For the sake of keeping things simple I’ve highlighted the two price zones that I consider significant in the short-term for the S&P future.  The scene of the breakout yesterday is interesting.  It’s the confluence of the prior two day’s value areas.  The subtle cue that the balance may break to the upside was the slight uptick in the value area.  Yesterday the breakout produced single prints.  Single prints signal aggressive activity that resulted in a violent movement in price.  How we treat this level for the remainder of the week can be very telling.

Above I’ve highlighted the level where I expect to see sellers enter the tape.  If they can’t show up and defend these levels, it’s pump time.

Today it’s all eyes on Facebook as expectations have been set high by wall street (why?) and they need to deliver. The GDP numbers are rattling the markets a bit, if the bulls actually hold on today they have serious sand.

The ball is still firmly in the bull’s court.  Seeing a day of liquidation with price discovery lower to find buyers would be constructive and welcomed by many participants who are sidelined or underexposed.  The question becomes at what level do the eager buyers step back in?  Buyers have spent the last six sessions buying value area lows and VPOCs from prior days.  They haven’t allowed price to trade below the prior day’s high.  If that trend changes, we can consider it an opportunity to test the true mettle of this year’s bulls.

Yesterday the developed profile overlapped Friday’s which signals a form of balance.  Buyers managed to push the VPOC only two ticks higher verses Friday and value high crept one tick higher also.  It appears the market is still trying to go higher but was contained by sellers.  The opening’s push lower by the sellers set the range for the day.  That was a minor victory for the sellers.

Clearly 1491 will be a key level today.  There are multiple levels in confluence here as of 8:30am the globex low was set here.  Should that break look for signs of buyers at 1487 where the low was set on 01/24 and is in confluence with the VPOC from last week Tuesday.

Chartpin link to market profile: https://chartpin.com/#chart/1151

As each session goes by, building value higher daily, it’s important to keep in mind the possibility of a pullback in the S&P future contract.  The first thing sellers are going to have to do is stop the advancement.  We have yet to meet a selling force of equal or greater value to the intermediate term buyer.  They want in and they’re willing to initiate trades at higher levels each progressing day.

This week I’m hunting for signs of the seller.  Tell tale characteristics of a seller are value pushing lower as measured by the VPOC, a wide range distribution day with broad based selling that takes out prior day value areas, and fast rotations to the downside.  Giving the markets current levels, action of this nature should not come as a surprise.  Rather we should prepare ourselves mentally for such market behavior and have a plan for addressing the downdraft.

My focus is on locking in profit in names I currently hold should we see the above signs play out this week.  I still plan to play the short term with potential short squeeze plays like GTAT.  I’m also going to stick around and ride a correction out if needed in my intermediate term holds like GS and CREE.

Taking to the profile, I’ve merged and chopped the sessions from the beginning of last week to get a better idea of the distributions.  I’ve split open last Thursday’s profile to give you a look at the “P” shaped profile that signifies a short squeeze occurred.  Notice the hard drop out of this area when 1494 was lost.  I want to continue to monitor this level as critical.  Next key support is 1486.25 where we saw a strong buyer reaction twice.  Should they not show up to defend these levels a third time it could signal a change in the market’s tenor.

If we keep levitating press your winners.  If a name comes into a big resistance level FOR THE LOVE OF WINNING take some profits.

The market continued its bull run yesterday with an aggressive morning pump.  The rest of the session played out first with the formation of a “P” profile which suggests the action to be temporary phenomena in the market known as a short squeeze.  I’ve split the TPOs from yesterday’s session and split them to the right for you to see.

Notice the letter J TPO which fell out of the developed P and the subsequent auction that occurred afterwards.  We tested the lower extremes of the sessions and the buyers bought the dip, we tried to reenter the upper distribution afterwards (the meat of the P-shaped profile) on to see rejection.

All of that unique auction action at 1494 is why we need to closely monitor how we trade relative to that level, that is where I will decide if I need to reduce cash from 40% to something less into the weekend.

Otherwise I may cut additional weakness and lock in gains to increase cash.

Names I’m watching should I need to add: FLT, CSE, TWGP, HTHT, GTAT, and BTN.

Trade’em well ladies and gents.

Good morning traders,

My first order of business is to sell my MLNX shares.  Their earnings were a nonevent until their dropped horrid guidance on the street.  Shares are down about 20% premarket.  The key here is to sell and move on/continue to monitor what this market is telling us.

The session yesterday was thorough and into the bell the bulls had the edge, closing near the highs.  However, the overnight session saw futures lower, especially with the weak action from AAPL. I’ve highlighted the overnight range in blue on the below chart.  The range was wide and we have an 82% probability of breaking either the high or low from this overnight session. To my eye it seems a break of the low end is more likely.

I’ve also highlighted in orange an area that is lacking thorough auction.  Seeing the market produce a thorough auction of these levels as opposed to a swift move lower would tell me this market is still very constructive.

I’ve marked up the profile chart to get a picture of what I’m seeing.  There are several interesting reference points on the auction charts.  I merged the “unorthodox pump” potion of the Friday session into yesterday’s session because it better fit into the auction that occurred yesterday and gave a clearer picture of the distribution of trades.

The resulting profile shows value at new highs, but still within the range of last week.  Just above the normal distribution is a low volume node then the trending action from yesterday.  Halfway through the session I commented the auction was very methodical.  I was referencing the fact that buyers sat back and watched the open, allowed price to tag our bias line (prior day VPOC) exactly as we highlighted then stepped in with their buy orders.

It still would not be a major blow to the bulls to see some retracement, and more and more traders want this to occur.  Therefore I’ve highlighted below levels that you may want to consider cutting weak longs or adding on hedges.

This one takes the chrome off a bumper (abrasive):

Friday price action was almost entirely contained within the range from Thursday.  The buyers managed to pierce the prior day highs with an unorthodox short squeeze into the close.  The very fact buyers were able to pull off such an aggressive feat suggests the sellers were fatigued going into the close last week after watching a stretched and gapped tape continue to defy gravity.  As impressive as the move was, the auction on Friday did manage to set value lower, moving value almost four handles lower to 1473.50.

I’ve highlighted my bias zone intraday in a lovely shade of blue.  This level is the confluence of the Thursday VPOC and Friday value area high.  It was also the scene of a swift V-shaped reaction this morning during the globex session.  It’s signaled its importance several times.  How the market treats this price level this week will be telling of the overall tenor of market participants.

Sellers will look to push us back below the Friday value area low which could lead to a swift back-and-fill of the gap left behind by Thursday’s gap higher.  The primary target for sellers is the VPOC from Wednesday with its high placement within the value area.  I expect to see buyers reacting at those levels.  Bulls have been eager this year to sweep up perceived bargains this year.  I remain constructive on my longs down to this level.  Below I will reconsider my intermediate-term stance.

http://youtu.be/deghL8o0qHM

The buyers continue to show conviction, and with the powerful numbers out of Goldman, and Jamie Dimon taking a pay cut to save face for having degenerate traders in his ranks I can understand their conviction.  The financials are getting their act together.  And the semiconductors are seeing buyers rotation.

The characteristics of yesterday’s profile suggest shorts were put into a squeeze.  You can see the “P” shaped profile suggesting the rally higher yesterday was drive by old business like shorts buying to cover their position.  This also suggests that the rally struggled to encourage new participants to enter into the market.  Should that theme carry into today, we could expect the market to auction lower, filling in the lower half of yesterday’s profile.

The other scenario is a break higher.  As over extended as we are this is still a real possibility.  No need to get fancy trying to spot the rally, just look for price to take out yesterday’s value area high and how we behave as we approach the high of the day at 1469.

Friday featured a blunt shaped profile as the S&P resisted the urge to sell off instead opting to properly auction the toothy area from Thursday’s afternoon thrust.  However it sustained the level on the lowest volume since starting the year. Sustaining those levels was telling of the demand for equity exposure.  However we want to be aware of price levels that could signal a change in risk appetite.

Given the progress we saw last week, the risk range below has increased significantly.  I’ve noted in blue our first key area of support.  Coming into the US morning we’re seeing the Globex session off nearly six handles after making new highs at 1471.25 overnight.  As of 8am, we’re set to open near this first level of support.  Thus how we open will be very informative of the early tenor of market participants.

Should we break the Friday VAL (noted below in blue) it will be a quick trip to the naked volume control point.  If buyers aren’t present here we could see a quick rotation through Thursday’s value area and a test of our major support for the week noted in green.  Seeing us back in the 1450’s should not be a cause for closing out all long exposure, but we should closely observe the markets behavior at these levels should they trade.

http://youtu.be/V8rZWw9HE7o

There are times when the profile formed by a day session doesn’t look quite right.  Often this is a result of price being jerked around by the indecisive participants jostling their books.  Specifically, the upper range yesterday looks poorly auctioned.  It looks toothy, with no clear distribution of TPOs or volume.  One of the most constructive things the market could do today is properly auction the upper range from yesterday.

Overnight the S&P found support at 1465 but to my eye what’s most important today is where we sustain trade relative to the upper volume distribution noted below in blue.  Notice the very Gaussian form of the distribution, with a high volume node (point of control on the day) residing near the middle of the distribution.  This is a healthy auction.

One last note, the aforementioned distribution makes up the upper half of yesterday’s value area.  I’m giving yesterday’s value area a bit less significance since the lower distribution isn’t as uniform.  However, if we begin trading below the VPOC at 1462 a slip down to the value area low becomes very likely.  If we visit the value area low and whether the bulls show up at that level will speak volumes to the conviction of longs going into the weekend.