Nasdaq futures are higher to start the week after a weak close on Friday. The market found a bid at an interesting level, 4180.25, just a few ticks above the midpoint/LVN of the volume pocket we entered during Friday’s close. The range is just beyond 1^st sigma suggesting an elevated risk environment and volume is running high 1^st sigma as well.

Just before the open the Industrial/Manufacturing Production data is coming out and shortly after the open at 10am the NAHB Hosing Market Index. More housing data is due out later in the week but the highest impact news comes Wednesday when both the Bank of England and the US Federal Reserve will be releasing minutes, employment, economic projections, and rate decisions.

Last Friday, after printing an abnormally wide initial balance (52.5 points) during the first hour of trade, prices spent most of the session churning inside the wide range. Then, in the final hour and fifteen minutes the market sold off sharply. The move carried into last night’s globex for a short bit before reversing higher.

Prices of crude oil are still drawing the attention of macro players and a rally overnight in the commodity is being at least partially attributed to the strength in equity indices.

Early on I am looking for sellers to press into the overnight inventory. Whether those sellers are able to take prices below 4200 will be telling early on. Initially I will be looking for signs of buyers at these levels who work higher toward overnight high 4227 and ultimately target Friday’s VPOC at 4231.

Secondary hypothesis is for sellers to accelerate below 4200 and target overnight low 4180.25 which opens us to the idea of continuing to explore lower prices especially below 4179.

Third hypo is a strong buying move to test the weak high up at 4251.25.

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

Knowing when to roll forward into the next quarter’s future contract is a vital piece to trading. Yesterday was no exception. If you were observing the December Nasdaq contract than you did not see the failed auction that occurred at noon ET. We traded two-ticks above Wednesday’s high and immediately failed back lower followed by a big swoosh down.

These little contextual pieces are the details that add up when you are trading.

Moving into today we have futures trading lower. The Nasdaq after hours continued lower for most of the session. On a day-by-day seasonality study of the last 30 years, today has the second lowest odds of being a positive gain session. Ranging 44.25 points, the session is normal statistically, with the 1^st sigma range of a down day being about 46 points. Volume is a bit higher than first sigma as it appears most participants have now migrated to the March contract.

Yesterday had many characteristics of a trend day early on but we saw that negated. That force of supply is likely to carry into today’s session. At 9:55am U of M will be releasing their survey and we have an otherwise quiet economic docket.

I am still sorting some issues out on my charting, but my primary expectation is for price to trade lower to test the overnight low 4189.25 before finding responsive buyers and balanced, two-way trade ensues.

News flow starts to accelerate a bit today. At 10:30am the weekly energy statistics (oil and gas inventory) will be released. At 2pm there is a monthly budget statement from the Department of the Treasury. Than ahead of the open tomorrow there is a Swiss rate decision, ECB Monthly Report, and US Advanced Retail Sales for November.

Also note that tomorrow futures trades will roll forward to the March 2015 contract. This can cause some wacky delta readings and offset order flow as positions are moved to the new front month contract.

Turning our attention to the market, Nasdaq prices are a bit lower from where they left off Tuesday afternoon and have traded in a balanced range for most of the session. Range and volume are normal and the low of the session looks a bit weaker than the high.

If you recall on Monday we discussed how once price entered the below pocket we were likely to test through to the other side down to 4242. Yesterday prices went gap down below this level and found responsive buyers. What followed was a stronger-than-expected neutral extreme day type which recovered the entire gap (recapturing the volume pocket) and more.

It was an interesting profile print because it spent nearly 2 hours building value down near 4242 before accelerating into the pocket/gap zone. This left the VPOC of the session down at 4239.25 almost 50 points away from current prices.

My primary expectation for today is to see a constructive inside day with buyers defending the upper half of yesterday’s range. Typically the day after a neutral extreme or trend day I look for continuation or exceeding the prior day high but the curious nature of yesterday’s print has tempered my expectation a bit.

