Nasdaq futures traded lower overnight in a normal manner. The largest blocks of order flow were to the sell side and as we approach US trade prices are trading below Monday’s range. US Trade Balance numbers were lower than expected at 8:30am and received a somewhat muted response—there was a bit of responsive overnight buying shortly after the announcement. We have Factory Orders set to release at 10am.
Coming into the new month traders had to come to terms with a large gap higher left behind on Friday’s trade. The Monday trade also went gap up and we spent the entire session unable to close the overnight gap which led to some hesitance to take intraday longs by day traders. With the market set to open inside of Friday’s range my primary expectation is for buyer to attempt to test higher and close the overnight gap up to 4156.75 before finding responsive sellers who defend the LVN zone from 4161.25 – 4160.75.
I am looking to see how aggressive sellers become and whether they are able to push prices below Friday’s low and if yes whether buyers are found leading to the formation of intermediate term balance or instead accelerate suggesting a sharp reaction of both Friday’s and Monday’s prices. The upward progress made these last few weeks is stretched and whether the market begins accepting these prices via a slow and sideways balance or instead returns to the fast pace of October will be an important clue to the overall market sentiment.
I have highlighted the key price levels I will be observing on the following volume profile chart:
