For a good portion of the week, market participants slugged it out at the 3390 price level in NASDAQ futures.  We kept printing low volume nodes at the level which is indicative of fast market action.  Indeed we saw several swings away from the level good for 5-10 points at a time,

Then yesterday came, and this is something you will see often in market profile work, the market spent hours at 3390 and built a ton of volume.  So much volume in fact, 3390 became the volume point of control on yesterday’s profile.

After building the base, the market began migrating higher and held the progress overnight.  The sellers were in charge Monday through Wednesday but now buyers are attempting to dictate direction.

I will be watching 3413.25 above to measure buyers’ progress and 3395, 3390, and 3385 to track their defense.

The 24 hour profile suggests we may see some back-and-fill action occurring and we are set to open in a slippery zone so we may see some chop.  If instead we see an aggressive drive above or below the aforementioned levels, be cautious for trending action.

The indices caught a bid on the dip overnight and have us set to gap higher this morning.  The buyers may need a head start if they are to claim a victory on the day.  Thus far this week, the sellers have held solid control and are doing a confident job dictating market direction.

The sellers could even be seen shorting into weakness yesterday, an action that in recent history would result in vicious squeeze and capitulation type action.

I am still keying off of 3390 on the upside and 3360 below on the NASDAQ futures.  We breached this low print yesterday during RTH, it became our overnight low, and it market the level where we launched higher last Tuesday.  If buyers cannot sustain trade above this level it would suggest the sentiment that propelled the market to recent highs has changed, and is no longer impactful.

Do not have any graphics to present this morning.  Watch for sellers to enter at some point this morning to close the overnight gap.  If they no show, something may be afoot or they are waiting to see the auction behavior before stepping back in.  Rest assured they have gained a bit of confidence this week which in a big part is due to their solid defense at 3390.

Price in the NASDAQ futures is nearing the zone where we saw the large breakout last week.  Last Wednesday, just before ramping higher, the market printed a well-defined low volume cave surrounding 3360.  To my eye, if the market accepts price below this level (spends an hour or more below and builds volume-at-price) then the sentiment introduced to the market last week is gone, and we should adjust accordingly.

Keep in mind however, that a mere breach of this level is not your tell.  Instead price needs to sustain below for a reasonable duration.  A VPOC establishment below the reference point would support the case for lower prices even further.

Up above we have a wonderful confluence of low volume and value area high at 3390.  This is the sellers’ stronghold, a level they defended well yesterday after thrusting us lower.  Trade above these levels would represent a bull victory as the market attempts to regain balance.

Overnight we were fairly balanced with a bit of sell flow which was faded this morning.  In determining whether the bulls can sustain control of this aged trend, I want to see the velocity of the market slow.  If we can consolidate sideways a bit slower then yesterday’s violent indecision, then that slowing of the market in and of itself would be constructive.

I have highlighted the above price levels, as well as drawn out a few normal scenarios on the following market profile charts.  Remember, normal does not always mean right, and a different type of day development would be another clue:

The index markets continued lower overnight, extending the move made yesterday afternoon.  The question now is whether the news driven selling from yesterday has created more overhead supply then can be handled.  This would result in value migrating lower and washing out last week’s progress.

Should a short-covering type rally occur today, I would expect it to run up to about 3394 on the NASDAQ futures.  If the action is able to sustain trade above 3394, the expectation is for buyers to target 3405 where I suspect we will see the effects of overhead supply from the Friday-to-Monday action.

Price is slippery below due to the thin profile structure we are working inside of.  It would not surprise me to see trade back down to last Wednesday morning’s trade, before the surge in prices.  Should this occur, I will be using the low volume node at 3360 as support to lean on.  Should we see price accepted below this level it would suggest a major sentiment shift away from all of last week’s action.

Our early clue to whether bulls can reassert intermediate term trend force will be the overnight low volume node at 3383.75.  Sellers hold the short term and overnight trend control.  Stay tuned to the midday report for insight into day control.

I have highlighted these levels, as well as a few scenarios on the following market profile charts:

Overnight was fairly quiet in the Composite futures where the main feature was a rotation higher in the early hours, around 4 am.  The pulse higher was effective in erasing a slow and balanced drift lower, but it also put the market into overbought territory on the very short term.  Early on, perhaps even premarket, my expectation is for sellers to work price lower a bit before we see an attempt at another rotation higher.

I have envisioned two scenarios for today, both which expect value to be built upon our existing and fragmented profile structure.  Should we press beyond these envisioned profiles and accept price beyond their range that would be an early cue this week that sentiment has shifted.

You can see my vision along with levels to monitor on the following market profile charts:

http://youtu.be/XXW84v_m50Y

The overnight markets caught a rotation higher and are currently showing balanced trade.  I have highlighted what I consider likely scenarios for today’s session in the NASDAQ on the right-hand market profile chart below.

I use the 24 hour profile to envision trade and get an idea of the overall structure of the markets.  With electronic trading occurring nearly 24 hours per day, it makes sense to capture this data and give it weight.

On the left-hand chart I highlight key price levels and zones where an event occurred during regular trading hours.  These events are caused by other time frame (OTF)  traders who enter the market.  The other time frame is not operating on a day-trade time frame, but instead a longer term.  Should their actions be negated by an opposing other time frame, it would suggest sentiment has shifted.

I have primarily highlighted the work accomplished by OTF buyers on today’s market profile and will monitor these levels/zones throughout the session to determine how the market is feeling into the weekend.