Balance: Post Trend Day Nirvana

It sure can be fun coming into a day with a strong balanced bias and having structure play out to offer up high confidence trade ideas.

Today was such a day.

Yesterday's post I forgot to mention that one of the best possible trade scenarios post trend days is the low confidence push lower to fresh lows on decreased momentum versus the prior trend day. This trade can play well both downside and upside.

And if the fresh lows are at a pure mechanical zone, like S1 as they were today, then it's game on for a short squeeze push up back into the previous day's range. (And I have been getting my R's and S's inverted lately, I think. S is the lower levels for support and R is the higher levels for resistance.  But it really does not matter what you call the floor trader levels, they are excellent clues to tune into who's in control of the market)  The crew was all over this trade like investors in San Jose buying million dollar starter homes. Pounce!  A trade we will highlight this evening on the 5 minute.

The 2nd trade of the day was the reversal at yesterday's midpoint (or pivot).  A hour and a half of lolly-gagging around at this zone with momentum diverging, the short became obvious and paid nicely. Small caps majorly diverged too.

All-in-all the day was balanced like we expected it to be.  Imagine that you programs!

Going forward into tomorrow, we note that no upside levels attained put any fear into sellers.  And it's natural to think today's balance as a gateway for lower prices.  But this market is due for a push higher at some point, but we are not prepared to make that call here and just considering it.   All that we can do now is look at both sides of the coin and flow with structure as it develops tomorrow and ride whatever wave appears!  

A Break That Worked

Our evening break-in update post last night about the overnight minor low did produce a sizable bounce of almost 10 points from the lows.  But it turned out to be just noise and never reached any levels higher to invalidate our downside bias.

The 1st hour printed a minor low of yesterday's range lows but then just sat there and "fur-balled" (balanced) for almost an hour and a half.  It became very clear to go with the downside break from balance and to give it a little room to run due the range break from lows coming from such a large multi-day balance formation.  Stuff that we have previously talked about.

It's fun to evaluate the data points and put your neck out on a call and get it right!  A 1% down today is not a massive breakout, but the ES finished the day down -18 points.  And by following our analysis of expecting a break to have some legs, then you had very profitable day.

And nobody I read yesterday concurred with my analysis.  They all were looking for upside.

After a trend day down, we are on a look out for balance tomorrow, or even a bounce, as this is still a bull market and a lot of folks got short today.  

Up Down Up Down Up

This market is really exampling the "two way auction process" to the extreme!   Somebody send me some Dramamine!

An:
1) overnight swoon to re-balance Friday's low volume long inventory
2) a morning look down below Friday's range lows
3) a then a minor low print of Friday's lows (Yes, they did it again.  And once again, this is the trade of the day)
4) then a sucker punch higher to re-balance the overnight inventory.
5) then a series of minor highs of the overnight highs liquidated the afternoon session to range lows.

What I liked so much about today is that the minor low of the previous day produced a sizable reversal trade yet again.  When this pattern strikes in the 1st hour and a half, it is ultra-high odds to be profitable long entry and that the lows of the day are in.

What also struck me today that it's a bit of a pattern change for sellers to have pushed price all the way to the lows with the morning minor low in.  Although the lows were only taken out by a tick or two.

6 days of washing machine balance is shaping up to potentially offer of a significant break from the range.

I've not made a truly biased call in awhile, but I think that a big downside break lower is brewing.  There are some positives to consider, like the market holding it's own down here, but I have to make the call when I see it.   I am overdue to get slapped.

Update 9:30pm PT: They looked it down in today's overnight session to 1662.75.  And I know you guessed it, it was a new minor low of the swing lows.  And so far it's an excess tail and price is back to 1667 settlement.  Further up movement, and the squeeze could be on and our downside thesis obliterated. A slide is added below. 

Added 9:30 PT

Washing, Washing...

Well, the programs did hit yesterday's minor low hard, and we are in the washing machine, so back up into the range they took it.

