Range is a touch above first sigma overnight on normal volume as we head into a fresh week. Friday the market opened to a pro gap down and the selling continued throughout most the session. By about 2:30pm however we formed a decent looking excess low and the auction showed early signs of changing direction.

Yesterday the Chinese announced a reduction to their reserve ratio. It led to choppy trade in Shanghai but has seen a favorable reaction in US markets. The economic calendar is quiet today. At 8:30am we had Chicago Fed National Activity which did not generate a reaction from the market. At 9:45 there are some details coming out of the ECB regarding their QE purchases.

Morgan Stanley is trading higher in the pre-market after reporting earnings and after the close attention will be on Big Blue (IBM) as they report their first quarter results.

We are currently set to open inside the fast liquidation zone from Friday. Opening in this thin zone and the fact we are at much different prices then Friday’s close mean we are likely to see other time frame active on the open.

Heading into today, my primary expectation is for sellers to push into the overnight inventory and test down to 4355. From here I will look for buyers to come in and work higher for the session, targeting 4388.50.

Hypo 2 is buyers push off the open and find responsive selling up near 4388.50 and two way trade ensues.

Hypo 3 is sellers work down through overnight now 4348.75 and continue to 4339.75 before finding responsive buying.

Hypo 4 is a drive higher, up through 4390 with a stretch target of 4406.75.

Levels are highlighted below:

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Nasdaq futures are lower overnight. Reports of widespread failure by Bloomberg Terminals may be at least partially to blame for the selling which accelerated around 5am. One may think volume would be low if participants were without data, however quite the contrary, volume was elevated to second sigma as was the range.

CPI data came in lower than expected and so far we have not seen any reaction in price. At 10am The primary read of U of Michigan data is out.   The primary read has often been a source of fast intraday Nasdaq moves. Also at 10am we have Leading Indicators and at 1pm energy traders will keep an eye on the Baker Hughes Rig Count.

Yesterday we printed an neutral day, the second neutral day in a row. Price settled right in the middle of the range however, which was unlike Wednesday’s neutral extreme day. Now, given the context of Wednesday’s neutral extreme, it is likely the initiative buyers seen Wednesday will be underwater due to this morning’s developments. Whether they can make a strong and aggressive responsive buy today will be telling. If not, we may see liquidation take hold.

Headed into today, we are priced to open on the low end of Tuesday’s range. The naked VPOC just above at 4386.25 is likely to attract price, as is the overnight gap up to 4414.25. However, today we are dealing with a pro gap, thus it will take significantly more resources to fill.

My primary expectation is for buyers to push into the overnight inventory and trade up to 4386.25 before finding sellers attempt to work down to the overnight low but struggle to take out 4363 and find responsive buying. Two way trade ensues.

Hypo 2, sellers gap and go lower, taking out 4363 early on and trigger a liquidation move down to 4337.

Hypo 3, strong buyers off the open work up to the range gap 4401 before finding responsive sellers who defend the range and churn us back down to 4386.25.

Hypo 4 full gap fill up to 4414.25 then a run for overnight high 4417.50 with a stretch target of the NVPOC at 4435.25.

Levels:

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Nasdaq futures are down overnight on an elevated range and normal volume. Price managed to exceed yesterday’s RTH high by 2-ticks before falling back through the entire daily range.

Pre-market we had Initial/Continuing jobless claims data which was mixed and Housing Starts which came in lower than expected. At 10am the Philadelphia Fed data is out and at 10:30am Natural Gas storage.

Yesterday we printed a neutral-extreme up day after the range extension down was quickly rejected and buyers put together an afternoon rally. The profile left behind had a pronounced pocket from 4417.25 – 4411.75. I would expect this area to trade fast on a revisit and afterward we’re likely to spend some time filling it out.

Heading into today we are set to open on the low end of yesterday’s range. My primary expectation is for buyers to work into the overnight inventory and attempt at gap fill. If they can trade up through 4411.75 they likely don’t see much friction on their quest to 4421.50. Then I will look for 2-way trade chop to ensue.

Hypo 2 is sellers defend the volume pocket and start working lower to target 4386.25 then choppy conditions.

Hypo 3 is buyers push the gap fill and continue on to take out the overnight high 4429.50 and target the NVPOC at 4435.

Hypo 4 sellers take out 4380 before finding a responsive bid.

Levels:

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Tax day is upon us. This day often marks a turning point in the market. Take last year, for example, we were all freaked out by the ultra-violent marketplace. Then, as if a switch was turned, we gracefully ascended from about tax day thru to 4^th of July.

This year we have little to fear. Markets are behaving well, the Russell is undergoing a major breakout, and oil has a bid. My hypothesis of a down week calls for Wednesday strength, thus I will stick with my cautious theme.

