Nasdaq futures are down a bit heading into Wednesday’s trade after an interesting overnight session. US markets followed China’s Shanghai Composite to an extent. Their index moved fast, falling more than 5% before reversing on rumors the People’s Bank of China could announce a 50-basis-point rate cut. Our session featured a slightly elevated range on normal volume. Price managed to push up above Tuesday’s mid briefly before rolling over and pushing deep into Monday’s trend day. Since then we are off the lows and the structure is balanced overall.
At 7am we had MBA Mortgage Applications and saw no reaction from the market. At 8:30am Consumer Price Index data was out and so far also is seeing a muted response. At 10:30am we have the weekly crude/gas/distillate inventory reports. However, investors are all eyes on The Fed who this afternoon (2pm ) will release Minutes from their July 28th-29th meeting. Participants will be parsing the language for any clues as to whether September will bring a rate hike.
Yesterday we printed a normal variation down. The session was slow with a slight downward drift and methodical. Buyers pushed into the overnight inventory but were unable to close the open gap from Monday before sellers stepped in. Sellers then worked down to test the value area high zones of the well-established value area that was below.
Heading into today, we are trading right at the VPOC of the well-established value area. My primary expectation is for buyers to push into the overnight inventory and close the gap up to 4543.25. From there look for them to continue higher but stall ahead of overnight high 4552.25 and roll over. Then look for sellers to work down to 4511.50 then 4505.50.
Hypo 2 sellers work lower off the open, push down into 4505.75 and exceed it briefly before responsive buyers step in and two-way trade ensues.
These two hypos are before the FOMC minutes. I expect the morning shuffle then action to quiet down as we enter wait-and-see mode. Then I will use 3rd reaction analysis to assess direction into the weekend.
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