New Month New Risk

Nasdaq futures are flat ahead of US trade after a benign session of trade.  Volume and range are both below the 1^st standard deviation of normal which is even more abnormal for the Sunday/Monday globex session.  As we enter a new month of trade the markets are working through earnings and we have a few economic events on the calendar.

Coming up today at 10am is ISM Manufacturing.  Tuesday premarket we will hear US Trade balance and at 10 US Factory orders.  Also after hours Tuesday, BOJ Governor Kuroda speaks in Tokyo and the verbiage will likely be scrutinized after last week’s stimulus news.  Wednesday premarket we have ADP Employment change which has been less consistent than in the past followed by 10am ISM Non-manufacturing Composite.  After hours Wednesday are BOJ October meeting minutes.  Thursday premarket we have ECB news including rate decision and a Draghi press conference.  And Friday premarket we have monthly Non-farm payrolls and US unemployment rate.

On a weekly chart of the Nasdaq Composite we can see the sheer size of the green candles printed the last two weeks.  These two candles suggest the hammer candle printed three weeks back is confirmed as a short term low.  Even if it was not, the distance traveled means sellers have their work cut out to revert long term control into their favor at the best or into balance at the least.  For now, the long term time frame is bullish.  Note also how we are back trading above the ‘gap-zone’ from 2000:

On the shorter term, we can see how the market spent three days building balance before the gap higher on Friday.  This balance is best seen as the green volume profile positioned to the left.  I have noted some measured move targets which, oddly enough, one of the targets from Friday morning ended up being an area where the market found support.  I have less conviction in these levels than auction/volume profile levels, but they do serve as a frame of reference when we trade in an area lacking price history.  I have noted these levels and a few other observations on the following volume profile mashup: