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Tag Archives: $NDX

Active Overnight Session and How It Fits inside The Big Picture

Futures traders had some action early this morning when equity futures abruptly fell out of balance and knifed lower.  The wave of selling rolled in around 5am and it was soon met with responsive buying.  The overnight profile shows no clean consensus on value and we are currently trading near unchanged in the NASDAQ.

I will always buy the first test of my EMA if I feel the chart is still trending and the EMA resides at a higher low then our previous swing high (or lower high then our previous swing low).  However, the buying is typically the easy part of this trade.  Knowing whether the trend will resume or whether price will roll tide back is the management key.  The very long term auction as seen on the weekly composite chart is still buyer controlled.  We were buyers ahead of the 33 EMA which has now edged higher to touch the low print.  Did you know moving averages move?  See below:


The daily chart which I most commonly refer to as the long term auction is no longer a clear picture of buyer control.  Our EMAs are not in full alignment and our longest term EMA, the 99, is flat.  We have also seen a pattern of lower highs and lows recently and it appears the long term timeframe is in balance.  Now buyers and sellers must slug it out before one or the other becomes the clear controller of the long term auction.  However, buyers have a slight control edge remaining (see blue circles on major swing levels).  See below:


The intermediate timeframe is seller controlled.  Their control can be seen as a series of lower highs and lows.  Yesterday’s action was dynamic and powerful to the upside, but until we see a higher low printed, the sellers have the ability to assert control on this timeframe.  I have removed all the lines I normally keep on this chart so we can more clearly view the seller control.  There are some very interesting low volume nodes if you click and enlarge the chart, and these make great entry points because they often see “hot plate” type reactions:


The short term auction is buyer controlled.  This can be seen as a migration of value higher as well as strong responsive buying tails on the recent profiles.  We are trading inside the price zone I highlighted yesterday as a low volume slip zone.  This zone is so important.  If buyers can finish trading up through it, and then gain acceptance via value up above 3602.25, this would translate well into gaining control of the intermediate term at best, putting the intermediate term auction into balance at the least.  I have highlighted this interesting zone on the following market profile chart as well as a few other observations:


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Cut Through The FOMC Noise With Two NASDAQ Price Zones

If you do not have time to read the entire context report, skip to the last paragraph/chart for the Two NASDAQ price zones you need to navigate the FOMC reaction-to-the-reaction-to-the-reaction.

Buyers showed up overnight and as the USA warms up we have a slightly green NASDAQ market.  One of the features of this multi-week selling has been mornings which start strong only to be faded and eventually wind up with price closing near the low of the session.  However, just when you think you have the markets number it will throw you a slider.

Let’s have a closer look at the long term auction and why I suspect a bounce is near.  Also, let’s look at what will begin to worry me and cause me to really tighten my book up.  See below:

Weekly Chart (long term auction):



DAILY CHART (long term auction):


Intermediate term we are still seller controlled but stretched.  This increases the likelihood of a big move in either direction, either a continuing to stretch the boundaries of the market to the downside or a snapback move.  With FOMC minutes out this afternoon, the likelihood is even greater.  You can see price has reverted back to my 33ema and paused.  The market is very likely waiting for FOMC minutes before deciding the next move.  More importantly to us is how the market reacts to the price reaction we see this afternoon.  This is not to say the first move is wrong or fake, but instead that long term participants are likely to be moved by the action and if they are we need to observe their order flow.  I have highlighted some key intermediate term levels on the following volume profile composite:


Finally the most delicious and powerful timeframe of all, THE SHORT TERM auction.  These profiles are set up more exciting then I have seen in a great while.  We have very low volume slippery zones on both sides of price right here, right now.  The short term is in balance with buyers trying to take the early initiative to break the balance.  On my market profile chart you will see a thick pink and a lovely chartreuse green line.  These two levels are the edges of where very low volume starts.  A breech of either (or both) is very likely to see an acceleration of price in that direction.  Which side of this environment we end up on will ultimately dictate the control on both the short and intermediate term.  In the meantime, it produces a massive trading opportunity to “go with” a move that penetrates either zone, intraday.  See below:


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Big Picture Shift

Index futures are flat to slightly down overnight as the market begins finding buyers and forming a balance.  As the USA warms up we are set to open inside of yesterday’s value.  This is a lower risk/reward opening position, however we are still in an overall riskier environment.

I continue to focus on my market profile which is a footprint of the short term auction.  The NASDAQ is coming into balance on a ledge.  If go back to the auction that occurred in early February last time we traded at these levels, then you can see a series of single print TPOs.  These signal two things: first there was very strong demand at these prices last time they traded.  Second, the thin volume is slippery and price can slide right down it.  Often times a legitimate volume pocket holds as support on the first test.  It is each subsequent test that weakens its defenses until finally a swift move zips right down it.  I have highlighted this level on my market profile chart.  It looks to be holding this time around:

A short covering rally starts to make sense with FOMC minutes out on Wednesday.  A short seller who has made a profit from this recent move down may seek to lock in some of that profit ahead of a Fed meeting because as traders we have been conditioned to expect market movement during these times.  The intermediate term is very stretched too, which means the snapback becomes more likely as time progresses.  Have a look at the zoomed out intermediate term.  Note we also cleared an open gap dating back to February 6th.  Remember, gaps always fill, but timing is key.  Can you imagine waiting through all of February and March for this gap fill?  You would be insolvent.


The long term auction is starting to look balanced.  It has been buyer controlled for a very long time and today is the first day I am changing my perception of the long term auction.  It is in balance.  My expectation now is for the long term auction to go range bound.  That means it is time to start trading futures again.

In summary, balance on the short term, seller controlled and stretched on the intermediate term, and the long term auction is coming into balance.  I am cautiously looking to build longs here for a snap-back higher as the long term auction settles into bracketed, balanced, range trade.

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Finding The Origin of Demand

Index futures are down overnight as the selling which quickly began mid-last week spilled into the globex session.  The entire move was quite exhausting as the USA comes online we are seeing some early buying interest.

My main focus today is on the short term auction.  Price has come down to a very interesting level on my market profile.  We are reaching a level where demand was once very high for equities.  I can tell this by the dynamic footprint which was left behind as a long and thin single print of TPOs.  As we come into it from above, the risk is slipping down the4 viscous slope where demand once existed.  The contrary move would be for us to not breach the upper reference point just before the slip zone.  I have highlighted where this slip zone begins and ends on the following market profile chart.  Should we not breach this level, I may be a buyer early on:


The intermediate term is seller controlled after briefly coming into balance.  The market was able to make a higher low, higher high briefly before the big liquidation snap Thursday and Friday.  For a moment we came into balance but when price travelled into overhead supply the market became overwhelmed with sell flow which was abundant compared to demand which was nearly non-existent for the two days.  Since then we have made a lower low putting sellers in control.  I suspect a revision trade will take hold at some point this week and return price to my EMAs.  I have highlighted a few key price levels on the following volume profile composite.  We are set to open nearest to 3511.25:


The long term auction is certainly in question.  One could perhaps make the case for buyer control based on the February low being below here.  I am not quite as clear on the long term.  I will call it buyer controlled with a 50% chance of balance taking hold.

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The Reaction to The Reaction

The NASDAQ futures drifted higher over night on low volume ahead of the jobs report at 8:30am.  The initial reaction to the jobs report was a move higher.  The report itself was mediocre-to-decent news thus an initial positive reaction is good, but not of the strongest conviction.  The strongest conviction would be a positive reaction to a bad employment report.  The strength was quickly faded by a strong bit of sell flow.  It looks like the opening may be interesting today.

The long term time auction is buyer controlled.  This can be seen as a series of higher highs and lows on the a daily chart of the NASDAQ composite.  If sellers can succeed over the next few days at printing a lower high verses March, we will likely see the long term auction transition into a balanced state.

The intermediate term auction is in balance.  Overhead supply came into effect yesterday morning and the resulting trading day was a press lower.  The action probed prices back to the midpoint of this intermediate term balance where my expectation was to find buying.  I will be watching the price action around 3632.75 for an early directional bias on the day.  I have highlighted this level and a few other observations on the following volume profile chart:


The short term auction is very indecisive but I would call it a semblance of balance.  Value is roaming somewhat aimlessly.  We have a strong developed profile overhead which price rejected away from yesterday and since then we have been inching back upward toward the reference zone.  I have highlighted this key upside profile as well as a few other observations on the following market profile chart:


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Coming into Overhead Supply

Yesterday was a strong day for the NASDAQ index, a day marked by aggressive other timeframe (long term) participation.  We really dial down in these morning context reports to wrap our mind around the context of the marketplace.  We focus on the NASDAQ because most of the high flying momentum stocks reside within it.  As important as the short term timeframes are to our daily decision process, we always have to keep sight of the big picture.  The long term auction is still buyer controlled.  This can be seen as a series of higher highs and lows on the daily COMPQ chart.  The long term buyer is now tasked with making a new swing high, otherwise the long term auction may come into balance.

The intermediate term timeframe is balanced.  The strong move yesterday was dynamic enough to push sellers out from their controlling position.  We are however nearing a price zone where I have some expectation of selling.  Price is pushing up into the bottom of our uppermost balance distribution which dates back to February 13th, a day when Ben Bernanke gave the market a final push before leaving his post.  As participants are made whole, we may see supply coming into the market.  I have highlighted some key price levels on the following volume profile composite:


The short term auction is buyer controlled.  This can be seen as value progressing higher over the prior few profiles.  It can also be seen as a lack of overlapping value areas which tells us the buying force is dynamic enough to keep value on the move.  However, our current profile which includes part of yesterday afternoon’s rally and all of the globex session presents a slight imbalance.  From this imbalance, I envision some downside early on.  I have highlighted this scenario, as well as a few other observations on the following market profile chart:


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Focusing on Early Price Action for “The Tell”

NASDAQ futures drifted higher overnight and as of this blog are set to open inside of yesterday’s balance and range.  Opening inside of prior day range presents a lower risk/reward environment.

