Nasdaq volume and range went 2^nd sigma overnight as the index traded lower for much of the session. As we approach cash open prices are below Tuesday’s range and we are in a “pro gap” type environment. The selling accelerated at 8:30am when weaker-than-expected Advance Retail Sales data hit the wires. We also had an corrective-type event in copper prices, the Japanese Yen is very active, and JPM missed earnings. WFC is trading lower premarket as well after reporting earnings.

Today we have crude oil inventory stats out at 10:30am. The weekly report is likely to be closely followed by all speculators as the commodity continues to correct lower. We also have Business Inventories at 10am and the Fed Beige Book at 2pm. Premarket tomorrow we will hear Continuing/Initial job claims and also earnings from BAC and C.

Yesterday prices opened gap up and we had an opening drive higher. After a strong first hour of trade buyers pushed us above the IB and we unable to test Friday’s high. The lack of order flow above the high was ominous and we quickly fell back to the daily mid. From there buyers were unable to defend and we gave back the entire opening drive and then some in a large impulse-type move. The overall print was a neutral print, perhaps barely able to classify as a neutral extreme.

The overnight session looks like a completion of the impulse wave. Early on my expectation is for buyers to push into the overnight short inventory and test Tuesday’s session low 4126.75 and likely push into the range a bit up to the LVN at 4138. From there I expect responsive sellers will step in and continue pressing lower to close the open gap at 4102.25 and test recent swing low 4082.

Hypo 2 is an open drive down. The risk of a drive is elevated given the recent price action on open and how we are out of balance to start the day. Drive down looks to test recent swing low 4082 early and push through to test 4069 then 4053.

Hypo 3 is a stronger than expected open which takes out the LVN at 4038 and sustains trade above it. This type of action likely builds into a full gap fill up to 4158.75.

These levels are highlighted on the following profile charts:

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Nasdaq futures are trading higher on the globex session. The buyers stepped in around 3am after defending the value area low of Monday’s cash session. Range overall on the globex session is on the high end of normal [1^st sig] as is volume. Oil is trading up into the open and we saw a positive earnings reaction from KB home this morning.

At 10am we have JOLTS, a low impact event. 2pm Monthly budget statement, and 5pm we have Fed speak from Kocherlakota. Tomorrow premarket we have WFC & JPM earnings and also Advance Retail sales, Fed’s Plosser, and MBA Mortgage applications.

The main feature of yesterday’s action that had me constructive was the b-shape of the market profile. This suggested a short term phenomenon known as a long liquidation. An early entrant pressured the market lower which forced longs into liquidating. Once that business was complete the market balanced and showed decent signs of excess(tails). You cannot see the tails as clearly, but the b-shape is quite evident on an old school MP:

Primary hypo is a 2-way open auction with big chop where sellers push into overnight inventory and test down to 4180 area. If no buyers than test down to 4176 area before we work higher to test Monday session high 4218.50

Hypo 2 is for buyers to thrust early and run us up the zipper and test Monday’s HOD 4218.50. Just above around 4224.25 I will look for signs of responsive sellers.

Hypo 3 responsive sellers reject the overnight move and sustain trade back inside the b-shape, below 4176. Then we test through to 4160 area and continue probing lower.

These levels are highlighted on the following volume profile chart:

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So far we have seen interesting globex action to start the week off. The Nasdaq traded inside of Friday’s wide range and held the low end of value before seeing a strong rotation higher. The move merited splitting the profile in half to see a clearer picture of the auction.

Before thrusting higher the market spent a considerable amount of time linger on those lows and from price action alone it looks like a weak low. However, from the profile view the volume distribution is decent. The globex high however seems a bit weaker.

The early battle ground is right near the 4200 century market. It will likely serve as an early pivot for the session. I have noted this zone on the following market profile chart:

We have Fed’s Lockhart speaking on US Economic Outlook at 12:40pm down in Atlanta. He is a voting member of the FOMC and may shake this market up a bit. This week is also monthly option expiration so we may see some big intraday waves, something to keep in mind.

Primary hypo for today is open auction in range, sellers work to close the overnight gap to 4201.50 and we see if this level attracts responsive buyers who then work toward overnight high 4227.50, then target MCHVN 4233.25 and potentially probe the upper pocket at 4240.50.

Hypo 2 is sellers capture the 4200 pivot then look to take out overnight low 4195 and test the LVN at 4193. Losing this level opens us up to retest Friday low 4181 which puts us in gap territory. Range gap fill is 4163.25 full gap fill is 4152.

Hypo 3 is drive higher, take out poor-looking overnight high and work up to test Friday session high 4248.50 and then test up to 4260 area.

These price levels are all highlighted on the following volume profile chart:

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Equity markets pressed higher at 8:30am after the US posted stronger than expected NFP data to the wires.  Just after the bell at 10am we have Wholesale Inventories and Trade Sales and at 1:20pm Fed’s Lacker is delivering a speech on his 2015 economic outlook.  We also have two ongoing hostage/terrorist situations in Paris.

