Nasdaq futures ticked higher overnight and peaked out around midnight before settling back to about the midpoint of the session.  Interestingly, we made a new swing high overnight and the swing high is rarely set outside of normal market hours.

The economic calendar is quiet today.  We have the Alibaba IPO set to price out today and also Leading Indicators at 10am.

Revisiting the weekly chart, you can see the strong responsive buy that occurred throughout the week which resulted in a long tail on the composite index.  What we need to wonder is whether buyer expended all their energy in this response, or whether they will be able to make a fresh push higher.  See below:

Intermediate term, we are in the precarious position of hanging out on the fringe of intermediate term balance.  As we saw Monday and Tuesday, the gravitational force of the mean can cause a rapid revision.  As we press the upper boundary, we need to be cautious.  Keep in mind however, this balance is old, and the market is likely to begin exploring soon.  I have highlighted the intermediate term balance and some key levels within it below:

 

 

I have noted the short term levels I will be observing on the following market profile chart:

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Nasdaq futures are up a bit as we approach cash trade in the US.  Each session this week, whichever party appears to have controlled the overnight session has been unable to sustain their edge throughout the session.  Thus this gap higher is suspect to a fade lower and perhaps even a down close.  However, just as soon as we suspect we find a pattern it often diminishes.

The economic calendar is quiet during today’s session.  We had Building Permits, Housing Starts, and Continuing and Initial Jobless claims at 8:30am which on the net did little to affect prices.  Traders are likely to pay attention both the BABA IPO and the Scottish independence vote taking place today.

Below you can observe the intermediate term balance.  These conditions are frustrating to many day traders who are having trouble with chop and indecision.  However, swing traders can revel in this environment for as long as it remains in place, up here near the high of the year.  I have highlighted the key levels inside this zone, including the MCVPOC at 4066.  If around 3,500 more contracts trade at this price, then we will see a major VPOC shift on the net composite profile.  The current composite VPOC is down at 3889.25 (not pictured).  If this occurs we need to be keen on who it entices into the marketplace.  Price and value will always converge.  It is our job to discern who it motivates to act.

I have highlighted the short term levels I will be observing on the following market profile chart.  Note also that I split yesterday’s profile at the TPO where The Fed response began:

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The overnight session was quiet as we head into a busy end-of-week.  The NASDAQ printed a below normal 9 point range ahead of CPI, which served to expand the range a bit after a lower than expected increase in CPI was released.  Overall, the range is still tight as we approach cash trade.

On these Wednesdays where we have FOMC announcements in the afternoon, we tend to see one or two actionable moves very early in the session and then a pause as the markets waits for the new information to release.  Anything can happen, of course, but having a hypothesis or expectation for the early trade means if something else happens we are seeing unique behavior which warrants our attention.

I opened the topic of intermediate term balance to the open forum Sunday afternoon because its starting point was a bit grey at the time.  Consensus was 08/25 seemed a proper start date and with that information the downside imbalance became abundantly clear.  The fast move lower and subsequent retracement higher yesterday settled the imbalance, but they also stretched out intermediate term balance.  Now I have pulled in data going back to 08/18 which gives the lower half of balance a bit more information.  Yesterday confirmed our hypothesis that intermediate term we remain in balance when we revised back to the mean at 4066.  I have noted the key intermediate term levels below:

I have noted the key price levels I will be observing on the following market profile chart:

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Nasdaq futures are down a bit overnight, currently trading near the lows of yesterday’s range.  The economic calendar was quiet mostly during the globex session, with the main release being UK CPI stats.  However, the real news over the pond comes Thursday when Scotland is set to vote on whether to continue as part of the United Kingdom.  The outcome of this election could send waves through the macro world as the Pound reacts.  Also on Thursday we have the BABA IPO.  But before all of that excitement we will hear from the Fed tomorrow afternoon who will be setting their QE pace followed by a Janet Yellen press conference.  Thus the market will have much new information to price in later this week.

Taking a quick look at the long term timeframe, we can see the trend on the Nasdaq composite is still up.  We can also see the fast behavior occurring in this gap zone from 14-years ago.  We are having a proper auction of these prices, both ways, to determine which side of the gap we belong on.  See below:

 

Determining what data to pull into your intermediate term composite is a matter of knowing what you want to see as far as detail.  Premarket yesterday we switched the start date to 08/25 which revealed the imbalance present in our upper balance.  Now I have pulled more data into the intermediate term composite to give the tail end a bit more detail for reference.  By doing so, we have some clear levels of interest to keep in mind as the day progresses.  Note also the lack of structure just below.  If we are not done finding buyers today, then there is scant volume structure to slow prices down until about 3980.  See below:

I have noted the short term levels I will be keying from today on the following market profile chart:

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Something to keep in mind whenever using a tool or indicator or data set to observe market behavior is the risk of confirmation bias. As objective as numbers and graphical representations of numbers are at first impression, as we shape them and select pieces from them we form our own data.  The key is perception and whether it is guided by the logical mind or the more instinctive, yet emotional mind.

One of the essential tasks for any trader is knowing when conditions have changed as early as possible.  Some strategies fare better in certain conditions, like balance.  Other strategies would be better suited for the price discovery phase.  If these concepts are a bit over your head, then I suggest taking a few hours to bring yourself up to speed with market profile. This however is not mandatory to interact with today’s post.

Below I present the same chart in every way except one—the first chart shows our developing balance as I have presented it for the last several sessions, with 08/22 being the point of change where our current balance initiated.  The second chart instead uses 08/25, the following session.  What I need your help with, traders, is determining when the CHANGE event occurred.

The implications are important for a few reasons.  I will discuss these in detail if I have at least five votes.  Observe the two charts below and simply leave a comment whether your think chart 1 (08/22) or chart 2 (08/25) marks the moment when a change occurred which led us into our current balance.  If you feel like it, add a few notes about why you answered the way you did.  See below:

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Nasdaq futures are flat overnight after printing a very wide and fast range yesterday.  The spike in volatility yesterday coincided with the Apple product release.  As the event introduced new technologies, the price of AAPL stock was radically swinging, moving the Nasdaq alongside it.  The economic calendar is quiet for today’s session, however there are a few pieces of context to keep in mind.

First, tomorrow is the Thursday before OPEX, a day often reserved for shenanigans.  Second, China released their CPI and PPI data after hours tonight which might impact any Chinese holdings currently housed in your book.

Turning our attention to the auction, we can see the intermediate term still hangs in balance.  The fast action was enough to raise a few eyebrows, especially how we rejected fresh swing highs, but we do remain in balance overall on this timeframe.  This balance is best seen using a volume profile which encompasses the last 13 sessions.  I have built this profile and noted the key price levels below:

Yesterday I made several comments about 4080.  The reason was how price was behaving at this level.  Sellers made three aggressive pushes at 4080 which were absorbed by a buyer, presumably the same responsive buyer who existed on Monday in this territory.  The problem was, like any aggressive attack on a territory, it jeopardized the structure in that area.  Said in market profile terminology, by mid morning we had a very blunt “poor low” which was susceptible to breakage.  It eventually did break, we found a sharp responsive buy to new multi-year swing highs, at this point going neutral (expecting the fade back to the mean), before finally giving way to heavy sell flow for a proper mean revision on the intermediate term time frame.  On the net, yesterday was seller controlled and we printed a neutral extreme profile.  This makes hypothesizing very simple today.

I have noted the key price levels I will be observing today on the following market profile chart:

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Nasdaq futures were up modestly this morning before giving up the gains as we rolled into 8am.  There are no economic events which align with this selling.  Instead it appears to simply be some early sell flow.  As we approach US cash open the Nasdaq futures are flat on a compressed 16.5 point range of trade.

Buyers pressed away from Friday’s range early yesterday morning before finding responsive selling back inside the range.  At this point expectation was for a move back to the micro composite volume point of control at 4066 but instead we found buyers who rejected the idea.  These buyers took us back up above the daily midpoint in the afternoon.  Overall price and value migrated up relative to Friday.

This is occurring inside intermediate term balance.  As this balance matures, now going on our 13^th session, expectation of a break increases.  As we head into Tuesday’s trade, we are priced in the upper tail of balance.  If buyers are not strong to initiate trade away from this area, then we are likely to go explore the lower boundaries of balance in short order.  I have highlighted the intermediate term balance below:

With that in mind, I have noted the key price levels I will be observing on the following market profile chart:

 

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Nasdaq futures are down just a touch premarket on an orderly session of price balance with a slightly below normal amount of volume transacting during the session.  We are set to hear Consumer Credit at 3pm today but have an otherwise quiet economic docket for the week.  UK GPD comes out Tuesday morning, China CPI late Wednesday, a Monthly Budget Statement at 2pm Thursday, and Retail sales and U. of M. Confidence numbers on Friday.

Long term, the Nasdaq continues to be bullish after printing an outside candle on the weekly chart.  The outside candle is often referred to as an “outside reversal” and in this case a “bearish engulfing” pattern.  The quirk to last week’s candle is the long wicks on both sides, especially the bottom.  This suggests a strong response to lower prices was able to press us well off the weekly lows.  The gap zone left behind 14 years ago is living up to the expectations of gap zones by providing fast trading action.  Overall, the market continues to sustain trade above the gap and we have to bear in mind how much energy was expended by the dip buyers and whether we see buyers initiating more risk this week:

Intermediate term we are fairly neutral at the moment.  This can be seen best on the following volume profile which encompasses eleven session of trade:

I have noted the short term price levels I will be observing using the market profile chart below:

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Nasdsaq futures are up in initial response to a weaker-than-expected NFP data point this morning.  The news sent the dollar lower, treasuries higher, and equity prices to their high of the overnight session.  As we approach cash trade, there are also unconfirmed reports of a ceasefire protocol in The Ukraine.  The initial reaction to any sort of economic figure or news event is often difficult to glean insight into the auction.  You are usually better able to observe the reaction to the initial reaction.  Developing…

The intermediate term is balanced after trending higher for much of August.  Balance can be challenging to trade.  The risk you face is chasing longs up into the upper boundary, stopping out in the lower boundary, then going short into the lower boundary, only to again stop out somewhere near the mid.  Or you can stick with one side, wait for resolution, then adjust accordingly.  I have marked up key intermediate term prices on the following composite chart:

You can see how the pace of trade accelerated during the last two sessions relative to the tight, small profiles to the left of them.  The environment is improving for trading the Nasdaq futures.  I have noted the short term levels I will be observing on the following market profile chart:

 

 

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Nasdaq futures are up on overnight after starting out rather weak when trade initially opened in Europe.  Traders’ attentions were focused on the Euro Zone this morning, where we were set to hear from both the Bank of England and the European Central Bank (ECB).  The UK left their rates at historic lows and will remain steady with their asset purchase targets.  The surprise came from the ECB who dropped their bank rate 10 basis points to 0.05% as well as decreased their deposit facility rate to -0.20%.  The news sent the Euro dollar falling, the US dollar rising, and US equity indexes higher.  We also saw initial jobless claims at 8:30am which was a bit higher than expectations.

Thus far, the net result was about a 25 point range on normal volume in the Nasdaq globex session.

At 10am we have ISM Non-Manufacturing composite which is listed as a high-impact event.  Energy traders will have a whole slew of oil and gasoline data to digest at 11am, and there are some Fed speakers after the market close (no Yellen).

The intermediate term has come into balance.  The balance spans 9 sessions and can be seen on the following chart.  Below this balance the volume composite is very sparse, and prices below about 4050 are susceptible to fast moves.  However, above here, we are likely to see the balancing process age a bit.  See below:

I have noted the short term levels I will be observing on the following market profile chart:

 

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