Nasdaq futures are sharply lower overnight on a session of nearly uncontested selling. Whether or not the affect, there were some troubling numbers from Japan overnight on the economic front. Year-over-year machine orders were expected to come in at 10.1% but the actual change was -14.3%. The action really accelerated around the release of UK Trade Balance data which came in worse than expected. US Jobless Claims data just came in slightly better than expected and we are continuing to see sell flow.
Hindsight is always 20-20, but looking at the profile prints from yesterday (splitting the session at the FOMC minutes) we can see two distinct P-shaped profiles. These suggest a short term phenomenon was occurring, a phenomenon called the short squeeze. We have seen these prints mean very little for the short term recently, when they occur in the context of a longer term uptrend, but in the wake of Tuesday’s liquidation they were a clue that the sell trend might continue. Thus far the responsive buying tail from last Tuesday has held as support. Whether or not it holds through today will be an early clue as to whether we sustain intermediate term balance or move into a seller controlled environment. The first chart below is a 24-hour market profile, the second is an intermediate term volume composite, and the third is another intermediate term volume composite drawn over the past 7 days to show the possibility for intermediate term balance:
I have noted the short term market profile levels I will be observing early in the day on the following market profile chart:
hypo 1 – test higher to 3849.75 LVN, find sellers who trade down through overnight low 3835.50 and work down toward 06/27 balance (3823.25-3817)
hypo 2 – drive lower to 06/27 balance and take out the range
hypo 3 – drive higher through LVNs at 3849.75 & 3853 to test out Wednesday low at 3856.50