Equity futures were quiet overnight, a feat in and of itself to hold this high watermark amidst a negative news cycle and more. We operate on a playing field (the pitch, for you English blokes) of sorts based upon the average true range of the marketplace. These type of measurements are interesting bits of context, but nothing is definitive in trading. The same average true range which may have been seen as a swing high or low in the past can be rendered into a support line as price grinds along it. This type of environment is where stock picking shines.
Tuesday was a pretty influential day on the market. Using the 24 hour market profile chart, we can see three distinct distributions which formed during the rapid migration through intermediate term balance. These distributions feature buying tails showing the aggressive response of buyers at prices they perceived to be discount. The action slowed during regular trading hours Tuesday and the distribution took all of Tuesday evening and Wednesday to form. This was the imbalance I highlighted yesterday morning. We resolved it in a rather methodical manner. We now have a wonderful and balanced distribution to gauge future market activity against.
The short term timeframe was in control yesterday and this could be seen as chopping action in the index with a slight edge to the buyers. This slight edge may be the influence of departing intermediate term balance and the long term auction being in buyer control.
The key to sustaining control of the short term is continuing to migrate value higher and also keeping the overall velocity of the marketplace low. Those same buying tails which represent strong responsive buying also have thin volume profiles which price can slash through. This type of action may be a shocking lurch back into intermediate term balance.
I have marked up my NASDAQ market profile on the following chart:
R Kelly said grinding was ok.
yeah baaby