Nasdaq futures are higher overnight on a session featuring normal volume and range, but a session that spent the duration trending higher. The action has pushed price to new contract high.
Initial/Continuing claims data came in a bit better than expected this morning and received little-to-no reaction then a delayed buy. The economic calendar is loaded this morning. Investors will most closely be observing day two of Yellen in Washington—today delivering a testimonial to the Senate Banking Panel. Also on the docket is Philadelphia Fed at 10am, NAHB Housing Index at 10am, and Net Long-term TIC Flows at 4pm.
Yesterday we opened gap up for the 4th day in a row. Price churned about while investors listened to Yellen testify to the House. Late in the morning we went range extension up but quickly fell back into IB setting up ripe conditions for a gap fill. Sellers pushed the overnight gap shut and overshot the gap while putting us neutral. Responsive buyers pushed us back up toward session high to end the day.
Intermediate term we are back at bracket high. Short term memory says look for sellers to defend here and whack us back through the range. To expect anything different would be to ignore recent history. The caveat is our current velocity. When we come into a key reference point at high speed, you expect to see the rejection/reversal happen quickly. Otherwise it’s likely we continue through it.
Heading into today, my primary expectation is for sellers to push down into the overnight inventory to close the overnight gap down to 4537.25. From there I’ll look for a continued push to 4530 where we see responsive buying a two way trade take hold.
Hypo 2 is we sustain trade up at new contract high and go hunting for buy stops. Measured move targets are 4578.75 and 4594.75.
Hypo 3 is liquidation. Sellers reject a new contract high harshly, push down fast to 4530 where buyers mount a weak defense but are ultimately overrun. Look for continuation down to 4515.
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