Equity futures continue to print wide ranges overnight on slightly above average volume.  Prices are higher in NASDAQ futures.  The overnight print suggests a slight imbalance exists to the upside, with our overnight volume profile looking like a half-completed bell curve distribution.

My first morning scenario would be an obvious bit of selling pressure since the overnight inventory is long.  Sellers may target an overnight gap fill down to 3473.75.   Price may continue lower, but my vision on the day is for yesterday’s session low to hold.

A second scenario would be for buyers to enter the market and gap-and-go drive prices higher.  For this to occur, we would need to see the opening print make perhaps one or two ticks lower and then blast higher, suggesting the long-term timeframe is entering the market.

A quick rundown of market control is presented below:

Long term timeframe – buyers

Intermediate term timeframe – sellers, we continue to make lower highs and lower lows since 1/22

Yesterday day timeframe – neutral, the NASDAQ printed a neutral profile, with rage extension on both sides of the initial balance.  This suggests indecision and balancing.  These prints tend to occur at or near inflection points.

Overnight timeframe – buyers, buyers have made four upward rotations in price and printed half a Gaussian distribution.

We prepared for the neutral print inside of 12631 yesterday just before the Fed meeting.  At the time, I noted 3440.50 as my max pain price level, a level that if breached would cause my capitulation.  I still find the price level incredibly important.  However, the neutral print held true and presented an excellent entry on the day.

Below is an updated picture of the “correction road map” chart, a 30 minute RTH chart of the NASDAQ, and also a picture of the overnight profile showing a slight imbalance with an upward skew:

Comments »

Index futures went for a ride overnight, with the S&P trading a 22 handle range and the NASDAQ trading over 45 points.  There were several macro influences affecting the action as the market was given plenty of information to digest in the overnight hours.  From the volume profile distribution that was printed, I can see there was no consensus reached.

Overnight, we are out of balance with sellers asserting control.

For traders, a market out of balance creates the greatest amount of opportunity.  However, this is a high risk/high reward environment where tight stops, although prudent, are vulnerable to random market noise.  The best strategy is often smaller position size with a larger profit target and stop loss.

Interestingly enough, we are currently set to open inside of yesterday’s value area which would typically mean we are in a low risk/reward environment.  Should we sustain trade between 3500 and 3486.50 on the NASDAQ, we may see a very aggressive chop-like trade.  This scenario would make sense, a violent waiting room ahead of the 2pm FOMC meeting announcement.

Another scenario would be for the intermediate term sell control to reassert itself early on and drive prices lower to 3474.25 then 3462.75 and ultimately to the naked VPOC at 3458.  This would fit into the discouragement framework noted yesterday morning.  If instead price continues to drive lower, cutting through 3452.25, then we are likely to see an acceleration of selling and may be entering the true panic phase of correction.  With the market movers at the FOMC on tap, this possibility becomes greater, however this is still scenario number two for the day.

A third scenario is the long term timeframe entering the market and driving higher. This would require sustaining trade above 3527.25.  I have highlighted these levels on the following intermediate term volume profile chart.  I have also attached a daily volume profile for insight into a possible chop trade.

 

 

Comments »

There was a strong appetite for risk over the holiday trade, which saw prices of the NASDAQ outpacing the performance of the S&P.  The action slowed a bit over these last 8-10 hours and the resulting profile print has a very familiar, uncompleted, shelf footprint.

By vision for today is a completing of the profile via some back-and-fill trade.  However, we are set to gap much higher, which signals the market is well out of balance.  If we fail to hold around the high volume node at 3476 it may signal a rejection of the holiday move by the market.  If this is the case, we may see a swift gap fill back down to 3469.

Conversely, the shelf at 3476 may not breach in which case price will continue to probe higher in search for sellers.

The shelf is an interesting bit of context to bring into today’s trade.  Even the casual observer, hunting black Friday deals can use the price action around the 3481 shelf zone to measure sentiment.

I have highlighted this activity on the following market profile charts:

Comments »

Overnight was fairly quiet in the Composite futures where the main feature was a rotation higher in the early hours, around 4 am.  The pulse higher was effective in erasing a slow and balanced drift lower, but it also put the market into overbought territory on the very short term.  Early on, perhaps even premarket, my expectation is for sellers to work price lower a bit before we see an attempt at another rotation higher.

I have envisioned two scenarios for today, both which expect value to be built upon our existing and fragmented profile structure.  Should we press beyond these envisioned profiles and accept price beyond their range that would be an early cue this week that sentiment has shifted.

You can see my vision along with levels to monitor on the following market profile charts:

Comments »

http://youtu.be/XXW84v_m50Y

Comments »