Prices are still on the move in the globex market but as we approach cash open we are trading right around yesterday’s high of the session.  We spent the overnight session trading above the mid of yesterday’s big range before taking out the highs on the NFP data.  The two pushes above Thursday’s range have found responsive selling.

Yesterday the market went gap up and started the session above the prior two day’s ranges and half-way into Monday’s range.  Shortly after the open a strong driver came in and pushed the market higher.  Toward the end of the session prices came into balance resulting in a P-shaped profile.  This type of print suggests a short squeeze took place.

In the context of a downtrend, a P-shaped short squeeze profile often occurs at-or-near the end of a counter rotation higher. However our current context is not a downtrend.  Our current context is intermediate term balance and it is comprised of all trade dating back to October 31st, see daily chart below:

For high level prices to keep in mind, I am sticking with the daily chart and highlighting the key Nasdaq levels below.  Note the three distinct volume distributions separated by two volume pockets.  This is vital information while navigating this big chop.

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Here are some levels on the Nasdaq to keep in mind this afternoon:

 

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If you go back and read my recent 2015 predictions you can find mention of a Euro-zone based negative news cycle. I suppose I was not expecting it to hit on the 5^th day of the year, but these are the facts on the ground. We have an important economic release at 10am today (ISM Non-Manufacturing Composite). Keep in mind tomorrow afternoon’s FOMC Minutes too. These could lead to some choppy-directionless trade.

Heading into US cash open the Nasdaq futures market is flopping around the unchanged line after a busy evening. Volumes are elevated but normal and the price range was contained to the lower half of yesterday’s RTH range. The primary feature of the overnight session was a strong range rotation that occurred from 5:30am to 7am.

Sellers took us back to the scene of the crime yesterday while extending their down-day winning streak to four days. The gap left behind after the Fed rate decision in December was filed before we way signs of responsive buyers coming in. Heading into today’s session it will be interesting to see if sellers are able to take out yesterday’s lows and continue probing into large daily session from 12/17.

My primary expectation is for a choppy open, likely an open auction in range then a push higher to test 4167. This level was a big battleground yesterday but eventually resistance. If we can sustain trade above it then I will look for a test of the overnight high 4172.50 then MCLVN 4179. Any trade sustained above 4179 may signal a shift in the character of the auction from short term seller controlled-to-buyer controlled.

Hypo 2 is a push lower toward the overnight low 4149. There is a big high volume node just a tick below yesterday’s session low at 4144.75. The area was met with a buyer response yesterday and returning to it would likely mean we push through HVN and test the other side of this value which is 4135.25.

Hypo 3 is an early drive higher that spikes through overnight high 4172.50 and tests 4179.00 early. We find responsive selling higher which takes us back down to 4167 where buyers defend and press us back up to test Monday’s session high 4207.25.

You can see these levels on the following volume profile chart:

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Bulls are starting the new year off on the cusp of a gap zone in the Nasdaq, and as we approach US trade the globex market is pushing into it. Trade volumes have come back to life and showing overall health in the facility of trade overnight which bodes well for intraday opportunity.

This is the first Monday of the year and month and could feature some aggressive jockeying for position. It is wise to closely assess the price action and trade in the direction of the hardest punches. The economic calendar is quiet today with most trades setting their sights on Wednesday’s afternoons FOMC minutes and Friday’s monthly Non-farm payroll data.

The primary feature of the last few weeks of trade was a strong swing higher across most equity markets as we headed into and through the holiday season. Sparking the move was the FOMC rate decision and Yellen press conference on December17th. We went gap up away from this area and grinded higher before rolling back over before prior swing highs. The Nasdaq was the only of the 4 major indices unable to take out prior swing high.  See below:

Whenever a move is news driven our expectation is for a return to “the scene of the crime” by the market. It will be interesting to see if we do that today, or if instead the buyers step in ahead of this price gap.

The last 3 days of trade were weak and unidirectional down suggesting sellers are controlling the short term auction and the market is trying to find buyers strong enough to start an upward auction. The overnight session took out Friday’s lows and as we approach US cash open it is trading along the low end of its range. Sellers printed the largest rotation of the session between 7&9am as the US came online, a 13.50 point rotation to take out the prior globex lows.

My primary hypothesis is for buyers to make a push into the overnight inventory early on and target 4208.75. If they do not find sellers here (initiative in nature relative to Friday and responsive relative to globex), then look for a gap fill up to 4214.50 then a test of overnight high 4220.75 and possibly a move up to 4225.75. I will be looking for signs of responsive sellers at each of these levels who will seek to push us down through overnight low 4197 to target MCLVN 4179, range gap to 4173, and potentially a full gap fill down to 4160.25

Hypo 2 is a opening drive down which takes out overnight low 4197 and targets MCLVN 4179. If no strong buyer response here then continue to range gap 4173 then gap fill 4160.25 and a blow through to test the CHVN at 4144.75.

Hypo 3 is a variation of hypo 1 where buyers gain acceptance inside Friday’s range and then make a big secondary push up through Friday VAH 4225.75.

