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:

Prices on the Nasdaq have drifted higher during the holiday session in a holiday manner. Under the influence of low volume and perhaps tryptophan the market has gained nearly 40 points to the upside since Wednesday’s close.

When trading at swing highs, there are not many reference points nor is volume profile analysis as effective for noting key inflection points in the market. However, as the market trades higher searching for sellers, we can not the key price level footprints left in its wake.

I have noted the key support levels and air pockets which may offer fast trades on the following volume profile chart:

A slew of economic data pertaining to Durable Goods and Personal Income and Initial Jobless Claims was released at 8:30 am and the mixed data ushered a bit of selling into the globex premarket. Looking ahead we have Chicago purchasing manager at 9:45 am, U of M Confidence at 9:55am, and New/Pending Home sales at 10am. Energy traders will also be keen on the 10:30am oil and gas inventory numbers and the 12noon EIA Natural Gas storage numbers.

Nasdaq volumes are still running at a fairly normal rate, just on the low end of normal. However the range compressed overnight to only 13.50 points which is below normal as we head into the final day of trade before Thanksgiving.

Overnight markets managed to make new swing highs on verses the RTH session yesterday and overall maintained trade in the upper half of Tuesday’s range. This is holiday grind-type trading at its finest.

There are a two volume pockets that have formed while we drifted higher out of balance. They will likely come into play at some point soon. The pink one might see some action today. When they do trade they will offer a quick opportunity to earn a few points. I have noted these levels and other key levels I will be observing on the following volume profile chart:

The Nasdaq continues to make new highs this morning as volumes begin to dry up. The overnight range is in the realm of normal but still exhibiting a slightly compressed range. GDP data came in stronger than expected at 8:30 am and the initial reaction was buying. Keep in mind we also have Consumer Confidence data set for release at 10am today.

My initial outlook on the week was that the extended Nasdaq had done a good job finding sellers on Friday with the big gap higher and subsequent selloff. However, the market is again drifting higher in search of a fair sell point. Yesterday prices managed to exceed Friday’s high and push value higher on a session that featured many pockets of momentum under the surface.

The low volume environment is showing evidence of favoring buyers and traders are likely to benefit more from targeting opportune individual charts than trading the index itself. However, I have highlighted the key context levels I will be observing today on the following volume profile chart:

Nasdaq futures traded a below normal range and volume overnight as the market heads into the halfway mark of a week featuring an economic data backload. At 8:30 am US Building Permits and Housing Starts numbers were released but show little impact on index prices. Instead it appears the market is more interested in the 2pm FOMC minutes and perhaps Thursday premarket when CPI data will be released.

My typical expectation on an FOMC day is an active open featuring 1-2 prominent rotations before the session turns into a grind ahead of the announcement. Yesterday’s strength was interesting early on because the open had a drive-like aspect to it that occasionally portends trend days. It was enough buyer conviction to keep me from putting any shorts on intra day and an interesting piece of context to carry through the session and into today. Buyers did manage to range extend higher and upon doing so discovered responsive selling. The high end of yesterday’s profile looks like absorption. The VPOC shifted to the high end of the profile and we pressed lower right into the bell.

The short term dividing point between the responsive seller and buyers is a low volume node at 4240.25. Even overnight, when prices briefly popped above this level, sellers were active. I have noted this level, all other key price levels, and an LVN slide zone on the following volume profile chart:

The Nasdaq has come into balance. Overnight prices traded a good portion of the balance zone, testing upper and lower value, and ultimately are trading near the midpoint as we head into Tuesday’s trade. Markets started moving around 4:30am when the UK released mixed-to-worse-than-expected Consumer Price data. The biggest rotations have been to the sell side but overall the session is neutral.

Any move away from our three-day value zone is now suspect with the approaching FOMC minutes tomorrow afternoon. The market is always trying to do something, even when it waits, and according to my contextual read it is trying to trade lower. However, it is not doing a very good job. Sellers pressed on the bid for most of yesterday’s session yet prices sustained above value. There is a poor low in place now [a double low vulnerable to breakage] and value drifted lower [VPOC] verses Friday.

