplanned trade. Make sense? If you hate it let me know.

I’ve gone over 100s of charts and screens and bloggers’ picks and have a few hot looks going into the week should the market bounce or even flatline. I’m a stalker long on MSPD, LSI, SNDK, NANO, and UTEK.

Get excited.

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Tip top of the morning, memorial weekend procrastinators!

The pre market has turned from moot to rather weak over the last hour, with sell flow pushing into the tape.  We’re currently trading at the value area low of our 24 hour profile which is also a high volume node at 1639.50.  We could see a bounce here, especially given the one direction nature of this most recent move.

Oddly enough, our profile yesterday took on the shape of a letter P which, in many cases, suggests we spent the session squeezing shorts.  That’s relatively uncharacteristic of a large gap down, but I know many long traders who were green come market close yesterday, so it makes sense.

The question now becomes, was yesterday a temporary phenomenon to the upside?  The attempt at filling the gap was impressive, so I give the buyers a pat on the back, but we are dealing with a heavy amount of sell flow in the globex hours.  It will be interesting to see how RTH handles this weakness today.

I’m keeping with the zoomed back profile to give us reference points to trade.

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I had three signals fire premarket that were victims of a choppy market, and were all stopped. Then when things got moving, the setups were of a nature which I still trade in simulation, and no additional live trades triggered.

Ironic as it may seem, all this early movement was not captured by the Raul.
Aside from the futures, I’ve added to my ANGI long. No other trades yet to report.

http://youtu.be/20Mg5CZOT1M

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We have two major price zones to use as guideposts if this market continues to put in large ranges.  The balance zone above (which coincides with a possible gap fill) from 1657.25 – 1653 is our barrier to the upside, and the lower zone, our major support, spans from 1628 – 1623.  It’s best to view these areas on the volume profile charts to see their significance.

In between, we have a low volume slip zone that the overnight session had some fun sliding down and up through.  I’m not going to inject much bias into this piece, I’m simply defining interesting reference points, and seeing how we behave today.

I want to see if they can form any semblance of a gap fill.  How well that goes (or doesn’t) will be telling.

 

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These morning markets, I come to them every morning.  Much like The Zen Hunter alluded to about surfers, it’s an obsession—every day hunting waves to ride.

I put up these profiles, looking for where the waves can kick up.  Boy did a wave kick up today!  I have wins on both the long and the short side, easily my best day ever, earning 10 S&P points.  It was fun too.  And I stuck to the plan all but once.  My one deviation, an attempt to knife catch that free fall, was my only loss on the day.  So be it.  Stick to the plan or lose money.

Anyhow, that’s why we do all this work, for days like today.  They’re calling this the blow off top already.  I’ll hold my judgment for now, but I did cut my RGR and YELP longs in case the afternoon gets a little Nightmare on Elm Street.

Let’s look at these stocks and see what’s working.

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Yesterday was essentially a completion of Monday’s auction.  The charting software I’m currently using won’t allow me to merge these two profiles together, so we’ll have to visualize it for today.

Notice the very fragmented, low quality trade that occurred in the upper 1/3 of Monday’s profile.  Now notice how much of Tuesday was spent thoroughly auctioning those prices.  Interestingly enough, yesterday was also a neutral day, featuring range extension in both directions, signaling a lack of directional conviction and the possibility of a change in the market conditions.

We’re still above the large balance distribution from last week, the overnight session is balanced within our current profile, and we’re essentially waiting for the market to tip its hand.

Here’s the levels I’ll be monitoring to gauge which way the market is trying to go, and how good of a job it’s doing:

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Lots of movement today, as a result there were several trades in the $ES_F.  Ten contracts were traded in total, 6 winners, 4 losers. I want to get this more like 8 winners, 2 losers.

All the trades came on the short side today, with the best being a sale at 1669.25 and riding down to 1664.75.  The worse was a sale into the hole at 1661.50 which didn’t stop out until 1664.25.

The total activity netted a small gain of $100 dollars and a grey hair or two.

Repetition is key in the futures market.  I was talking to a friend of mine who works closely with Special Forces.  I asked what they do in their off time.  He said train.  He said they have layouts of the buildings they plan to raid and run through mock up copies in simulation over a 1000 times before the real deal.  That’s real deal awesome, and why they have high 90 percent win rate.

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The overnight session has seen sellers trying to gain a foothold.  Most of their overnight attempts have been thwarted but they appear to be gaining a bit of traction as I’m preparing this analysis.

We’re still above the major three day balance zone I highlighted yesterday morning.

The behavior of volume on the upper half of yesterday’s range is fragmented and signals a lack of trade facilitation.  It’s odd really, it wasn’t a sharp reaction from the sellers but more running out of buyers.  Either way 1666.75 was left behind as a near no volume node and is the primary resistance to the upside.

It’s looking like we may test the balance zone today, and along with it my expectation is for some choppiness.  Buckle up.

UPDATED NOTE: We put in a double bottom at 1661 overnight.  It’s close to yesterday’s low 1660.  A test of this area seems likely and important.  A break of 1661-60 should have us looking for swift trade back to the balance zone below.

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We’re seeing reversal action in some of the pockets of strength, including solar.  But it’s not lights out yet.  We’re still above the major bias line highlighted this morning.

I’m still considering the $ES_F range from 1654.75 – 1657.25 as the bias zone.  We can turn out a few lights if price is accepted below here.  Until then, swing away.

http://youtu.be/yfv9z23lu9E

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