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Tag Archives: $NQ_F

Up Gap To Wrap The Week Up

Nasdaq futures pushed higher overnight and achieved a news swing high in the globex hours.  The thrust occurred right around 3:30am and does not align with any economic release, thus it is the result of either a news development or simply more buyers than sellers.  As we approach US cash open, prices are off the highs of the session.

Personal Consumption statistics came out at 8:30am in line with forecasts which initially has brought little activity into the market where we are holding onto the overnight gains.  We have Chicago Purchasing Manager at 9:45am and U of Michigan Confidence numbers at 9:55am.

Yesterday’s auction was effective and methodical.  You will often see the Nasdaq futures operating in this manner.  It will go about the day resolving unsettled items one after another.  The gap higher on Monday did not quite resolve on Monday when prices stopped a tick above the full gap fill.  Yesterday we filled the gap before finding a responsive buyer who returned us back into the upper balance formed this week.  They closed the weekly gap, then they closed the range gap between Wed/Thurs, then they targeted a full overnight gap fill, stopping just one tick shy of this achievement.  It was a very methodical process.

I have highlighted the key LVNs as well as a measured move target which is a point shy of where we printed our overnight high:


I have also noted the short term levels I will be observing on the following market profile:


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Back in The Thick of The Auction

There is only so much analysis one can do when the price of an instrument is climbing to fresh highs.  Mostly I rely on measured move targets to the upside and highlighting support levels.  This is important, but I much prefer the confines of territory we have already auctioned.

I have these expectations sometimes, based upon analysis, where I expect something like lower prices.  Yesterday I was expecting some follow through on the morning weakness in the Nasdaq.  The challenge with expectations, especially those built upon market profile logic, is the timing.  The old axiom says the market can stay irrational longer than you can stay solvent.  The duration of “longer than you can stay solvent” is drastically shortened when you add a big leverage element to your trading.

GPD numbers came in better than expected and jobless claims worse than expected.  The initial reaction to this cocktail of economic numbers is buying across the equity index complex.  Overall however, it appears we will be gapping lower on the open, an event we have not seen in the Nasdaq since 08/12.

I have highlighted the key composite price levels on the following chart.  I will be watching how we behave at these low volume nodes for clues about the ledge of overhead supply and looking for signs of dip buyers creating demand below:


I have noted the short term price levels I will be keying off of on the following market profile chart:


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Gap Fill Complete

If you have been following along, then you have been aware of this big picture technical piece dating back to the year 2000.  “The 14 year gap” has been a feature of the premarket analysis since it came into range.  I am both satisfied and a bit sentimental that the gap has been filled and is now gone.  See below:


Such is life and markets, change is inevitable and we must now be aware that the resistance free environment is complete.  How we handle this gap range will still be of interest going forward—whether buyers can sustain trade above the midpoint, whether we use the strong thrust to overshoot, or whether sellers reject us back below.  The simple trade was to press longs through the gap which saw little if any media coverage.  Simple, but not easy.

Nasdaq futures are down just a bit overnight and we have no major economic data out for the week.  There are Gasoline and Crude Oil numbers coming out at 10:30am to be aware of and also 2Q GDP tomorrow before market open.

Intermediate term continues to demonstrate buyer control and I have updated the LVNs to observe below:


Short term, taking our eyes inside the daily bars and observing the market profile, we can see value overlapping the prior day.  This is an early indication that prices are coming into balance.  The key question in whether we are pausing or if the market is done finding sellers.  Monday was a neutral day and yesterday we traded inside the range and value tightened.  This compression may preclude a swing high, however I will be observing the following levels and withholding any judgment until more information is made available:


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Neutral Footprint

Nasdaq futures are up a touch premarket in a quiet session of trade.  Durable Goods fell off a bit according to this morning’s release where numbers came in a bit softer than expected.  The initial reaction is a bit of sell flow.  We have consumer confidence information coming out shortly after the open at 10:00am.

After gapping higher to start the week, we printed a tight open auction, explored higher out of the tight initial balance and then went neutral on the session.  Price stopped just one tick shy of a full gap fill before turning higher and rejecting out of Friday’s range.  The afternoon snap back was not strong enough to press prices back to the VPOC in the upper distribution.  Instead we saw a VPOC shift lower to end the session.

Taking a zoomed out look at the intermediate term time frame we can see just how ruthless the upside progress has been.  Prices have been gapping and legging higher since taking out prior swing highs.  The resulting volume composite resembles a series of peaks and valleys as the market explores higher to discover a fair value.  I have noted the key low volume nodes on the following chart as well:


I have noted the key price levels I will be observing in this morning’s trade below:

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Gapping into The Week

Nasdaq futures are set to gap higher to start the week after a delayed start to the globex session.  Chicago Mercantile Exchange futures, of which the E-Mini Nasdaq is, usually open for trade at 6pm eastern on Sunday.  Yesterday the globex market did not open for trade until 10pm.

Just a bit after the open we have Markit reporting Composite and Services PMI.  We also have New Home sales at 10am and Dallas Fed Manufacturing Activtiy at 10:30.  Looking at the week ahead, we have Durable Goods Orders Tomorrow morning premarket as well has the House Price Index.  Consumer Confidence Tuesday at 10am as well.  Perhaps the biggest economic event of the week occurs Thursday when we have GDP numbers out for the USA.

On a big picture chart like the weekly composite chart below, we can see that we are currently participating in a price zone with very limited price history.  Back in the year 2000, we started the second quarter with a big gap down.  Before it could receive any resolution the dot com bubble burst.  Thus a price gap remained open for the last 14 years.  Now that we have finally reentered the gap, it only took one week to capture the “half gap” or midpoint of the open void.  This week I will be monitoring the progress of the auction and whether we are likely to fill the entire gap or stall out.  Either way, be aware of this big picture environment and how it could result in some accelerated moves:


The intermediate time frame is buyer controlled.  After gapping higher outside of prior day range for five sessions in a row, the auction began to slow a bit Wednesday-Friday.  The slowing tape allow a semblance of balance to begin to form.  On Friday we attempted an early move from balance which at first found some responsive selling.  Later in the session however we negated that selling and ended the session near the highs.  Thus, although we saw the early signs of balance beginning on the intermediate time frame, it still has a bullish skew.  See below:


On a short term time frame we can also see the buyers in control.  Value continues to migrate higher, not just price.  This can be seen most clearly via the value area range relative to prior sessions.  I have highlighted the key levels I will be observing early in the session using the following market profile chart:


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Sunday Morning Stat Crunch

During the week long Market Profile webinar I hosted for the After Hours with Option Addict crew, I defined and discussed initial balance (IB) quite extensively.  This simple concept of noting the price range printed during the first hour of trade can be a huge help in determining market conditions early in the day.  The same can be said for the opening swing, only the opening swing interprets market activity even sooner, sometimes being established in less than 5 minutes.

One of the primary reasons for tracking the initial balance is its use in determining what sort of “day type” is occurring.  Another primary reason, the reason which is more actionable intraday, is that we rarely see a full day of trade without breaking either IB price extreme.  Therefore, if we manage to enter a trade inside of initial balance which is working in our favor, we can press that day trade and ride that winner a bit further.  Traders always emphasize the importance of letting your winners run because those few extra ticks you gain from a well managed trade can make a huge difference to your overall expectancy.

Nothing builds confidence in an idea like statistics and probabilities.  Therefore as an addendum to the weekly course, I have built out the relevant IB statistics for my product, the Nasdaq E-mini future contract.  I used five years of pure IQ Feed data to compile the following stats.  Some highlights:

  • We break initial balance 94.75% of the time
    • By 11:30 – 73.03% of the time
    • By 12:00 – 81.13% of the time
  • Normal IB range (69.87% frequency) is 11 – 24 points
  • Normal IB volume (66% frequency) is 40k – 75k contracts

And without further adieu, I present the data (looks familiar, yes?) in its entirety below.  Enjoy:





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Bull Push on Pause Ahead of Fed’s Yellen

Nasdaq futures are basically flat after an odd overnight session.  There were no economic releases overnight but right about 2am we saw a big push by the sellers.  UPDATE: The overnight push is being attributed to 17 Russian trucks crossing the Ukrainian border without authorization.  The move has since been faded back up and in its wake we have an interesting overnight profile to aid our early context.  Have a look:


Today’s price action could produce a large range as we have the risk associated with hearing from Janet Yellen, head of the Federal Reserve.  The market has demonstrated a consistent proclivity to move abruptly during such talks which is why it is reasonable to carry such expectations into today’s trade.  She will be speaking at 10am and just to keep you sharp into the afternoon, we also have Mario Draghi speaking at 2:30pm from the same venue.  These two central planners carry words which are paramount to market participants.  Keep this context in mind as you make decisions today.

You can see the market starting to pause this week ever since Tuesday afternoon’s rally.  Since then we have churned sideways essentially, with a slight upward drift.  The resulting footprint is balance with a blunt upper taper on balance which may suggest a bit of upside is needed to settle this imbalance.   Not much, however, just a bit.  We are likely to see new development not too long after 10am.  However, I will be keeping an eye on how we treat this micro composite of balance early on.  I have also noted about 50 points worth of support levels to the downside.  Should we “bunker bust” through these, some caution is merited:


On the Market Profile chart we most clearly see the structure of the auction, which reveals a hint of buyer control yesterday.  There was a buying tail and a poor high which suggests a bit more upside could occur.  Pair this with the overnight high exceeding yesterday’s high and you have the likelihood, even if it does not stick, to see higher prices today.  The key will be how we develop IF we trade new highs—are they rejected sharply or do we accept the prices via sustained trade?  If we do, then we could see much higher price given the gap zone we are trading inside of dating back to the year 2000.  I have highlighted the market profile levels I will be observing below:


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New High Hint

Nasdaq futures are up just a bit as we approach the open of US trade.  We are current priced to open inside of yesterday’s value

The economic calendar is picking up steam as we head into the final days of the week.  Premarket we saw jobless claims come in a bit better than expected and the news encouraged sellers a bit.  We have manufacturing PMI coming out at 9:45am followed by Existing Home Sales and Philadelphia Fed at 10am.  However, participants are particularly concerned with the tone of Fed’s Yellen talk set for 10am Friday.

The intermediate term continued being under the control of buyers yesterday where we saw sluggish upside action but continued upside action nonetheless.  We saw our first signs of some real seller interest yesterday after hearing minutes from the FOMC.  The Fed minutes were greeted with a 10 point rotation down, the largest selling rotation of the week.  The question however, especially if you intentions are to initiate a short sale, is are we done finding sellers?  I have noted the key price zones I would expect sellers to begin recapturing if we indeed have finished this intermediate term leg higher:


The daily market profile suggested a bit of indecision on the day after wrapping up as a neutral print.  Neutral prints tend to occur at or near inflection points.  This was a very sluggish neutral print and it left one slight hint that we may not be done going higher.  Before the session was wrapped up we printed a poor high.  Overnight prices came up and poked the level again.  I have highlighted this observation, as well as other key price levels I will be observing on the following market profile chart:


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Almost a Half Gap

Nasdaq futures are up just a point or so, essentially unchanged, as we approach the US cash open.  Today The Fed will release minutes from the July 29-30 FOMC meeting at 2pm.  The expectations are low, with traders looking for more details on the specifics of the exit strategy.  The overall consensus is for full details to be released at the September meeting.  Since we have testimony from Janet Yellen coming up Friday from Jackson Hole, any market reaction today is likely to be muted.  Keep in mind this meeting we are receiving minutes from today took place prior to the recent uptick in geopolitical tensions.

The Nasdaq Composite, not the front month futures contract but the actual index, has pushed well into the monthly gap left behind at the start of the dot com crash.  This context could be one of the factors leading to this low volume drift higher.  If you think about how price behaves in a volume void or pocket, we tend to see this type of slow grind up through it.  As we progress, I will be watching this index closely to see if we are destined to traverse the entire region or instead perhaps only half for now.  I have noted the gap and its midpoint on the following weekly chart:


The intermediate term timeframe is bullish.  We are seeing a series of higher highs and lows print since exiting a tight price compression on 08/11.  The move has featured five overnight gaps in a row which exceeded the prior day range.  As a result, our composite profile has some very pronounced peaks and valleys.  When we eventually find sellers, the question will be how much ground are they able to cover?  We can gauge the timeframe of the seller and their conviction by how many of these price levels highlighted below are recaptured by the selling.  I left the measured move targets on the chart for one last look (127.2% and 117.2% Fibonacci extensions) but since we have actual price action in place now I will delete them.  I have also noted the current midpoint of this move just to give some perspective to the progress made:


Taking our eyes even closer to the action, we can see the short term trend is higher.  Not just price but also value continued to migrate higher yesterday.  In its wake we left a poor low which may be vulnerable today.  I have noted this price as well as other areas I will be observing today on the following market profile chart:


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Into The Gap

Index futures are trading up a bit premarket, CPI data just came out in line with expectations and brought in a bit of selling, however we still have almost an hour before the market opens.  Traders may have their eyes set on Wednesday, the day we are scheduled to hear from the primary market movers—the USA Federal Reserve.  They will be releasing the minutes from their July meeting at 2pm on Tuesday.  Before we open for trade Wednesday we will be receiving the Fed minutes from the Bank of England.  With earnings season winding down, these type of economic events will be what prompts movement in the markets.

The intermediate term volume profile has taken the shape of peaks and valleys one might expect when price discovery is underway, and that certainly appears to be the case.  The market is searching for sellers as the auction rolls upward.  The pace began to slow yesterday afternoon, however we did not find a selling response significant enough to be begin the process of balancing this timeframe.  Instead we are buyer controlled.  Price stalled at my first measured move target, however these prices are by no means science, they are merely Fibonacci extensions of our prior swing dated from 07/24 -to- 08/07.  It does tell me yesterday was a stop run because essentially this price level is where intermediate term short sellers might put their stop loss orders in.  If we exceed the second Fib level at 4030.50, and see acceptance, this market can go much, much, higher.  I have noted these levels and other intermediate term prices below:


Supporting the idea of a heady rally is the very long term perspective seen on the weekly Nasdaq Composite where price breached the 14-year-old gap I have been discussing.  The Nasdaq Composite is just an index, thus we do not have volume profile to observe, but the gap suggests similar behavior may occur.  This gap has over a 60 point range to the upside, see below:


Here’s the snapshot I posted last week if you want to reference the gap:


Yesterday we printed a P-shaped market profile which suggests a temporary phenomenon known as a “short squeeze” occurred.  When this formation occurs after a two or three day snapback rally inside an intermediate term downtrend it can often mark the end of the rally, a final squeeze before returning to the bigger trend.  However, in this case, where we are making new contract highs to start the week AND where we gapped higher, it does not carry the same implications.  It does tell us a squeeze occurred early in the session.  It does tell us fresh risk was initiated by buyers during the day, and it does tell us sellers did not enter the market in a meaningful way.  I have highlighted the prices levels I will be monitoring, as well as a few other observations below:


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