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Nasdaq futures are inching higher as we head into the new year of trading. Volume has normalized in globex leading me to suspect the quality of trade may resume during RTH as well.

There are some economic data releases to be aware of – at 9:45 the Markit Mfg PMI and then at 10am Construction Spending and ISM Manufacturing. These early releases may lend some choppiness to the early trading action.

The futures managed to hold the Wednesday lows overnight and push up through the poorly auctioned zone from 4262.50 – 4252 (pink box on chart). The buyers are defending the globex midpoint at 4248 as we approach the open.

Sellers took control of the short term auction this week after a balance day on Monday. Tuesday went gap down and when buyers responded and attempted to push us back into Monday’s range we saw a sharp rejection lower. When Monday showed afternoon follow through it suggested the intraday sellers had converted from responsive to initiative.

Wednesday they defended a gap and range extension up. Again they defended Monday’s value and then pressed us lower for the rest of the session resulting in a neutral-extreme print. Wednesday’s profile structure carries strong directional conviction with it, thus the sizeable gap up this morning is suspect.

The slightly longer, intermediate term timeframe resembles neutral-to-slight bullishness. We have essentially traded flat for the last three weeks.

Early on I will be watching for buyers to make a push through the thin zone for a test of globex high 4262.50. I will be looking for responsive sellers in the zone from 4262.50 – 4271.25. From there I suspect we could slide back down through the thin zone to test 4254.25.

Hypo 2 is sellers pushing into the overnight inventory early with a drive which is likely to target globex low and then work toward Wednesday low 4228.00. This opens up the auction to test the low volume node down at 4216.50 and puts the December 17^th gap into play.

Hypo 3 we see buyers sustaining above 4271.25 and pushing a secondary leg up to 4285.25 thus regaining control of the short-term auction.

I have highlighted these levels on the following volume profile chart:

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The Nasdaq is hardly showing a pulse as we heading into trade this morning having traded only a paltry 6000 contracts so far. Range is low, prices are a bit higher and the primary feature of the session is an 11 point rotation up which was faded back to the mean of the session.

At 8:30am Initial and Continuing Jobless claims came out mixed and we saw little-to-no reaction from the market. At 9:45am we have Chicago purchasing manager index set for releases, this may lead to a choppy open, and then at 10am we have Pending home sales.

At 10:30am we have crude oil and gas inventory data followed by a noon read on natural gas inventories. The weekly energy announcements have been showing an elevated impact on not only the price of the commodities but also equities, thus, they are something to keep in mind as you navigate your trading day even if you primarily deal in stocks.

Turning to the charts, we can see the intermediate term coming into balance. This is seen as a series of overlapping value areas which I coagulate into a volume micro-composite (red-outlined, green value area profile on left).

Yesterday we opened gap down and when we tested higher sellers rejected us away from Monday’s range aggressively and targeted the gap fill down to 4281.50. If you recall this was yesterday’s hypo 2.

Sellers could also be seen actively defending the micro VPOC at 4295 which resulted in the second leg down. I emphasize this not to pay myself on the back but instead to show you the market has memory and this is not a random walk of price.

Toward the end of the session we saw some signs of excess low and then a sharp candle higher.

Today my primary expectation is for sellers (initiative in nature relative to the int term, and responsive relative to the overnight session) to push into the overnight inventory and close the gap down to 4283.50. Here I will look for signs of buyers who work back up to test the MVPOC at 4295, just abover the overnight high of 4294.25.

Hypo 2 is sellers become initiative and push through overnight low 4281.50 and test the lower end of intermediate term balance via taking out yesterday’s session low 4273.75 then 4271.25. If buyers are not present at this level then a continued exploration lower to the LVN at 4263.

Hypo 3 is the buyers blast through overnight high and MCVPOC 4295 and work to close the Monday-Tuesday gap up at 4313.25.

I have highlighted these levels on the following volume profile chart:

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Nasdaq futures are trading lower overnight as volumes continue to come in light on the globex market. Around 8:30am some chatter out of Russia resulted in a bit of a reaction from equity and gold prices, pushing the Nasdaq below Monday’s range and spiking gold higher.

At 9am the Case-Shiller Composite -20 data is due out and at 10am Consumer Confidence. The 10am news might cause some early chop before the market finds direction on the day.

The intermediate term is showing signs of coming into balance but still has a neutral-to-bullish skew. The monthly high is only about 20 Nasdaq points away and the quiet consolidation just below these levels increases the likelihood of a test up to 4323.75.

Early on I am looking for a bit of weakness to test the mcVPOC at 4295 where we see responsive buyers who work to close the overnight gap to 4313.25 and take out the overnight high 4318.

Hypo two is buyers push into the overnight inventory but get rejected away from Monday’s value 4309.50 and begin exploring lower to target a move down to 4295 and if they do not find responsive buying here then a continued move to 4285.25 and finally a gap fill down to 4281.50.

Hypo 3 sellers drive off the open and close the open gap down to 4281.50 early and continue testing lower to 4277.50, 4271.25.

I have highlighted these levels on the following volume profile chart:

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