Avoiding Big Red

It seems as if each time we see a few progressive up days in the Nasdaq we soon see a session of heavy selling which unwinds all the progress made.  This behavior has conditioned astute swing trades to fade the rips.  The question now is whether we see more of the same or instead the market begins climbing a wall of worry.  You can see a few recent examples of what I am referring to on the following daily Composite chart:

With the long term in balance and a bit of skepticism about joining strength, we have to question intermediate term balance.  I have expanded my intermediate term profile to encompass 26 sessions of trade because price was escaping the shorter 18 session balance.    As you can see below, we are trading up into the thin upper tail of our balance.  This zone is where action can become rather interesting as the pull of mean revision is strong but with enough propulsion (buy flow) we can escape balance and swing higher.  We left a big gap in the chart yesterday which suggests strong buying but also leaves a sloppy chart behind.  I have marked the key levels below which buyers need to defend to keep us on a swing higher ascent:

The short term is buyer controlled.  Although the larger timeframes show balance, on the short term we are out of balance and exploring higher.  Price action and volume were dynamic enough yesterday to press our entire value area above the prior (Friday’s) day’s session.  One cannot predict whether such upward progress will continue, however we can monitor the continuation via some key price levels.  Between the price levels highlighted above, and the ones below, we can determine if buyers are coming in today and initiating into strength by defending these key levels: