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Fueled on Strong Earnings, The NASDAQ Heads into Friday at Record High

NASDAQ futures are heading into Friday flat after an overnight session featuring normal range and volume.  Price worked sideways after a spike higher during Thursday settlement period, fueled by earnings from Amazon.  At 8:30am annual GDP data were released, worse than expected, and cause little effect to the market.

Also on the economic docket today we have Chicago Purchasing Manager at 9:45am and Baker Hughes rig count at 1pm.

Yesterday we printed a normal variation up that morphed into a double distribution-type trend day during settlement period.  Thursday morning marked the third gap up left behind during the week, including the major gap up Monday following the French election results.

Heading into today my primary expectation is for buyers to work higher, up through overnight high 5597.75 and continue probing all-time highs. Price stalls just beyond 5600 and two way trade ensues.

Hypo 2 sellers push down through overnight low 5582.75 and flush lower, down to 5559.25 before two way trade ensues.

Hypo 3 sellers push lower, down to about 5575 before two way trade ensues.

Hypo 4 buyers work up through 5600 and continue working higher, into open air as we wrap up the week.

Levels:

Volume profiles, gaps, and measured moves:

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Treading Water: NASDAQ Based Out at Record Highs

NASDAQ futures are starting Thursday gap up after an overnight session featuring normal range and volume.  Price worked higher overnight after briefly poking below the Wednesday low yesterday evening.  At 8:30am a slew of economic data were released including Advance Good Trade Balance (beat), Durable Goods Order (miss), and Initial/Continuing jobless claims (mixed).

Also on the economic agenda today we have Pending Home Sales at 10am and a 7-Year Note auction at 1pm.

Yesterday we printed a normal variation down.  After a brief spike to all time highs shortly after the open, the session was quiet, working sideways with a slight downward drift.

Heading into today my primary expectation is for buyers to work higher, up to test all-time high 5562.50 before two way trade ensues.

Hypo 2 sellers work down through overnight low 5534.25, down to 5511.50 before two way trade ensues.

Hypo 3 tight chop, range bound from about 5553 to 5527.25.

Levels:

Volume profiles, gaps, and measured moves:

 

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NASDAQ Bases Out at Record Highs Amid Trump Tax Plan Talks and Earnings

NASDAQ futures are flat heading into Wednesday after an overnight session featuring normal range and volume. Trade was balanced overnight, holding inside the upper quadrant of Tuesday’s range.  At 7am MBA mortgage applications came out better than last week.

Also on the economic docket today we have crude oil inventory at 10:30am, a 2-year floating rate note auction at 11:30am, and a 5-year note auction at 1pm.

Yesterday we printed a double distribution trend up.  Price opened gap up and ran higher nearly the entire day, exploring the open-air of all-time highs.

Heading into today my primary expectation is for sellers to push into the overnight inventory and close the gap down to 5548.75 then continue lower, down through overnight low 5543.75.  Look for buyers down around 5530.50 and two way trade to ensue.

Hypo 2 buyers work up through overnight high 5554.75 then test up above all-time high mark 5557.25 and continue exploring higher prices.

Hypo 3 strong sellers trigger a liquidation down to 5511.25 before two way trade ensues.

Levels:

Volume profiles, gaps, and measured moves:

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NASDAQ Extends Monday Gains: Trades To New Record High Overnight

NASDAQ futures are coming into Tuesday gap up after an overnight session featuring normal range and volume.  Price worked higher overnight, briefly resting at the Monday high before continuing to work higher.  As we head into cash open, prices are hovering at all-time highs.

On the economic docket today we have House Price Index at 9am, New Home Sales and Consumer Confidence at 10am, 4- and 52-week T-bill auctions at 11:30am, and a 2-year Note auction at 1pm.

Yesterday we printed a normal variation up.  The details of the session were recapped yesterday afternoon.

Heading into today my primary expectation is for sellers to push into the overnight inventory and close the gap down to 5504.50.  Look for price to continue lower, down through the 5500 century mark and testing 5495.50 before two way trade ensues.

Hypo 2 buyers gap-and-go, continue exploring higher prices beyond the current swing high 5524.

Hypo 3 strong selling takes price down to 5462.25 before two way trade ensues.

Levels:

Volume profiles, gaps, and measured moves

 

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Let’s Take A Look At How Futures Traded Monday, After The Pro Gap Up

Pro gap is loosely defined, per my own statistics, as a gap greater than 40-60 points on the NASDAQ, roughly.  Greater than 60 points and we truly are dealing with something unique. Let’s discuss the forces behind a pro gap and the implications they carry into the trading day.

A gap usually occurs when information deemed material by investors and traders is discovered outside of open market hours (9:30am-4:15pm, New York Time).  When the market resumes trading, many participants (including institutional, the higher or ‘other’ time frame) are put in a position that may require them to adjust their exposure.

In Monday’s instance, the large move higher may have pressured short sellers to cover their positions, creating a natural demand force inside the market.  The move was deemed macro driven, tied to the first round of French Elections.

And buyers were the first ones to attempt a move after the opening swing, but by late morning, NQM17 (the front month futures contract) had fallen back around the opening prices.  This is when the day became interesting. The first trade of the week set up, a zipper, affectionately named by the image it resembles on my renko trigger chart. See below:

The trade was scratched at cost.  I managed to cover one unit at the exponential moving average then due to the day’s context scratch the remaining units instead of re-adding to the shorts and pressing for the range extension down.

Range extension is a move beyond the first hour’s range.  Understanding range extension is only important because it unlocks a high probability edge for day trading.  You can run a study yourself (and you should for added conviction) where you calculate what percentage of the time the first hour’s range is exceeded.  It happens 94.3% of the time.

94.3% probability, does that sound like an edge to you?

The trick of it is guessing which side of the range is going to break.  On a big gap day like today’s, the range extension could carry big order flow with it, and implications that could last days, even weeks into the future.  Historically, the high of the 1st hour’s range (aka initial balance) is taken out 66% of the time, while the low is breached 52% of the time.  The high breaks more often mainly due to the long term trajectory of the NASDAQ, which is up.

Below you will see Monday’s initial balance, which is clearly marked—observe:

When sellers failed to take out IB low it became evident that the primary expectation from this morning’s trading report was still in play.  For added context, we had a clear pivot zone, the old zipper that triggered the late-morning short trade.

The final layer of context is a statistic that needs to be dug up (it is archived in the laboratory somewhere, SMH) which states that if a gap outside of the prior day’s range is not filled by 1pm, the market is likely to continue in the direction of the gap.

Mix all these little contextual quirks, expectations, trade set-ups, and high probability events and you have an excellent foundation for justifying taking longs—afternoon day trades.

Overall, the day had a wait-and-see feel to it, with buyers hardly initiating fresh risk beyond opening balance.  This suggests the institutions are waiting for more information before they become aggressive in either direction.

In short, it seems, for now, the market remains out of balance which means it is interesting.  Interesting, because of the potential opportunity it holds.

 

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Out of Balance: NASDAQ Begins Week Pro Gap Up After First Round of French Elections

NASDAQ futures are coming into the last full week of April pro gap up after an overnight session featuring elevated range and volume.  When Globex trade opened Sunday evening, futures were 30 points higher and the rally continued overnight, pushed price nearly 60 points above last week’s closing price. This sort of gap throws the market out of balance and could lead to institutional activity at the opening bell.

The economic calendar is light this week.  Today we have only the 3- and 6-month T-bill auctions at 11:30am.

Last week U.S. markets worked higher, lead by the small cap Russell Industrial Average.  There were bouts of selling throughout the week, but the sellers never managed to gain much traction, and most mornings featured a gap up.   The last week performance of each major index can be seen below:

Last Friday the NASDAQ printed a normal variation down.  Price opened more-or-less flat, and after some early chop a brief range extension down was achieved by the sellers before two-way trade ensued.

Heading into today my primary expectation is for a two-way auction at the open, pushing up-and-down to establish an early range, then either the buyers or sellers will make an attempted move out of it.  The move away from early balance will likely be significant and could drive direction all day.

If move is higher we only have one reference point—a Fibonacci level at 5517.75.  Primary hypo is sellers hold this level and two way trade ensues.

Hypo 2 buyers push up through 5517.75 and continue exploring higher prices, trend day, open air, all-time highs.

Hypo 3 sellers break early balance and begin working into the overnight inventory, pushing a half gap down to about 5484.50 before two way trade ensues.

Hypo 4 full-on liquidation off the open, selling down through overnight low 5470 and a test of 5462.50 before two way trade ensues, or even a full gap fill down to 5441.50.

Levels:

Volume profiles, gaps, and measured moves:

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Overnight High Looks Weak, NASDAQ Looks Strong on Option Expiration Day

Let the record show my Sunday analysis, which suggested US markets had a ‘scary look to them heading into OPEX’ was off base.

