The Shanky Tape
The hardest fades are the best fades, Mon Frere!
Let me tell you something my friend. Hope is a dangerous thing. Hope can drive a man insane.
--Ellis Boyd 'Red' Redding, The Shawshank Redemption
Well, Colin came and went and traders are busy trying to figure out what other traders are thinking so they can step in front of their flow. They say that moderation is the key to life. That may be true, Mr. Dufresne, but interpretation is the key to trading survival...and there's a whole heckuva lotta interpreting going on! Come with me, let's crawl through this muck and see if we can find our way to the other side.
The first thing I did when the NDX broke the minor uptrend on my five-day chart was "pull it out." By extending the time frame of my chosen chart, it offers a longer term backdrop with which to juxtapose the price action. I've found--and some will disagree with me--that the longer the trend, the more powerful the pattern. In other words, a weekly trend supercedes a daily, a monthly chart trumps the weekly, the yearly pattern is more important than a monthly (and so on).
When I jumped to an 8-day chart of the N's and S's (randomly), I found an S&P downtrend (from last Wednesday's top) intersected directly with Monday's high and, now, today's high. I'm using that as a guide for my day trades while keeping the more important S&P 870 level on my radar for my positions (with a longer duration).
The (very) light volume action reeks of entrapment (both ways) and I'm seeing macros push the tape back and forth. The gorillas have been noticeably absent for a while now (can you blame them?) and the hedge fund hot potato is dominating the action. While we know that the (reactive) buyers (sellers are lower) the ability to remain proactive will continue to differentiate our performance. In other words, don't let the actions of others define your view--make your own decisions and attempt to use prices to your advantage.
While the fate of today's tape is still very much in question, I can say that IF they turn 'em lower, it's gonna take the wind out of Hoofy's sail in a big way. Straight down after Colin was too...intuitive (as I feared). Now, after a session of traction, the balance of the day becomes entirely more difficult to game. I continue to hop around with one leg in my metaphorical bear costume (25% conviction on the short side) and will look to add more appendages should we trade higher (towards S&P 870).
Looking forward, earnings tonight are fairly light (EXPE) although they'll pick up marginally in the morning (ALL, GCI, PEP, SWY, USAI). Our pal Beeks will also swing by tomorrow with the Nonfarm Productivity (exp. .7%), Unit Labor Costs (exp. 3.0%) and Initial Jobless Claims (exp. 390K). Finally, the E.C.B has a morning meeting so toss that on your radar as your ordering your bacon and eggs.
That's about it, Minyans, it's very quiet and I'm juggling between trading, writing, investors and those delicious Minyanville chocolate chip cookies (always honest). I've been very careful not to press (my trades or my thoughts) so please understand that I haven't got a lot of real-time examples to walk you through. When they arise, you'll be the first to know about it!
As always, I hope this finds you well.
Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at email@example.com.
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