I have highlighted the key levels I will be observing on the following volume profile chart:

A mix of concerns over China loans and Fed rate concerns are being cited as ‘the why’ behind this morning’s sharp selling of index markets. As we head into US trade there is little on the economic calendar.

Aiding in the movement was the volume pocket formation we fell into yesterday. When prices entered this thin region yesterday I noted that we were likely to test through to the other side, down to 4242 with perhaps a few pivot points along the way represented as low volume nodes. Sellers are not wasting much time it seems.

The definitive break of balance yesterday put the market into intermediate-term discovery mode down. Sellers took control of this timeframe. They continued to press their control overnight and we are now trading on the other edge of the volume pocket.

The market is now exploring lower in an attempt to find buyers. After overshooting the 4242 HVN my expectation is to test through down to 4227.75. This is ‘pro gap’ territory, meaning, fading the move is requires very deep pockets and the gap has a low probability of filling during today’s session.

The risk of an opening drive is also elevated given how out of balance we are.

In summary, I am expecting other time frame participants to be active in this out of balance market with a low likelihood of filling the gap. I have noted the price levels I will be observing on the following volume profile chart:

Macro currents have put a damper of the price of the Nadaq as we head into the week. The most notable event was a warning out of Europe regarding their economic prospects. For full details from Reuters, you can click here.

In regards to seasonality trends in December, the second week of the month is its weakest. However the month is overall a bull one seasonality-wise. Therefore it makes sense to look for strong charts which pull-back and consolidate as opportunities into year-end.

The overnight profile on the Nasdaq formed a slide zone which can be seen as a series of single prints. This piece of context might result in a fast trade upward at some point today. It also has been lingering down on session lows leading me to expect a retest of the low early on.

The structures forming on the 24-hour profiles [which encompass both regular trading hours and globex after hours] show two ‘pinch points’ or low volume nodes which seem to define the current short-term balance structure. Please see the below chart for key short-term context:

Keep these levels in mind as we progress through the week. A breach of 4292 opens the path to a slide through the Nasdaq volume pocket which spans down to 4242. There are several low volume node reference points between those two levels, however the major traverse would be all the way down to 4242. I have noted this pocket and the relevant potential turning point LVNs on the following volume profile chart:

The market is experiencing little reaction to the 8:30am data which featured a significantly stronger-than-expected NFP number and an inline unemployment rate. Just before the news was released there were short headlines out of Europe concerning a one trillion dollar bond buying program in the multi-country zone. The news sent the thinly traded Euro dollar reeling lower. The busy morning on the net however has produced a normal overnight range on normal volume as we head into Friday’s trade.

There has been a buyer in the Nasdaq defending around 4310 for the last 26 hours. What I am interested most is the low volume node formed just below this level, right at 4307.50

Since the sharp move lower on Monday prices has drifted higher on the index, and part of yesterday’s neutral print was a sharp excess high. The first reaction to the NFP data was a sell that took us right to the low of the globex session but did not breach it.

This structure leaded me to hypothesize we see sellers at the open who push into the overnight inventory and take out the overnight low 4310.75 to test the 4307.50. I will look for signs of responsive buyers at that level otherwise the MCVPOC at 4298 becomes an area of attraction for sellers to target. Below there the structure starts to get loose, especially below 4286.75.

If buyers defend the LVN at 4307.50 then I am looking for a run toward prior swing high formed last Friday.

I have noted the price levels mentioned above on the following volume profile chart:

Nasdaq futures are on the move as we head into US trade as speculators digest the ongoing ECB commentary from Mario Draghi. Third reaction analysis of the news driven move showed sellers as the most active participant, however it will be interesting to see how we auction once the markets open for trade.

Shanghi composite surged over 4% overnight on fresh speculation of stimulus. During the Draghi comments we are seeing some big swings in the Euro and the DAX. The DAX covered 250 points of range on this move, first up nearly 100 then sharply reversing.   So overall these are very volatile market conditions as we head into the open.

Yesterday the Nasadq came down and touched the micro composite VPOC at 4290 and saw a sharp reaction higher. The action that followed managed to push the VPOC a bit higher to 4298 after price churned in this region for much of the session before ultimately moving higher.

