Nasdaq futures are trading higher. The volume and range are normal and as we approach US trade the market has given back over half of the overnight progress. Coming into today we had an expectation for a green close on the Nasdaq based upon a 30-year study of seasonality. This day has a high probability of closing in the green.
The problem when you are not the one who builds this type of study is you don’t get to dirty your hands with the data. How much is it up on average? What did the red days look like? What years were they? What were the conditions leading into them? Etc, etc.
The largest rotation of the overnight session came around midnight when a motivated buyer caused a 29.50 point unidirectional rotation.
The economic calendar is quiet on this option expiration Friday, however we do have some Fed officials speaking. At 10am Evans will be given opening remarks in Chicago, at 11am Kansas City Fed MFG activity, and at 12:30 Lacker speaks on the economy in North Carolina.
Taking to the chart and looking to the left, we are trading inside the profile from 12/11 which was the roll forward day for futures traders. If you did not convert to the March contract that day then you missed a key piece of context that sparked the entire move lower.
On 12/11 we 1-ticked the local swing high and sellers made an aggressive push lower. In their wake they left a thin LVN zone from 4270-4282.50 and this is likely to be an interesting area of trade during today’s session (baby blue box on chart). Yesterday we also left a thin-auctioned zone. It is the baby-pink box spanning from 4249 – 4259.
Primary expectation this morning is for sellers to work into the overnight inventory initially. Open auction in range breaks lower to close range gap then full gap. If no buyers show here then a run at the baby pink box to test the pocket mid 4254.25. If that breaks than sellers will target the VPOC at 4245.50.
Secondary hypo is buyers press through the thin pocket above to target the naked VPOC up at 4287.75. Then look for a run at overnight high 4299.25.
Hypo 3 is more of a drive down, aggressive selling on the open takes out the entire pink pocket, slides through the NVPOC and retest the MCVPOC at 4233. Look for signs of responsive buyers here who work back toward yesterday’s close 4266.
The levels discussed above are highlighted below on the volume profile chart:
