Wednesday, December 17, 2014

Posted by preznicek at 9:11 AM on Wednesday, December 17th, 2014

Good Morning

Value areas and POC figures for /ESU4 and /NQU4 are posted free every morning HERE.

click to enlarge

click to enlarge

Volatility continues with large gaps each morning. This is the norm in a VIX 20 environment as opposed to a VIX 11 environment.

Overall the tone has changed now. We should all remember how recently the market was higher by the end of the day but had very frequent liquidation breaks which were quickly reversed. Now we are getting the opposite with the market ending lower and short covering rallies being sold off. Remember that short covering weakens a market as it takes potential buyers out.

Overnight inventory is very close to 100% net long and the market is already well off of the overnight high. Further disappointment for the overnight bulls in early trade could lead to a gap fill. One thing to think about is that even though I often characterize this as “early trade”, it doesn’t have to happen immediately from the open. The trade can easily be flat to up and a failure to take out the overnight high much later in the morning. It can also be a “look above and fail” where the ONH does get taken out but does not find enough new buyers to maintain the direction and prices begin to move aggressively back towards the open.

Speaking of the open, note that waiting for futures to cross the open for a fade has worked very well over the last few sessions. I have talked about this often on the tastytrade show. In a nutshell, let’s say you gap down. Then you move lower off the open in the first TPO period. The down pressure is weak and feels forced. Once futures reverse, put a buy stop one tick above the open and a stop under the day’s low. Target the usual suspects such as prior day’s low, VAL, POC, halfback, etc. Reverse all that if dealing with a gap up.

Futures may be choppy today ahead of the Fed. A meeting on rates is coming at 2pm EST today. There will be no rate change today but the focus will be on the items below: (according to the Wall Street Journal)

1) The ‘considerable time’ language. 2) Recent gains in the
labor market. 3) Ripples from crumbling oil prices,
including complications with forecasting growth. 4)
Expectations for inflation and the risks to stability caused
by falling oil prices. 5) The impact of slow growth
abroad

Market Profile Wisdom of the Day
Ask yourself, “Where is value going to be today?” Never trade against developing value and always try to watch value more than price.

Have a totally awesome and stupendous day!
-peter

Tuesday, December 16, 2014

Posted by preznicek at 8:36 AM on Tuesday, December 16th, 2014

Good Morning

Value areas and POC figures for /ESU4 and /NQU4 are posted free every morning HERE.

Futures down on a double digit gap. Gap rules apply. Overnight low thus far was much lower so we are seeing some recovery off of most bearish levels. Read More…

Monday, December 15, 2014

Posted by preznicek at 9:12 AM on Monday, December 15th, 2014

Good Morning

Value areas and POC figures for /ESU4 and /NQU4 are posted free every morning HERE.

click to enlarge

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Gapping up 13 thus far. Overnight action has breached into Friday’s VA by a few handles. We are currently trading inside Friday’s range but below VAL. The overnight session did go a few ticks below the RTH low. I tend to note that as a sign of a weaker market.

Note the large spike that formed at the end of the day. There are obviously a few traders who joined the party late and are “short in the hole” or we wouldn’t be gapping up as much as we are right now. Obviously, the RTH session is the only thing that matters and where it closes. What we’re seeing thus far is short covering on those late day sellers.

For what it’s worth, this is a gap that I would fade if it were smaller. The spike that goes from the low on up to 2004.50 is all single prints so it’s natural that it wouldn’t resist much on the way back up during an inventory rebalancing which is what we’re getting right now.

As always, bears need to continue to build value lower to maintain trend.

**I’m on the squawkbox for Brad all day today….come join us. Thinkorswim platform, support/chat tab, ShadowTrader room.**

Have a great day
peter

Friday, December, 12, 2014

Posted by preznicek at 8:49 AM on Friday, December 12th, 2014

Good Morning

Value areas and POC figures for /ESU4 and /NQU4 are posted free every morning HERE.

click to enlarge

click to enlarge

Confidence is low, the market is in the throes of short term traders batting it around, getting too short, covering too much, then selling it off again. Opportunities abound in this type of market for the informed and aware.

12/10′s RTH and Overnight sessions double bottomed and we have now breached that area in the premarket sitting on a double digit gap of about 8.50 to the downside. Overnight inventory is almost 100% net short so I would place the odds of early follow through to the downside as lower. Gap rules apply.

I believe that double bottom low is key to this morning’s action. Already we are seeing futures flirt with that level now after rallying a good clip off of the ONL. Any movement above 2023.25 could bring in a short covering rally at least to yesterday’s settle.

A lot of the recent action was discussed by James Dalton/Julia Stewart in a webinar which aired yesterday. I urge everyone to check it out if they haven’t already. A link is below which you can cut and paste into your browser.

https://yd147.infusionsoft.com/app/linkClick/8879/9062377c0b5614c0/534521/7acb3868bb745b8c

have a great day,
Peter

Thursday, December 11, 2014

Posted by preznicek at 9:11 AM on Thursday, December 11th, 2014

Good Morning

Value areas and POC figures for /ESU4 and /NQU4 are posted free every morning HERE.

click to enlarge

click to enlarge

Gap up of about 8.50 as of this writing. Goldilocks type gap which could be faded if the ONH is not taken out early and given the proper context of not too bullish internals. Watch how the TICK acts early, that will be the clue. A tick that opens firmly positive and stubbornly refuses to budge back down below zero indicates a gap that is probably not going to fill much.