Early on, the proper logical assessment of structure was to go with the fact that yesterday's look down minor low and failure was being bought hard and no need to hold a short bias.  After the 8:00 pullback and reversal, it was clear the destination was yesterday's range highs.

If not long early on, the obvious trade for the day was wait until yesterday's range highs were hit.  All they could do was print yet another minor high of yesterday's range highs and it was a clear short signal as TICK diverge formed on the minor high.  Then target VAH or VWAP.   But buyers remained in control and end of day downside was very muted.

The obvious visual for the programs to target for Monday is the 5 day range highs at 1683 zone.  And from there we note if they plunge it back into the range or put on a more serious rally attempt.

But inventory is going back and forth each day, so a plunge lower would also make a lot of sense for Monday.

Great post about political stuff going down now. 

Feeling Well Washed

Nobody has turned off the washing machine yet, as today's morning sweep lower washed out all of yesterday's longs and the entire 3 day range lows. Once washing machine mode is identified, it does make it rather fun, no?

And it "just so happened" that average initial balance volume, R2, 9:00 PT, and a minor low of the previous swing lows all coalesced to produce a very high-odds reversal trade.   And it just so happened to work really, really well!

Program, Program on the wall; who is the most transparent of them all?

We correctly assessed yesterday that the fooling around at the 50 day was a negative clue. And we also were prepared for washing machine action. Our real question now is if today's minor low reversal will be jumped on?  Or if the down trend will continue? Today's action featured intra-day washing machine movement, and this is a bit of a change.

My best guess that lower attempts are high odds.  But we counter that bias with the notion that this is a textbook reversal zone in a bull market.  And are on watch for a push higher.

Washing Machine

Today featured a very clear reversal trade of the day.  The morning look down that printed a minor low of yesterday's range low during the 1st hour.

These minor lows of the previous session, 1st hour, are powerful patterns that occur over and over again.   It's almost getting boring pointing them out all of the time!

As the move higher progressed today, 9:00 PT showed no signs of reversal, so then all there was to do was wait for gap fill or 11:00 for possible exit from the morning long or gaming a reversal entry.

Right on cue, sellers came in 10:56 but didn't get very far.

The market is now in washing machine mode with inventory sweeping up and then down.  I don't view this as particularly healthy as the push off the 50 day should not have been messed with.

I just cannot stop the political rants, so "maybe" coming to a movie theater near you is a reason why the Government has been cornering the ammunition market for years now, with it's 1.6 billion round "strategic" accumulation program.
With a population 319 million, I guess that the Feds want to make sure that they have the firepower to plug each citizen with 5 rounds each, should that become necessary.  Makes me all warm and fuzzy knowing that big brother is arming himself to the teeth.  But what do I know?  It all does not seem real.

I can't wait for Hilary in 2014 and then Michelle after that. A hyperlink in case you missed it.  They will make a back-to-back combo that will fully revenge 4X the left's suffering under multiple Bush terms.  And then some...

50 Day Turn

The crew is back home after taking care of our 99 year old grandmother for a spell.  She sure has lived through one of the fastest changing century's in the history of mankind.  With things changing faster than ever, we are worried about the next 10 years. Civil war? We can definitely envision the Federal Government continuing to swell it's ranks of 130k per year workers who will stop at nothing to keep their paradigm intact.  And now that we will most likely not have a Republican President in the distant future, (Dems sure are surgical in fostering dependency among the masses) it's probably two more terms until civil unrest and/or another American Revolution of some sort.  But what the hell do we know? We just hope that we are smart enough to sell all of our assets at the right time.  In the mean time, let's just run up the debt to 100 trillion and party on before interest rates go back to 8% and wipe the country out! Who are we to question the lack of fiscal prudence? Old school dudes like us just need to be sent to pasture.

We were correct tuning into the turn at the 50 day.  And today was the sort of session where you assessed that pullbacks were high odds longs, as shorts were trapped.  Today's afternoon VWAP base pullback a classic textbook trade that we will highlight.