Trying to go lower, waiting for new information, thus not doing a very good job trading lower is the short of it.

I have highlighted these observations as well as key price levels on the following volume profile chart:

Thank you for all the positive feedback on the inaugural Weekly Strategy Session. I look forward to building the broad context going forward.

Nasdaq futures trader lower for most of the globex session after Japan reported a weaker-than-expected third quarter GDP data. Buyers stepped up just above Friday’s low and as we approach US trade prices are pairing back more than half the overnight losses.

ECB Central Bank President Draghi is speaking in Brussels as we work through this final half hour of premarket trade. We also have US Industrial Production set to release at 9:15am.

A quick update of the weekly composite chart shows price worked higher last week following the indecision doji candle printed the week prior. We are trading above the now thoroughly auctioned ’14-year gap’ left open back in the year 2000 and are trading in a zone that was fast both upward and downward during the mania of the dot com bubble. See below:

Drilling down to the daily chart we can see just how stretched the market has become. Following a V-shaped recovery in Octobter the market has subsequently grinded higher through the start of November.   We are now trading up at the top end of some broad Fibonacci strokes drawn to assess whether the move higher is primarily driven by stop runs or if in fact it is something much larger. Buyers need to defend above the HVN at 4150 otherwise they run the risk of filling the air pocket 100 Nasdaq points below. I have noted these observations on the following daily Nasdaq future chart:

Finally, I have note the key short term levels I will be observing on the following volume profile chart. Note especially the short term LVN pivot at 4214.50 derived from the micro composite on the left.

Extended markets have a knack for continuing in the direction of the move well beyond what would be considered rational.  Mean revision strategies take heat, stubborn traders are slowly forced to liquidate, and eventually prices lurch back when a strong enough opposing force is found.  This is the auction process.  What we have seen this week is four steady days of value progression higher with only a slight sign on excess showing up on Thursday’s tape.  As we close out a week that was focused on retail we are currently trading right in the middle of Thursday’s range and a few points higher from the close.

The market appears to have come into balance overnight and it will be interesting to see how this is treated heading into the weekend.  Unlike the fast v-shape that put us into these last 10 days of grinding trade, we have moved higher on healthy auction activity free of overnight gaps.  We saw some signs of responsive selling yesterday where two waves of selling swept through the market at 11am and 1pm, vital times of day.  Whether that responsive seller is able to turn initiative and press down into Thursday’s range to target the NVPOC at 4190 will be a slight hint.  Even more telling of a market that has found a seller would be prices accepted below the LVN zone around 4183.75.  This is the key short term pivot for bulls.

I have highlighted this level and other key price levels on the following volume profile chart:

Nasdaq futures are up overnight with the primary thrust occuing just before midnight.  However as the US has come online prices have steadily declined and given back about half of the overnight progress.  The pullback began around 6am which does not coincide with any economic report or news story but did begin with an overnight failed auction.  Price took out the prior overnight high by a few ticks then quickly reversed.

At 8:30am US initial and Continuing Claims were released and both numbers were a bit higher than consensus expectation.  The initial reaction in the Nasdaq is light selling.

Volumes picked up yesterday and overnight to the highest levels on the week.  Walmart topped earnings forecasts this morning suggesting the US consumer is healthier than analysts expected as we head into the holiday season.

On a daily chart of the Nasdaq futures we can see price has entered a zone where according to measured move analysis there is an expectation of finding sellers.  Measured moves are not as dependable as volume profile and prior price action, however they give a sense of where the market might go to run the stop orders of short sellers.  The globex market is showing signs of effectively finding sellers, however it is more important to see it show up during regular trading hours.  I have noted the above observations and a few more notes on the following daily bar chart:

As a general rule, after three days of movement favorable to your bias, it makes sense to take profits.  On the below chart you can see value made a steady three-day progression away from a well-formed intermediate term balance.  This morning might be an opportunity to lock in some stretched stock trades you have, especially if they show signs of pause or reversal.  This will also free capital to initiate fresh risk, if you choose.  I have also noted the very key levels that emerged during yesterday’s session.  Note too how cumulative delta (Ask Traded vs Bid Traded) was unable to remain positive yesterday for the first time since 11/5: