Facebook Faced Back -Now What?

Facebook Faced Back -Now What?

Facebook’s report after the bell disappointed and is now about 35% off its peak. They lost subscribers for the first time. Maybe politics and censorship are finally coming home to roost, as has been the case at Twitter. The market will tell us whether this is a buying opportunity or not. A lot of the recent market gains are still associated with short-covering.

Today will be all about how much traction sellers get from this Facebook-driven gap down and what sectors will rise or drop in sympathy. I am not inclined to get too bearish yet, at least until the Navigator delivers a sell signal.

Day Traders

I am looking for about a 30 point range above or below the open, and my volatility forecast is still relatively low for the day. Support is about 4500 or so, and the most I see on the upside is about 4563.

I am concerned that the Weekly Expected Move low around 4521 will complicate trades this morning. Market Makers have a gift from Facebook to deal with their deltas at or below the WEM high. It could be a magnet now until tomorrow’s expiration at the close.

Both Gap and Spike Rules apply again this morning on overnight inventory that is net short. The gap is down, not up as yesterday. As with all gaps, the focus is on whether or not there is any countertrend fade. Watch NYSE tick closely as it can be an excellent first clue.

A failure of ticks to get positive is usually a sign that a fade will either not materialize or be weak and partial. A total gap-fill to yesterday’s low sets up a potential short point. Traders should monitor for continuation and see if it’s a true rejection or just a pause before finding acceptance within range.

Should we fill the gap and find acceptance within range, monitor for continuation and recognize the overhead resistance and difficulty in the climb higher.

We have more downside than upside signposts. The overnight low is now through Monday’s entire spike and has traded below its base. We were watching this spike yesterday when prices held well above it.  

Sellers in the NASDAQ 100 are certainly more prevalent, motivated by the dismal results from Facebook. NASDAQ futures are off double what the S&P’s are currently. Carry this forward in your narratives.

A.F. Thornton

AF Thornton

Website: https://tradingarchimedes.com

A.F. "Arthur" Thornton is an expert in logic, risk/reward quantification, market fractals, pattern recognition and asset class behavioral analysis with 34 years devoted to developing algorithmic and quantitative trading systems. In addition to trading his own capital, Mr. Thornton designs custom algorithmic and quantitative trading systems for a small and exclusive group of exceptionally qualified traders.

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