The composite index gapped higher Monday morning and was mostly able to sustain the gains.  We did see heavy selling into the bell which carried over into the post market settlement period.  However, this selling was not able to achieve even a half gap fill.  As we progress through this week, we must keep this gap context in mind and how the market ultimately handles it.  Do we leave this gap behind?  Does it half fill then find buyers?  Or do we close the entire gap and then ignite selling momentum again?

Standing between us and the above gap fill scenario is a volume cave on the intermediate term.  The cave spans roughly from 3590 – 3565.  We entered the cave yesterday but sellers ran out of time.  With the overnight inventory long, I suspect we may see sellers present themselves after the opening swing and attempt to stimulate liquidation through the cave.  Whether or not they succeed will be interesting because they still retain control on the intermediate term timeframe.  I have highlighted the intermediate term volume cave on the following volume profile chart:


However, this is the first of the month, the first day of a four day period where buyers have a slight edge in the SPX.  Whether this strength finds its way into the NASDAQ is to be determined.  The short term auction is balanced.  We are trading inside of a large distribution formed yesterday with clear signs of responsive buying and selling.  The break from here will give us guidance into whether either party is able to gain control in the short term.  I have highlighted your key levels to monitor for short term control on the following market profile chart:

The long term auction is still buyer controlled, it is the beginning of the month and quarter, and we are priced to open inside balance and inside range.  This seems like a great day to fade early price level extremes (extensions from the opening swing) and go with and buy flow trend intraday.


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Month-End Roll Up

Index futures gapped higher Sunday evening and did little else for the remainder of the globex session as price chopped sideways and formed balance.  As we approach USA cash open, the NASDAQ is currently up about 0.50 percent.

The long term auction is still buyer controlled and we are near an area where I expect to see signs of buying.  Keep in mind however, this is only an expectation.  If instead I see heavy selling pressure throughout the week, then we may see buyer control on the long term come into question.

The intermediate term is seller controlled but showing an attempt to balance.  The selloff on Friday afternoon printed a neutral print which suggested slight indecision but an overall directional confidence from the sellers.  Now that price has reverted back to the mean overnight, it will be interesting to see if the NASDAQ futures can stabilize above Friday’s low and consolidate before moving elsewhere.  A consolidation would be a welcomed break for stock traders, perhaps even more so then a strong rally.  I have highlighted the intermediate term on the following volume profile chart:


Bear in mind today is month-end and statistically the first four days of the month favor longs which could skew the picture we see develop today and throughout the early week into a very interesting picture.

The short term auction is balanced.  After forming a large-balance distribution through Thursday’s trade, we printed a P-shaped short squeeze and a b-shaped liquidation profile.  We are now trading in the middle of these two profiles.  Let’s see which breaks and whether it sticks to see where the control is early on:



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Opening Swing: Third Edition

Opening Swing is an ongoing series where we review the opening swing for each day of trade in the NASDAQ futures and the effect these price levels demonstrate on the subsequent price action.  We also look at tradable opportunities and discuss the risks involved with these trades.

The opening swing is the price range established right after the market opens.  There are orders called Market On Open (MOO) orders which execute when the market opens.  The opening swing is not timed, but rather the push in either direction from these orders.

I began writing this series at a very interesting time in the market.  Many of the traders I respect and follow foreshadowed 2014 to be a year of increased volatility and as soon as it hit in mid January I began formulating thoughts and testing strategies to capitalize on the wider ranges volatility offers.  I chose to focus on the NASDAQ because it offers a wider range to trade then the S&P and also by monitoring the index I have an indication of the pressures existing on most of the stocks I trade.

Most of my notes this week are embedded in the images, so click through them to see some very interesting market activity in and around the opening swing.  There were some fantastic tradable opportunities this week.  As always, do not hesitate to discuss these strategies and share any inputs you may have.

For additional insight into the overall context from each day you can review my morning context reports.












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Nearing a Potential Inflection Point

We began seeing sellers abate yesterday after they gave the marketplace a solid push at the opening bell.  Their activity early in the day was dynamic enough to print a very wide initial balance, but as the day progressed we saw their control give way to balanced, two-way trade.  This type of market profile print is referred to as a Normal day although the name is misleading as these types of sessions are more an exception to the rules.  A normal day lacks any real directional conviction and often shows up near inflection points.  We can see the short term coming into balance on the following market profile chart:


The intermediate term auction is seller controlled however, which leads warrants caution until balance can be achieved at the least.  I covered my hedge early yesterday into what I deemed price becoming extended to the downside.  However markets can certainly continue to press their momentum both directions.  I have highlighted the key downside levels on the following volume profile chart:


The long term auction is still buyer controlled.  It is damaged.  The trend is not as clean cut as we have seen for many months, but the pattern of higher highs and higher lows is still in place.  And we are nearing one of my favorite reference points, see below:


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