Liquidation Friday

NASDAQ futures took the elevator down this morning after a much weaker-than-expected Nonfarm payroll print.  Prior to NFP the globex session was working higher.  Price managed to push into the low-end of last week’s range, just like yesterday morning, before reversing lower.  However, we did not exceed the globex high set Thursday morning.  The NFP reaction managed to push us into another extreme range/volume session with price now trading on the low-end of yesterday’s range.

Also on the agenda today we have Factory Orders at 10am and Baker Hughes Rig Count at 1pm.

Yesterday we printed a neutral extreme day.  After opening gap up we had a sharp drive lower but held Wednesday’s range.  Buyers stepped in and defended it twice—once in the morning and again in the early afternoon before reversing the auction and closing the day out at session high.

Heading into today, my primary expectation is for buyers to push into this NFP reaction.  Liquidity is still way out of whack as we head into cash open which can lead to quick directional moves.  Look for buyers to trade up and close the overnight gap up to 4187.25.  From there look for buyers to continue trading higher to ‘check back’ to the scene of the reaction up at 4213.25 before two way trade ensues.

Hypo 2, sellers gap-and-go lower.  The way USD/JPY is breaking lower supports this hypothesis.  Look for sellers to test yesterday’s low 4116.25 setting up a gap fill down to 4074.75.  Look for responsive buyers down at 4062.25 otherwise a move to the stretch target, the open gap down at 4031.25.  If the liquidation really accelerates then also look to fill the open gap down at 3997.50 from the China Rate Cut.

Hypo 3 so kind of two way trade ensues.  Sellers test below yesterday’s low 4116.25 and immediately find responsive buyers who struggle to fill the overnight gap up to 4187.25 stalling instead around 4160.

Levels: