This morning we have Nasdaq futures up a bit, just over 5 handles, but until we hear from the dovish Yellen at 10 am it is likely the markets just chop around. We are currently priced to open inside yesterday’s value which suggests little-to-nothing occurred overnight to change the perceived value of the index.
The intermediate term is in near-perfect balance. As exciting as that may sound, it means an increased risk of long liquidation exists. We likely need another 10 points of Nasdaq progress atop our current swing high before price can escape the gravitational forces of mean revision. See below:
Elevating the likelihood of a mean revision even more is the 11.25 point gap we printed yesterday morning. If buyers cannot defend their initiating drive tail (pictured below) today, then we could be in store for a quick gap fill which could very well set the tone for a complete mean revision trade. This is only one scenario, of course, as sustaining trade above the initiating drive tail could be the catalyst to launch a new value discovery phase up. Remember, there is still a 14-year-old open gap above, an artifact from the dot com bubble. I have highlighted this driving tail, as well as a few other price levels on the following market profile chart:Twitter