NASDAQ futures are coming into Friday, option expiration Friday, gap up after an overnight session featuring normal range and volume.  Price worked up to the Thursday high, and has been treading water right at the high since.  The high has been tagged many times but so far not exceeded.  Therefore the profile has taken on a blunt shape on top, suggesting the high is ‘weak’ and prone to a test above it.

The economic calendar is light today.  We have Markit Manufacturing/Service PMI at 9:45am, Existing Home Sales at 10am, and the Baker Hughes Rig count at 1pm.

Yesterday we printed a double distribution trend up.  Price opened gap up for the third time this week, and for the third time this week sellers were unable to close the gap.  Instead the market pushed higher off the open, at one point before lunch trending up into the 04/05 liquidation zone before settling into two way trade.

Heading into today my primary expectation is for buyers to work up through overnight high 5454.75 continue up to 5461.50 before two way trade ensues.

Hypo 2 sellers work down through overnight low 5440 triggering a liquidation down to 5415 before two way trade ensues.

Hypo 3 choppy range from 5430 – 5455.

Levels:

Volume profiles, gaps, and measured moves:

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Recovery: Wednesday Afternoon Sell-off Erased During Extended Trade

NASDAQ futures are coming into Thursday gap up after an overnight session featuring normal range and volume.  Price worked higher overnight, reversing the Wednesday afternoon selling but holding inside the Wednesday range.

On the economic calendar today we have Initial/Continuing jobless claims at 8:30am.  At the same time, the Philadelphia Fed data is out.  Other economic events include Leading Indicators at 10am, and a 5-year TIPS auction at 1pm.

Yesterday we printed a neutral extreme down.  Price opened pro gap up, saw an early rally that briefly went range extension up before reversing down through the entire range and giving back most of the gap.

Heading into today my primary expectation is for sellers to work into the overnight inventory and close the gap down to 5396.50.  From here we continue lower, down through overnight low 5394 and close the open gap down at 5389.50 before two way trade ensues.

Hypo 2 buyers gap-and-go, up through overnight high 5418.25,  Buyers continue higher, up to 5424.50 before two way trade ensues.

Hypo 3 strong buyers rally up to 5432.25 before two-way trade ensues.

Levels:

Volume profiles, gaps, and measured moves:

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Last Tuesday’s Conviction Selling Erased During Strong Overnight Trade

NASDAQ futures are heading into Wednesday gap up after an overnight session featuring normal range and volume.  Price worked higher during the entire session, pressing up into the hard selling from last Tuesday and nearly erasing the losses.  At 7am MBA Mortgage applications data came out worse than last week.

Also on the economic calendar today we have crude oil inventories at 10:30am and the Fed’s Beige Book at 2pm.

Yesterday we printed a normal variation down.  The gap down was quickly bought up and buyers continued pushing higher, to a new weekly high before sellers came in and reversed the entire move, briefly pushing the market range extension down before two-way trade ensued.

Heading into today my primary expectation is for buyers to gap-and-go higher, working up to the naked VPOC at 5432.25 before two way trade ensues.

Hypo 2 seller work into the overnight inventory and attempt to regain the Tuesday range at 5405.25 but fail, ultimately leading to a move up to 5432.25 before two way trade ensues.

Hypo 3 sellers work a full gap fill down to 5389.50 then take out overnight low 5388.  Look for sellers down at 5383.75 and two way trade to ensue.

Levels:

Volume profiles, gaps, and measured moves:

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Commence The OPEX Grind; NASDAQ Loses Half of Monday’s Gains

NASDAQ futures are coming into Tuesday gap down after an overnight session featuring normal range and volume.  Price took out the Monday high, briefly, during extended trading hours before a significant rotation lower pushed through.  The down move stalled around the Monday RTH midpoint. At 8:30am Housing Starts came in below expectation and Building Permits above expectations.

Also on the economic docket today we have Industrial/Manufacturing production at 9:15am, and a 4-week T-bill auction at 11:30am.

Yesterday we printed a double distribution trend up.  Price opened the week gap up and buyers bought into it before we spent much of the day churning sideways.  Then, the afternoon featured a ramp higher.

Heading into today my primary expectation is for buyers to work into the overnight inventory and close the gap up to 5394.50.  From here sellers step in and work lower, down through overnight low 5375.50.  Look for buyers down at 5374 and two way trade to ensue.

Hypo 2 sellers work a gap and go lower, down through overnight low 5375.50 and continue lower, targeting the weekly gap down at 5358.75 before two way trade ensues.

Hypo 3 buyers work a gap fill up to 5394.50 the continue higher, up through overnight high 5403.75 triggering a rally up to 5430 before two way trade ensues.

Levels:

Volume profiles, gaps, and measured moves:

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