The Nasdaq trader higher overnight after catching a bid around 3am. No particular economic event stands out at that time. Around 10pm the China GDP data came out in line and on deck for today we have Industrial Production at 9:15am, NAHB Housing Market Index at 10:30am, Crude/Distillate Inventory at 10:30am, and Fed Beige Book at 2pm.

Intel traded higher last night after reporting, BAC is slightly lower after their premarket earnings. On deck this evening are NFLX and SNDK, while C, and GS are set to report tomorrow BMO.

Taking to the chart, we can see the 2-way conditions present. We started the week continuing to explore higher prices. By mid morning the market managed to find sellers and roll. That selling continued into Tuesday before managing to print a decent looking low (excess wicks on candles) before firming up into the close.

Heading into today, my primary expectation is for action early on to fizzle out relatively soon and put us into a holding pattern ahead of the Beige Book. Look for sellers to work into the overnight inventory and test down to 4397. Here I will look for buyers to step in and take out overnight high 4410.75 to target 4414.75 before two way trade ensues.

Hypo 2 buyers take out 4415 early and set up a leg to 4435.25

Hypo 3 we test down to 4381.50 – 4378 before finding buyers and balancing out below 4398.

Levels are highlighted on the following market profile chart:

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Range elevated just a touch beyond normal overnight while volume came in normal during globex. The market continued pushed lower overnight before finding buyers around Friday’s session low to bring us back flat headed into Tuesday. Advance Retail Sales came in a bit softer than expected at 8:30am and the data encouraged a bit more buying.

This is where the week starts becoming interesting. WFC and JPM earnings are out this morning and neither has made a dramatic premarket move. The financial sector has coiled over time and we may see the compression resolve as the banks earnings continue to roll in. Also important is tonight’s GDP data out of China. All eyes are on the red giant as its stock market soars. Finally, the Nasdaq is likely to be reactive to the INTC earnings scheduled for release after market close.

Yesterday the week started with a small gap up then an open drive higher. Price managed to tag the naked VPOC at 4438.25 and go slightly beyond it before stalling out. Sellers then slowly worked the market lower before accelerating down through the open drive to extend the range lower.

Intermediate term conditions are neutral, but overall context is bull.

Heading into today, my primary expectation is for sellers to make a push to test 4395. Look for responsive buying here. Choppy conditions between 4395 and 4405 give way to another leg lower to target 4382 and a stretch target of 4379 before 2-way trade resumes.

Hypo 2 is buyers push off the open to 4415 where responsive sellers are found and two-way trade ensues with buyers sustaining above 4395.

Hypo 3 is buyers make an aggressive push back above 4415 which leads to a second leg up to 4429.25.

Levels are highlighted below:

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Part of the reason I work with market profile is it allows me to envision how the day might progress. The idea is simple. Going back and reviewing a market profile chart shows you how markets often trade in statistical bell curves. Therefore, if you come into a session with a slightly incomplete bell curve, you and visualize what type of trade would be needed to smooth it out.

The economic calendar is quiet to start the week and earnings are starting to roll in. But for all intents and purposes Nasdaq futures will be left to their own device today due to limited external factors.

What was constructive about last week was how we auctioned each price level thoroughly before advancing to the next. The prior auctions that took place from about 4377 – 4425 were fast jerks through price. When instead each level is debated as we go, it sets a better foundation. See below:

Heading into today, my primary expectation is for buyers to continue exploring higher prices. However, I will be looking for signs of responsive sellers ahead of 4425 and two way trade to ensue. This is the green hypo on the below chart.

Hypo 2 is buyers continue exploring higher prices, trade up through 4425 early on and sustain trade at these levels before setting up a second leg to 4440.

Hypo 3 is sellers go to work off the open and churn us down below 440 before finding responsive buyers and 2-way trade ensues. This is the orange hypo on the below chart.

Hypo 4 sellers take out 4395 early and set up a fast leg down to 4382.25.

Chart & Levels:

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Nasdaq futures are priced to trade flat/higher at the open after a normal-looking overnight session. Price spent most of globex in 2-way trade contained in the upper quad of yesterday’s trend day. Price managed to take out yesterday’s high a few times before ultimately falling back to the middle of range.

Intermediate term, we are trading neutral. We’ve spent the last 3 weeks oscillating but not really going anywhere. Instead we are bouncing along the tips of prior resistance. Bulls have struggled to confidently convert the prior resistance into support but have managed to hold the line thus far.

The nature of yesterday’s push higher means the ground below is us unstable all the way down to about 4280. Thus as enthusiastic as the rally was, bulls will want to see additional progress made away from this fast region. Conversely, the structures above are well established value curves suggesting it will take sustained demand to work through the thick supply.

Heading into today, my primary expectation is for buyers to make a move for overnight high 4357. If they do so, then look for a test up to 4362.25 where we find responsive sellers and 2-way trade ensues. The market may go into “wait and see” mode sooner than some anticipate with Wednesday afternoon’s FOMC minutes scheduled.

Hypo 2 is sellers push the overnight lows 4337 and work toward 4328.25 before finding responsive buying and stabling out, perhaps even printing a neutral day.

Hypo 3 is sellers accelerate us down below 4328.25 and set up a trend back down the zipper, all the way down to 4280.

Hypo 4 is buyers sustain trade above 4362.25 and continue on to test 4374.25 – 4375.75.

Levels:

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Nasdaq futures are lower as we head into a fresh week of trade. Sunday evening we came into globex well below Thursday’s closing price due to a reactionary sell to Non-Farm Payroll data during the holiday shortened session Friday. Since opening yesterday evening volumes have been abnormally light and trade behavior has been 2-way.

The nature of the price move lower (news driven, low volume, outside of regular trade) makes it suspect. However, it has thrown us out of balance and therefore is likely to induce the higher time frame participants into the market. This means an elevated risk:reward environment intra-day. It also means I have an expectation for us to return to the scene of the crime, prices much higher, around Thursday’s close 4307.50.

Heading into today, my primary expectation is for buyers to push into the overnight inventory and test up to 4286.75. Here I will look for signs of responsive selling and 2-way chop to ensue which holds value low 4272.50. If this sets up, look for a secondary leg higher to test the 4300 century mark.

Hypo 2 is sellers become initiative off the open and press to take out the overnight low 4262. Look for signs of responsive buying around 4255.75 and 2-way trade to ensure.

Hypo 3 is an aggressive buying response, drive-like open when recaptures 4300 early and makes a full gap fill move up to 4307.50.

Hypo 4 is a gap-and-go trend lower.

Levels are highlighted below:

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Nasdaq futures managed to print an abnormal range but volume has returned to normal as we head into Thursday. The session traded inside of yesterday’s range and found responsive buying down near the VPOC of the session (4290.50). The session was balanced.

Yesterday we printed the elusive normal day—a day where the first hour’s range is never exceeded for the remainder of the session. These day types suggest an other time frame was aggressive at the open but never became initiative intraday and 2-way trade ensued. It could be early signs of a pause ahead of tomorrow morning’s NonFarm Payroll change.

Overall, the short term is seller dominant, and the last 2-3 weeks are neutral. We are trading along the peaks of prior resistance and buyers have three times defended their progress. The more tests lower we have, the weaker their ranks become.

My primary hypothesis on the session is for buyers to sustain trade above 4300 and make a push to take out overnight high 4319.75. Look for responsive sellers around 4326 otherwise continue higher to 4338.50.

Hypo 2 is sellers push down through 4300 and push down to 4285 where responsive buying comes in and 2-way trade ensures.

Hypo 3 is a strong selling take out 4285 and test below yesterday’s session low 4275.75 to target 4255.

Levels:

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Nasdaq futures went on a ride overnight where both the volume and rang exceeded second sigma.  During the hour and a half ahead of closing bell price started selling fast and on volume. The abnormal globex session continued to see selling, fast at times, which pushed below the prior (3/13) swing low before finding buyers.

Once it found buyers the auction reversed, and particularly after midnight price began moving upward with speed. The action nearly went round-trip as we head into cash open. And this morning like likely to be a busy one.

At 8:15 the ADP Employment Change data was weaker than expected. This news was met with a buying reaction. Also on the agenda today is Markit Manufacturing PMI at 9:45am, ISM Manufacturing at 10am, Fed’s Lockhart talking monetary policy at 10:30am, and oil/gas inventories out at 10:30am as well.

Turning to the market profile chart, the carnage of last night’s session revealed a territory where buyers are being aggressive. Just below 4285 buyers have demonstrated aggressive control. Should that price level trade again today, I would expect a similar response, otherwise I would deduce a material shift in context has taken place.

Price is currently pinned within a well-defined value area dating back to 3/26. Essentially, how we break from the 4324 – 4305 range will determine direction in the short term.

Heading into today, my primary expectation is for buyers to attempt to push back into Tuesday’s range (4320.75) and claw back into the value area up at 4350. However I anticipate responsive sellers will defend this region.

Hypo 2 is seller push off the open to 4305 where responsive buyers step in and we stick in the 4324 – 4305 range.

Hypo 3 is sellers blow through 4305 to set up a test of the responsive buying zone below 4285. If buyers do not defend we could see a fast flush.

Hypo 4 is buyers reclaim 4350 and continue pressing higher to target 4362.

Levels are highlighted below:

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