After nearly two weeks of globex volume running hot, last night comes around, and the action is completely benign. Nasdaq futures are up overnight on a range that’s high-end normal on low volume.
There’s a news dump at 10am, including ISM Manufacturing, Construction Spending, ISM Prices Paid, and University of Michigan’s final Confidence read for April.
Yesterday most closely resembled a trend day down. It may constitute a triple-distribution trend day, if such a name existed. Toward the end of the session buyers came in, about halfway into the 4/20 range. If you recall, 4/20 was two Mondays ago, and we started with a gap up and ran all day—in essence it was a conviction day.
So we have two combating forces here which will tell the major story going into the weekend. Market Profile theory states that any entry in the direction of the trend on a trend day is a risk-free entry into the following session, meaning, we are likely to at least go one tick below the trend day low in the following session. The other force is the proclivity of a conviction day to be defended.
Heading into today, my primary expectation is for a choppy open until we hear the economic data points at 10am. After, I will look for sellers to push into the overnight (and late-yesterday afternoon) inventory and test their conviction. If sellers can trade below 4409 I will look for them to test yesterday’s low 4386.50.
Hypo 2 is we muddle around north of 4400 in choppy, two-way, Friday trade.
Hypo 3 is we gap-and-go, demonstrating some v-shape tendencies. Look for responsive selling up at 4452.
Hypo 4 is we test higher early on, to 4432, then reverse and continue working lower to test Thursday low 4386.50. If liquidation takes hold look for a gap fill down to 4349.50.