The ONH went right to the base of the spike as seen in the graphic above. This is a good visual reference to get long if the spike is breached. You would more than likely travel to the other end of the spike very easily as there will be little resistance there. Interestingly enough, half-back is right in the middle of the spike.

The ONL failed to take out the RTH low and has formed a double bottom so there is a reference point there as well. Yesterday’s low was poor so a breach there would set up a short trade for some movement below yesterday’s low and targeting the prior highs in the SPX at 2019.26 (9/19) and 2011.17 (9/4).

There are some anomalies (flat right edges) in the lower distribution. These happen when more emotional buying and selling is ruling the auction. Think of them as “non-professional”.

Value established overlapping to down yesterday which is not as bearish as one would expect. Yesterday’s profile is a double distribution; acceptance within the lower area keeps things status quo of a downward trend, acceptance in the upper distribution may change the tone. Note how thus far overnight action has failed to rally into the upper distribution.

NOTE: ShadowTrader always trades the old contract on the Thursday of rollover and switches to the new one (H5) the next day. Tomorrow’s value areas and pivots will be calculated off of what the H5 contract did today. Today I am talking about the /ESZ4 and Brad will be as well during his show.

Market Profile Wisdom of the Day
There is risk of seeing inventory corrections as something more.

Have a great day,
peter

Wednesday, December 10, 2014

Posted by preznicek at 8:09 AM on Wednesday, December 10th, 2014

Good Morning

Value areas and POC figures for /ESU4 and /NQU4 are posted free every morning HERE.

click to enlarge

click to enlarge

Yesterday’s tone was bullish from early on but value still developed lower and did not “pierce” into the prior day’s VA. Read More…

Tuesday, December 9, 2014

Posted by preznicek at 8:30 AM on Tuesday, December 9th, 2014

Good Morning

Value areas and POC figures for /ESU4 and /NQU4 are posted free every morning HERE.

click to enlarge

click to enlarge

Double digit gap down this morning following on from yesterday’s weakness. Futures are now well below the low of 12/1 which was a swing low. This is the first time in awhile that we’ve seen futures actually make a lower low on the daily chart.

Overnight inventory is very short but not 100% so. Gap rules apply, not the least of which is the “Reznicek Caveat” which is that double digit ones are difficult to trade in either direction and are better off left alone in early trade. A tradeable situation will often develop later.

Yesterday’s profile was a double distribution. Let’s see if futures can get up to at least the lower of the two distributions. If we can’t get back into range at all, then value could establish lower in a breakaway manner which would be more bearish.

With yesterday’s break and today’s follow through, if we stay weak the market has clear sailing to the downside to 2011 which is the prior high where we broke out in early November. Noone can say for sure if this will be the next move but technically speaking, that is now the path of least resistance.

Have a great day,
Peter

Monday, December 8, 2014

Posted by preznicek at 9:10 AM on Monday, December 8th, 2014

Good Morning

Value areas and POC figures for /ESU4 and /NQU4 are posted free every morning HERE.

click to enlarge

click to enlarge

Opening out of balance below Friday’s RTH low. The ONH was not able to take out the all time high of Friday’s RTH. Read More…

December 5, 2014

Posted by preznicek at 8:49 AM on Friday, December 5th, 2014

Good Morning

Value areas and POC figures for /ESU4 and /NQU4 are posted free every morning HERE.

Continued intraday liquidation breaks are strengthening this market and allowing it to make new all time highs more often than not. We had another one yesterday and the forecast for today is probably more of the same.

There was a slight bit of excess on the high in yesterday’s distribution.

Value was unchanged and an outside day which is bullish. The settlement was a couple ticks below the prior day but the POC migrated a few ticks higher. Overall there is continued acceptance at these levels.

Overnight inventory is slightly net long but for the most part balanced. Futures gap as of now is too small to look for any type of fade move early on.

2077.25 is the new all time high. The ONH came close to this mark but was not able to clear it. Overall, the tone is that long breakouts over the all time highs have not been good setups in this market. There is simply not enough momentum. This may come but as of now we have seen very little range expansion on new highs. Should that be carried forward? Probably.

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Market Profile Wisdom of the Day
(A fitting one for this current environment)
Always ask “How much confidence does this market have?”

have a great day,
peter

December 4, 2014

Posted by preznicek at 9:09 AM on Thursday, December 4th, 2014

Good Morning

Value areas and POC figures for /ESU4 and /NQU4 are posted free every morning HERE.

click to enlarge

click to enlarge

Market didn’t like the employment numbers apparently. The why is never important, always focus on the what. The what is that futures are down 4 currently (oh my, I thought they only went up??). Read More…