A Fresh Batch of Context

We are starting the year off with an interesting bit of context in place.  The long term control of the bull was reasserted last week, fueled by strong buying demand that entered the market when The Fed removed uncertainty over their taper itinerary. 

Intermediate term, looking at the last few sessions, we have begun the process of balancing out up at annual highs.  We were yet to see any sharp rejection.  Instead price has drifted with a slight bullish bias through the holiday season.  Within this low volume drift environment, individual equities have performed well.

Tuesday, year end, was a day controlled by the buyers, and showed signs of control both from the long timeframe and the day timeframe where local traders appear to have actively participated at value area low, a logical level to see their participation.

Overnight we gapped lower and initially the action is being met with buying.  The move was dynamic enough to print nearly 10 handles lower on the S&P futures (/ES) and nearly 20 handles on the NASDAQ futures (/NQ).  This is pro gap territory where attempting to fade the sell flow and press the gap shut becomes a more risky endeavor.

However, we are still trading within Tuesday’s range, just a few points below the value area.  If price can creep above 3577.50 before the opening bell, it would indicate we are back into Tuesday’s balance, and the move has been accepted.  Should we open below this level, we need to be keen to the open type and who may be asserting control.

Should the sellers reject any attempts back into Tuesday’s value, we may begin liquidating early on.  I will look for buyers to react at 3563 and then at the support zone highlighted below.

Overall I anticipate balanced trade may ensue, but should my support zones void I am prepared for a liquidation tape, especially given the extended nature of the market.