After closing out trade yesterday in the Nasdaq futures with a neutral print, the balance and indecision continued throughout the globex session.  The market balanced ahead of GPD and jobless claims information.  The expected numbers were -0.5% and 318k.  Actual GDP number was -1% and actual claims were 300k.  Thus we had a slightly worse than expected GDP number, which was blamed on weather and a slightly better reduction in jobless claims.  The premarket reaction is timid.

We are currently priced to open in balance and in range suggesting a lower risk environment.  Keep in mind however that we started the week with a gap higher and have yet to even attempt filling it.  This piece of context in the back of most speculators minds as they position throughout the day.  This is either gap and go support, or a more likely fill opportunity.

On the intermediate timeframe, we can see the buyers controlled price action for nearly 6 uninterrupted days.  The late selling yesterday almost gives the intermediate term a balanced look, but with a slight edge to the buyers.  See below:

I have merged the overnight market profile into yesterday’s profile so we can see the near perfect balance on the short term.  These levels will be in play early on:

Overall, on the short term, we are coming into balance after squeezing shorts. Whether we continue to squeeze shorts is contingent upon sustaining trade above yesterday’s neutral print.  See below

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Nasdaq futures traded quietly for most of the night before sellers came in around 8:30am.  Since then, it appears the sellers have taken control on the very short term in an otherwise balanced overnight session.  There are some retail store numbers out premarket including the Redbook, and we have several treasury auctions in the afternoon.  The economic calendar is otherwise quiet for the session.

Buyers pressed the envelope of extreme on the intermediate timframe yesterday after starting the day with a short squeeze.  The market profile print into the early afternoon resembled a P-shape, which signals a dynamic short squeeze which failed to attract fresh initiating buyers.  However, buyers were enticed by the higher prices eventually and an afternoon rally took shape.  You can see we are trading above a composite volume pocket below.  This may be traversed several times today and during the rest of the week:

On The short term, buyer are in control but we are set to gap lower a touch in a thin volume zone.  One must be careful in this region as price can move very fast.  I suspect we retest yesterday’s VPOC if sellers continue their early campaign, and we still have a large gap left below on the weekly chart.  I have highlighted a few short term observations on the following market profile chart:

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Nasdaq futures drifted higher while stocks were closed for trade Sunday and Monday, and as we approach USA open prices are around 15 point above our Friday closing price of 3675.  Durable Goods Orders came in better than expected at 8:30am but was received by the market with a muted response.  This may suggest buyers have already priced in best case scenarios on the short term.  Or perhaps participants are moving slow after the holiday weekend.

The short term pivot level early on appears to be 3689.75.  Taking a look at our 24-hour profile which includes all of the globex trade during the holiday, we can see a buildup occurring just below this level before finally bursting through.  The resulting profile has a low volume node at this action point.  See below:

Buyers are in control the intermediate term swing.  Price has been trending higher since setting swing low on 5/20.  The action indicates other timeframe (OTF) activity.  These longer term participants became evident last Wednesday and now they are coming into the week in control.  There is a possibility we see some profit taking by the OTF early this week, and an early tell about the profit taking and the overall health of the market will be the depth of the next pullback.  It seems bulls will want to hold 3645.25 which is Friday’s low print and a low volume node on our composite.  Otherwise the door swings wide open for a fast mean revision trade to take hold:

It is important to keep the long term market structure in your mind even while you trade the very short term.  Looking a monthly candle chart you can see the sideways churn or bracketed trading action.  Markets spend around 70% of the time in balance.  Hanging out up near the dot come bubble peaks for this long is rather interesting.  What is it telling us about the overall health of the marketplace?  What is it telling us about investor risk tolerance?  See below:

 

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Traders often look for the markets to behave a bit lazy as we head into a long holiday weekend because the normal participants are perhaps skipping out of the office early or checked out mentally even if they are at their workstations.  The grind higher certainly seems to have taken hold this year.  As the week progressed trade became more and more slow.  There was a fast sale early Friday, perhaps a move driven by longs in the profit eagerly looking to cash in and head out of town for the weekend.   That move ended up being a huge opportunity to hop on board a quiet trend day higher.

I highlight this tradable opportunity and many more on the following charts of Nasdaq opening swings, enjoy:

MONDAY:

TUESDAY:

WEDNESDAY:

THURSDAY:

FRIDAY:

 

 

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The Nasdaq is trading a touch higher after a relatively quiet and balanced overnight session.  As we roll into the holiday weekend the economic docket is quiet, with only new home sales at 10 am and some markets closed for trade at 2pm.

Given the weekend context and the strong progress of the week, we may see some profit taking where sellers are more prevalent then they have been during the rest of the week.  Yesterday the buyers continued to show control on the short term where value migrated higher without any overlay of the prior day.  The action dried up a bit and as a result we printed an oddly shaped profile with almost two distributions.  We may see this area of low volume more thoroughly auctioned today:

The intermediate term is really attempting buyer control here, and I will say they are in control of the current swing, but it is just barely confined to the intermediate term balance.  We exceeded the prior high of the intermediate term balance yesterday by two points.  However another leg and sustained prices above yesterday’s high would be needed to establish a strong foothold of the intermediate term time frame by buyers.  I have noted a few other key upside levels as well as our two point range extension below:

Don’t lose sight of the big picture.  These are important prices we are trading:

Volume may be light today, so have well established price ranges and try not to get whacked by the day traders.

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We never know how far the market can go in any one direction.  We can however monitor the action and look for signs of continuation.

Nasdaq futures  are trading a touch higher after giving up some of the overnight gains when the 8:30am jobs report hit the tape.  We are currently trading just above the low of the job claims selling as the USA comes online.  The overnight session formed an odd ledge which is likely to resolve early on, especially given the proximity to the overnight gap.  See below, on the 24-hour profile:

The regular trading hours profile shows buyer control, however not the radical jolt higher radical control we have been managing to trade lately.  Instead we saw buyers respond to early pricing as if it was a discount, and later in the session more buyers came in and initiated fresh risk.  Toward the end of the session we saw another rally which printed a high volume node near the high of the session.  This is interesting and suggest the market was successful in facilitating trade at these higher prices.  Higher advertised prices brought more buyers into the market.  See below:

We need to remember however, that we are trading at the high extremes of intermediate term balance.  Gravity may kick in and pull us back to the mean, which is now very far from current prices.  Should this occur, we would first need to lose some important composite low volume nodes.  I have highlighted the levels below which sellers would have to bunker bust to cue the revision trade:

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The overnight auction is slightly higher in the Nasdaq index after an interesting neutral session yesterday.  As the week continues on, volumes are light and likely to decrease as we head into the holiday week.  Note: US markets will be closed Monday in observation of Memorial Day.  We have lots of Fed talk on the docket for today which may lend some volatility to the market. However, as the USA comes online we are priced to open inside yesterday’s value and range.

Yesterday was a neutral day, the type of market profile print where price range extends beyond both extremes of the initial balance.  These profiles suggest aggressive indecision on the behalf of the marketplace and tend to occur at or near inflection points.  The volume profile print that resulted from the action shows the heavy indecision with a wide distribution and several high volume nodes throughout the profile.  We settled near the mid, but there are some interesting characteristics and price levels from which we can glean some intraday insight as today progresses.  See below:

Since we can see the seller above, and we can also see the thin structure they desire to press price into, we can zoom out to the intermediate term and see why their presence is being felt.  See below:

And if we zoom in on the intermediate term action, we can see the microcomposite low volume node that is pivotal on this timeframe, 3599.75, which you just as easily could have conjured by watching the price action around the 3600 century mark.  But at least we know there is a why in the equation.  As adult learners we always want the what and the why.  See below:

Finally, going to the very long term weekly chart of the Nasdaq composite, we can keep our mind wrapped around the brackets we are trading in.  The market spends more time bracketing then trending, so you need tools to trade these conditions.  See below:

 

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You may think everyone sold this afternoon on the Fed comments, but if you were watching the tape closely we began the heavy selling 27 minutes before that pasty face took the podium.  Did he speak from a podium?  I don’t actually have cable.

Anyhow, the real reason for selling, the pivotal moment which occurred at 11:47 and eleven seconds (timestamp), a mere 3 minutes before top tick in the daily Nasdaq session, was me buying June calls in the succubus, Angie’s List.  Everyone knows the game you play when you dabble in the dark arts of summoning the succubus.  All joking aside, I like the name, if only for a brief short squeeze into the greatest month of the year.

We printed a neutral day in the Nasdaq today and these tend to occur near inflection points.  The play is to grit your teeth and buy the second range extension on the day, which was the new low of the day this afternoon.  However, as is usually the case with market profile probabilities, one cannot simply place a buy order below the low of the day and pray, because the risk is insane.  Instead you need something to lean on.  You can also use the 1,2,3 reversal to keep yourself patient.  Here’s the neutral print, followed by the 1,2,3, reversal:

 

Bottom line: these neutral prints are a big piece of context.  We are trading in the mission critical danger zone, the upper cusp of balance.  Fast attempts to thrust the knife into your gut will be made.  Smaller position sizes are warranted until a clean trend emerges.  A short or two may not be a bad idea.

Stay dry out there folks. See you tomorrow.

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Lately I have been studying the /NQ or Nasdaq electronic futures because I am building systems to trade it and find the auction activity to be more active and also more relevant to my tech-heavy holdings.  However it can be informative to look at other markets and see how they are behaving.  I have made a few observations about the /ES on the following market profile chart:

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Nasdaq futures are trading a touch higher overnight in a mostly balanced session.  The key feature that stands out from the 24-hour profile (which includes our globex session) is the ledge that formed at 3607.25.  Markets have a tendency to spill over, or “flush through” these ledges.  The context of a ledge is interesting because we can glean insight from it.  If the market is instead unable to press below the ledge, then the profile piece is indicative of a strong bid in place.  I have highlighted this ledge below:

Taking our eyes to the intermediate term timeframe, we are at the top of our bracket range.  This zone is as challenging an environment as I know to trade within.  The forces of mean revision act like gravity on the tape and their powers are stronger until we exceed balance and begin exploring elsewhere.  This is week 7 inside this bracket range which is fairly old in market years.  The potential does exist to breach and explore higher, however you should be looking closely for signs of weakening propulsion.  There’s no need to get fancy in this regard, keep your eyes on 3600.  There is a very low volume node at 3599.75 which separates us from the main pull of mean revision.  See below:

Short term, we are buyer controlled with yesterday’s profile finishing out with a strong distribution atop a thin zipper.  This looks like an exaggerated short squeeze profile which often takes on a P-shape.  It suggests the progress made in the morning was sufficient for the day and did not entice enough new buyers to continue the trend.  That makes sense, given we have an entire week left.  Upside targets are the 05/13 high at 3624.25, then the naked VPOC from 04/03 at 3631.75.  Caution below the profile ledge at 3607.25:

 

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