Nasdaq futures have seen a slow in pace as we enter the new week. Last week (OPEX) featured the highest volumes both in regular session and globex that we have seen in several years. As we embark on a new month of risk, activity has slowed. Since opening for trade Sunday afternoon the price of the Nasdaq front month (December) futures contract has traded inside of Friday’s range suggesting overnight/weekend participants accept Friday’s range as balance. The session kicked off with a low volume rally which slowly evaporated through the duration of the evening. The economic calendar was quiet overnight. We have China GDP numbers out this evening and USA CPI on the docket for Wednesday premarket. Earnings season is ramping up throughout the week as well.
The market became a bit illiquid last week as participants aggressively sold equities. Price action ‘broke loose’ which is a phrase we often use to describe the price action following a break from compression. In these conditions, the quest for value and balance go out of whack and we are offered a rare opportunity to see real human emotion play out in the tape, often fear. The event leaves a ripple in our environment and is likely to continue affecting the behavior of prices going forward. Remember, price has memory. Fortunately, the action managed to form brackets last week—guideposts we can use to assess price and volume going forward to determine if either the buyer or seller is gaining control. I have noted these brackets on the following daily chart. Note how prior zones of support and resistance are transformed into their counterparts:
Given the progress of sellers over the last 1-2 weeks, the micro composite from Wednesday/Thursday, and especially given the amount of volume which came in on the downward action, my short term bias is medium bearish. You can see three volume profile print-types: the large composite on the right (months of volume-at-price), the red and green ‘micro composite’ facing the opposite way of all the others, and the daily volume profiles. Each tells me a different story. I have noted the price levels I will be observing as opportunities on the following 15-minute volume profile chart.
Primary hypothesis – buyers early push higher to target Friday VPOC 3811.50, we see some chop and another push higher that stalls ahead of overnight high 3832.50 when responsive sellers step in. Targets ONL 3793.25 then Friday low 3780.75
Seem to be testing the 3840 level now, will have some room to run if it pushes past
range already expanded to 46.5 points, not likely to see another big push on the day, though anything is possible
Looks that way – I think AAPL earnings rumors will now dominate the rest of the day – I think the IBM miss my have spooked some of the euphoria