Lazy Friday

No fireworks today (except for the  pyromaniacal-types igniting M-80's close to my house) and no pick up in volume.

Structurally, the red bar fit into our downside thesis presented yesterday.  But it really was a non-event.

Monday is the 1st of the month and that's when the money flows will show their hand, albeit during a 4th pre-holiday venue.

Today featured some spectacular range fade and a late day puke intra-day.

The profile shows the action well!  Let's dig in...

Day Three

Daily Structural Pattern Development:  
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What's repeating?  
1) 3 days now of overnight spike moves, creating gaps at or above the previous day's range.

2) 3 days of low volume, creeper/balanced cash sessions. No up movement of confidence with cash session volume.

Takeaways:
Cons:
1) It's flat negative that the entire up move is spiky very low volume overnight movement.  The potential for this 3 day rally to be taken back is def con level 5 high.

2) Each cash has session closed at or below it's open.  And why is this the case if there are any "real" buyers?

Pros:
1) It's quarter end, so who is going to sell and ruin the party?

2) The pattern in up and it just might stay that way for while.

Another Grinder

Let's look at gold first today as it was in the news with yet another decline today.

2nd day of ES gap up and grind.  Overnight launched with the European opening and spiked hard without looking back. Today's session was a bit more balanced but it featured (just like yesterday) a slow morning move down and then that distinct, slow, methodical, steady, grinding action higher so characteristic of this 5 year bull market.  Left to their own devices, the programs operate in this fashion, over and over -- and over.   That, or it's just Government manipulation!

So, two scenarios for tomorrow..and it's going to be one of these two most likely:

1) "The grind" up is back.  Buy the morning pullback (if any) and watch out for inventory adjustments lower if holding for bigger targets.

2) Selling re-enters the market and these grinder days offer no support whatsoever and POW!  They get taken back quick.

If sellers are in charge we should get #2 tomorrow or Friday.  If not, then, firmly back into the range we go.

Notable divergences in small cap issues today.

Low Volume Inside Day

Mostly an inside day with a 4 day low in volume.  It's like a whole bunch of players disappeared and just let the grinder higher bots take the wheel.

Traders are so programmed to not fight these days.  Buying the paltry initial balance inventory pullback at 7:30 once again the trade of the day.  This is one of the most common patterns of the last 5 years.

Short In The Hole

Daily comments...

This is our current market top day, http://scott-trader.blogspot.com/2013/05/down-day.html and even I forgot to make a specific comment about how a tail like this, at this exact yearly all time highs zone, could be trouble. It is so easy to get lost in smaller time frames.   And this signal was entry short for the long term swing account.

Now let's look at today's action that featured a vicious short squeeze.

Intra-day snapshots

Reversal Below Yesterday's Lows

We bring up the volume chart again to hammer home increased volume = increased volatility.  It does not matter what day it is... Even options expiration day like today will wag the volume's tail.   Today's 24 point range way above average.

Before we go into our daily drill down of the ES, just look at bonds. The fed is losing control and when (not if) rates continue in this trajectory, it's going to be a major game-freaking-over for the stock market and our beloved America.  The lunatics have been at the controls for too long, doing too many stupid things, and there is ultimately going to be a price to pay.

Ultimately, I'm bullish on America but bearish on what the hell has been going on, knowing that the piper is going to pay up sooner or later.

Onto the positives...  Today was an excellent day for the astute trader to pounce on increased volatility and make hay at the zones. Structure don't lie!  

We previously indicated that the last two down days were vulnerable.  Today's look down transitional structure at 9:00, just below yesterday's lows, was the trade of the day.  

And the increased volume signaled to increase those targets! 

Intra-day screenshots

Down Hard With Volume

They not only targeted the range lows but knocked them out with confidence. Compare today's breach of the lows with the laggard slow up day breach of the highs two days ago...

I have really liked our IB volume analysis this week.  Today's IB volume breakout was so big that only two other days this year compared: 1-19 and 3-15.

Compare this to our Tuesday post http://scott-trader.blogspot.com/2013/06/low-volume-grind.html where the last time IB volume readings were so low was April 1st.

Who's in control?  Buyers or sellers?

Fed Day Breakdown

Our sense that laggards were in charge of yesterday's poke above the range highs came to pass after the fed announcement.

The significant plunge back into the range featured the lowest TICK reading since April of 2010.  It takes a lot of horsepower to get readings of -1500, and we get to  soon see if this was an exhaustive reading or a signal to watch out for more downside.

Red bar, green bar is the pattern and a lot of folks are emotionally short (and could get squeezed).  But further extension to range lows makes sense too.  

Trader Psychology

Evaluating our want-to-be psychology expert last week made me want to look back at a few Brett posts to get a flavor of how the two differ.

Our expert on Friday gave up his recipe for success...

So does Brett compare?  Differ?

Who digs deep into the real issues?   And who leans on psychobabble as he's selling his solution for big bucks?

Let's take a look:

Of the many things that struck me, was how Brett brought into the equation  issues outside of trading that ultimately are the real problem.

I personally have struggled with being a habitual contrarian.   And, from what I can tell, I think that most traders struggle with this issue -- which is why Brett highlighted the issue.

The jerk who cut you off on the freeway and then flipped you off is most likely a habitual contrarian when he engages the market.  So is the control freak at work who refuses to listen to another point of view -- despite being in trouble.  He's lost in his bias...

My contrarianism stems from growing up in an abusive household and desperately wanting control.  If I can control things, then the pain will stop.  Pure and simple.  There is no time to DANCE, flow, or think otherwise.  Fear is the dominatrix.

This is the beauty of trading and hanging out with guys like Brett.  We learn about ourselves in ways that most do not.  We get to struggle with our real selves as they reflect back to us while engaging the markets.

Low Volume Grind.

Today turned out to be a very low volume creeper trend day higher above the range.  Multi-month IB volume low print.

Days like these often get taken back swiftly.  But they can also signal the return of programmed grinding higher action that is so characteristic of this uptrend.

As I was doing analysis last night, I was very conscious that late day liquidation events are bullish.  I've stated this many times in many previous posts.  My mistake was to give too much credence to the daily range and discount this pattern.

The liquidation washes out short term longs and if the ranges stay intact, like yesterday, then watch out for more upside.  But we did point out the ascending nature of the daily price patterns, so we were not totally off in our analysis.

Tomorrow is Fed day, so we expect a slow morning with potential movement afternoon.  We will not be surprised to see a plunge back into the range or continued grinding higher.

But that very low IB volume probably does indicate lack of institutional participation early going...  So maybe the laggards were in control today.

11:00 Liquidaiton

Friday Range Action

The market is in up/down mode and today was no exception.  But it was a lazy, Friday move down.   And the 1st inverted check mark pattern we have seen all year.  Possibly yet another clue of topping action.