NASDAQ futures are priced to start the week out with price gap down. The overnight session featured slightly elevated range on normal volume. Price managed to push above the Friday high and sustain trade above it for long enough to form a weak high. Then around midnight sellers stepped in and worked price back down to the Friday mid.
The economic calendar is light this week as we wrap up earnings season. At 10am we have Labor Market Conditions Index Change and at 12pm MBA Mortgage Foreclosures.
Last week started with a trend day up which saw follow through Tuesday. On Wednesday price opened gap up, went to new contract high briefly (failed auction) before reversing. The rest of the week was a churn with slight downward pressure as sellers emerged.
Friday morning price accelerated to the downside but quickly reversed forming an excess low. Then late in the afternoon a small rally took hold into the weekend.
Heading into today my primary expectation is for buyers to work into the overnight inventory and close the gap up to 4702.50. From there look for buyers to set their target on the (weak) overnight high 4712.75. Look for responsive sellers just above overnight high and two way trade to ensue north of 4692.
Hypo 2 buyers have a hard time closing the overnight gap and instead stall out around 4700. Price heads down and takes out overnight low 4683.50. Look for responsive buyers just below around 4681.50 then two way trade to ensue which eventually closes the gap up to 4702.50.
Hypo 3 once buyers take out overnight high 4712.75 they set their sights on a pole climb to test above last Thursday high 4726.50. Look for buyers to press for new contract high then look for responsive sellers at measured move levels 4732 then 4734.50.
Hypo 4 sellers gap-and-go down, take out overnight low 4683.50 early and sustain trade below 4680 setting up a liquidation down to test below Friday low 4658.75. Look for responsive sellers down at 4656.50.
Levels:
hypo 4 in play
You could have shorted a number of interest rate adverse sectors (like homebuilders for example) and be up nicely the past week instead of focusing on a group (biotech) that is made of teflon. Next time you decide to short a sector, you may want to do some “research” on the macro details (ala interest rates) vs. taking the “this sector is overvalued” approach.
Which home builder stocks are you short?
Shorted the sector (XHB) ETF on Wednesday just above $36 and bought BBH calls Friday morning.
Nice, do you have a twitter or something where I can read about your ideas?