Prices are set to open inside of yesterday’s range at the open, however prices are on the move as the markets continue to adjust in these volatile conditions.

I have noted the key price levels I will be observing on the following volume profile chart:

We started the month of December with an ‘event’ of sorts. The first half-hour of trade, also known as the initial balance, was spread far and wide (61.25 points) by an aggressive other time frame participant who predominantly sold the market. We must also give some credit to the buyers who pushed up 7.75 points before the move, the move largely driven by a fast sell in AAPL shares.

In case you are very new to the Nasdaq, Apple Inc. is the largest component of the Nasdaq 100, the underlying index of /NQ_F futures.

However, none of this activity was news driven, which makes it unique. We treat motivated, news driven moves a bit differently from big, participant driven moves.

Participant driven moves must be monitored for continuation. Does the responsive seller become initiative? Is the other-time-frame (OTF) still engaging the market? So far no, and maybe.

We have traded inside this initial balance since it occurred. And as far as I am concerned, we can shelf the volume profile I normally share which features very granular levels only useful to me and other day traders, and instead put your eyes, the swing traders eyes, on just a few key points.

Listen, we have Fed Beige Book coming out at 2pm today and it is usually not a high impact event. But before then ISM Non-Manufacturing Index is set for release. This number surveys all sorts of odd industries like services, construction, mining, agriculture, forestry, and fishing and hunting. It may be of interest during the great commodity liquidation of 4^th quarter 2014. Keep an eye on the price action around 10am eastern.

In the meantime, amid all that noise, keep these context levels close to your itchy trigger finger during today’s session:

The start of a new month tends to carry volume with it and yesterday was no exception. Prices traded lower fast to start the cash session in the Nasdaq after opening right at Friday’s low. The initial drive down behaved much like news had caused a swift other timeframe entry, however it was largely due to a sharp sell in shares of Apple, the largest company in the world.

The market spent the rest of the session confined within the 61.5 point range developed during the first hour of trade and overall led to a weak climate for individual stocks. The heavy churn managed to shift the VPOC of the current micro composite up from 4242 which was a subtle contextual development. Whenever I see a VPOC shift it tells me two things—value has migrated and it’s time to closely observe who it motivates to act most aggressively on the market (buyers or sellers).

The Nasdaq is still trading above an air pocket which separates us from the mutli-day balance formed from 11/13-11/20 unlike the S&P which is already down in its pocket. Buyers need to sustain prices above 4268 to hold off the process of exploring and negotiating the pocket open just below current prices on the Nasadq.

The overnight action was up and contained within the balance formed yesterday. Buyers were most active thus my expectation is for the open to feature a push lower to test the overnight inventory. Sellers will look to target the MCVPOC at 4290. If buyers are not found in this region then I expect us to continue lower to test the overnight low 4283.50 then Monday’s low 4273.50.

Swing traders will be eager to see if the speed in the marketplace continues which may lead them to raise cash of even seek out short positions.

I have highlighted the important levels I will be trading from on the following volume profile chart:

Despite the volatility in the commodity futures markets, the action in the Nasdaq has mostly ‘normal’. I use the term normal loosely to define the amount of volume transacted and the overall range of the session which both fall well within the 1^st standard deviation of a data set dating back to January 2012.

Also, the profile print suggests balance. You can see the action formed a well-distributed bell curve:

Keep in mind we have ISM manufacturing stats at 10am today then an otherwise quiet economic calendar until Wednesday.

Looking at the higher timeframe as we start the week, we can see the first real sign of excess show up on the Nasdaq since the doji on 11/25/2014. As we enter a new month of trade with the potential for new cash flows, it will be interesting to see how this candle is treated to start the week. I have noted very little else on this daily chart, just the major air pockets below current prices:

Below I have note the key price levels I will be observing today. Note how prices overnight exceeded the lows of Thanksgiving day. The market appears to want to properly auction these prices. If we decidedly break below 4309.75 then it likely opens us up to continued tests lower. Otherwise, I expect chop and balance. Please see below: