Time for Buyers To Prove Their Grit

Nasdaq futures are trading flat as we come into the cash session. Range compressed down to an abnormal sub-1^st sigma range on low, but normal volume. We traded in the upper quad of yesterday’s range.

A few of the bigger players who reported earnings this morning are trading higher (PEP, TWX, ING) and the economic calendar does not have any major events for today. Fed Fisher is speaking in New York to economists, he has been doing so since 8am. We have oil/gas inventory stats at 10:30am and at 2pm we have the Monthly Budget Statement.

Yesterday we opened gap up from Monday’s neutral day. Buyers defended re-entry into Monday’s range and then the market began one-time frame trading higher for the rest of the session. The print was technically a neutral extreme due to the double range extension but the formations of value areas along the way and subsequent breaks higher looked more like a trend day.

Price exceeded Last Friday’s high and pushed into the large value distribution at the top of our intermediate term range. At this point we are on the high end of range and traders will be on watch for signs of an aggressive seller entrant. Over these next several days, buyers are tasked with proving their initiative, otherwise one is more wise to assume the current market behavior of bracket-range will continue.

My primary expectation heading into today is for choppy, 2-way action with a buying skew. Price will look to target the MCHVN at 4285.25 and continue higher to target 4293. Stretch targets are 4300 and 4302.50.

Hypo 2 is sellers us down the zipper to 4262.50 where we find responsive buyers who manage to take out yesterday’s HOD 4284 but not much more and begin the process of cutting into yesterday’s gains targeting 4254.25 then 4240.50 with a stretch target of 4233.25.

Hypo 3 is strong buyers off the open who press up through 4290 early and then put together a second leg up to test 4302.50.

These levels can be seen below: