NASDAQ futures are coming into Friday gap up after an overnight session featuring elevated range and volume. Price worked higher overnight, methodically trading higher in a unidirectional manner. As we approach cash open price is hovering near the Thursday midpoint.
On the economic calendar today we have Markit manufacturing/service/composite PMI numbers at 9:45am. There are no other important economic events.
Jim Dalton, a legend in the field of auction theory and market profile, put out a tweet this morning regarding the behavior of the auction, the 45-degree manner in which it traded yesterday and overnight, tweeting that the behavior suggests the market is dangerously net short. Something to keep in mind on this first official summer Friday:
45-degree lines occur when the POC (fairest price at which business is being conducted) doesn't migrate lower with price. Yesterday provided a perfect example. When this occurs the market is dangerously short. See attached graphic. #ES_F #futures $spy pic.twitter.com/t2LOVEhL7P
— Jim Dalton Trading (@daltontrading) June 22, 2018
On Thursday the NASDAQ printed a normal variation down. The day began with a gap up that buyers quickly drove shut. Then sellers continued driving lower, effectively closing the open gap from Tuesday and pushing down into the Tuesday range before finding a strong responsive bid (responsive relative to the Thursday open, initiative relative to the Tuesday open). Sellers defended the daily midpoint and then spent the rest of the session pressing lower, making new daily lows along the way, and pressing into the upper quad of Tuesday before the day’s end.
Heading into today my primary expectation is for buyers to gap-and-go higher, up through overnight high 7274 setting up a move to target 7300 before two way trade ensues.
Hypo 2 sellers work into the overnight inventory and close the gap down to 7236.75. Sellers continue initiating trades, down through overnight low 7222. Look for buyers down at 7211.50 and two way trade to ensue.
Hypo 3 stronger buyers trade us up to 7328 before two way trade ensues.
Volume profiles, gaps, and measured moves
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