The NASDAQ futures drifted higher over night on low volume ahead of the jobs report at 8:30am.  The initial reaction to the jobs report was a move higher.  The report itself was mediocre-to-decent news thus an initial positive reaction is good, but not of the strongest conviction.  The strongest conviction would be a positive reaction to a bad employment report.  The strength was quickly faded by a strong bit of sell flow.  It looks like the opening may be interesting today.

The long term time auction is buyer controlled.  This can be seen as a series of higher highs and lows on the a daily chart of the NASDAQ composite.  If sellers can succeed over the next few days at printing a lower high verses March, we will likely see the long term auction transition into a balanced state.

The intermediate term auction is in balance.  Overhead supply came into effect yesterday morning and the resulting trading day was a press lower.  The action probed prices back to the midpoint of this intermediate term balance where my expectation was to find buying.  I will be watching the price action around 3632.75 for an early directional bias on the day.  I have highlighted this level and a few other observations on the following volume profile chart:

The short term auction is very indecisive but I would call it a semblance of balance.  Value is roaming somewhat aimlessly.  We have a strong developed profile overhead which price rejected away from yesterday and since then we have been inching back upward toward the reference zone.  I have highlighted this key upside profile as well as a few other observations on the following market profile chart:

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Stock index futures were quiet overnight and traded inside of a narrow range without much volume.  As a result the overnight profile shows no definitive value or balance.  As the USA comes online, it appears some selling is working into the marketplace.

The short term auction is balanced.  The balance spans back to Tuesday afternoon when a strong upward move came into overhead supply and two-way auction ensued.  This was very interesting because my expectation was for overhead supply to be of a greater force and cause a more sudden rejection, especially with sellers at the time controlling the intermediate term.  Perhaps the market place is waiting to hear the jobs report on Friday.  Regardless, it appear the market is pausing until more information is presented.  I have highlighted the short term balance on the following market profile chart:

The intermediate term auction is balanced.  Price is pressed up into a glut of supply dating back to mid-February and it is slowing upward price movement.  The EMAs I keep on the intermediate term timeframe crossed back upward and now my expectation is to get back into the prices in and around these EMAs and see how the market behaves.  I have highlighted some key price levels on the following intermediate term volume composite:

The long term auction remains buyer controlled.  Buyers are currently tasked with setting a new swing high.  On the contrary, sellers want to roll this market over and put a lower high in place.  A turn lower could be the catalyst to displace the long standing buyer control on the long term.

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Yesterday was a strong day for the NASDAQ index, a day marked by aggressive other timeframe (long term) participation.  We really dial down in these morning context reports to wrap our mind around the context of the marketplace.  We focus on the NASDAQ because most of the high flying momentum stocks reside within it.  As important as the short term timeframes are to our daily decision process, we always have to keep sight of the big picture.  The long term auction is still buyer controlled.  This can be seen as a series of higher highs and lows on the daily COMPQ chart.  The long term buyer is now tasked with making a new swing high, otherwise the long term auction may come into balance.

The intermediate term timeframe is balanced.  The strong move yesterday was dynamic enough to push sellers out from their controlling position.  We are however nearing a price zone where I have some expectation of selling.  Price is pushing up into the bottom of our uppermost balance distribution which dates back to February 13^th, a day when Ben Bernanke gave the market a final push before leaving his post.  As participants are made whole, we may see supply coming into the market.  I have highlighted some key price levels on the following volume profile composite:

The short term auction is buyer controlled.  This can be seen as value progressing higher over the prior few profiles.  It can also be seen as a lack of overlapping value areas which tells us the buying force is dynamic enough to keep value on the move.  However, our current profile which includes part of yesterday afternoon’s rally and all of the globex session presents a slight imbalance.  From this imbalance, I envision some downside early on.  I have highlighted this scenario, as well as a few other observations on the following market profile chart:

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NASDAQ futures drifted higher overnight and as of this blog are set to open inside of yesterday’s balance and range.  Opening inside of prior day range presents a lower risk/reward environment.

The composite index gapped higher Monday morning and was mostly able to sustain the gains.  We did see heavy selling into the bell which carried over into the post market settlement period.  However, this selling was not able to achieve even a half gap fill.  As we progress through this week, we must keep this gap context in mind and how the market ultimately handles it.  Do we leave this gap behind?  Does it half fill then find buyers?  Or do we close the entire gap and then ignite selling momentum again?

Standing between us and the above gap fill scenario is a volume cave on the intermediate term.  The cave spans roughly from 3590 – 3565.  We entered the cave yesterday but sellers ran out of time.  With the overnight inventory long, I suspect we may see sellers present themselves after the opening swing and attempt to stimulate liquidation through the cave.  Whether or not they succeed will be interesting because they still retain control on the intermediate term timeframe.  I have highlighted the intermediate term volume cave on the following volume profile chart:

However, this is the first of the month, the first day of a four day period where buyers have a slight edge in the SPX.  Whether this strength finds its way into the NASDAQ is to be determined.  The short term auction is balanced.  We are trading inside of a large distribution formed yesterday with clear signs of responsive buying and selling.  The break from here will give us guidance into whether either party is able to gain control in the short term.  I have highlighted your key levels to monitor for short term control on the following market profile chart:

The long term auction is still buyer controlled, it is the beginning of the month and quarter, and we are priced to open inside balance and inside range.  This seems like a great day to fade early price level extremes (extensions from the opening swing) and go with and buy flow trend intraday.

 

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Index futures gapped higher Sunday evening and did little else for the remainder of the globex session as price chopped sideways and formed balance.  As we approach USA cash open, the NASDAQ is currently up about 0.50 percent.

The long term auction is still buyer controlled and we are near an area where I expect to see signs of buying.  Keep in mind however, this is only an expectation.  If instead I see heavy selling pressure throughout the week, then we may see buyer control on the long term come into question.

The intermediate term is seller controlled but showing an attempt to balance.  The selloff on Friday afternoon printed a neutral print which suggested slight indecision but an overall directional confidence from the sellers.  Now that price has reverted back to the mean overnight, it will be interesting to see if the NASDAQ futures can stabilize above Friday’s low and consolidate before moving elsewhere.  A consolidation would be a welcomed break for stock traders, perhaps even more so then a strong rally.  I have highlighted the intermediate term on the following volume profile chart:

Bear in mind today is month-end and statistically the first four days of the month favor longs which could skew the picture we see develop today and throughout the early week into a very interesting picture.

The short term auction is balanced.  After forming a large-balance distribution through Thursday’s trade, we printed a P-shaped short squeeze and a b-shaped liquidation profile.  We are now trading in the middle of these two profiles.  Let’s see which breaks and whether it sticks to see where the control is early on:

 

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Opening Swing is an ongoing series where we review the opening swing for each day of trade in the NASDAQ futures and the effect these price levels demonstrate on the subsequent price action.  We also look at tradable opportunities and discuss the risks involved with these trades.

The opening swing is the price range established right after the market opens.  There are orders called Market On Open (MOO) orders which execute when the market opens.  The opening swing is not timed, but rather the push in either direction from these orders.

I began writing this series at a very interesting time in the market.  Many of the traders I respect and follow foreshadowed 2014 to be a year of increased volatility and as soon as it hit in mid January I began formulating thoughts and testing strategies to capitalize on the wider ranges volatility offers.  I chose to focus on the NASDAQ because it offers a wider range to trade then the S&P and also by monitoring the index I have an indication of the pressures existing on most of the stocks I trade.

Most of my notes this week are embedded in the images, so click through them to see some very interesting market activity in and around the opening swing.  There were some fantastic tradable opportunities this week.  As always, do not hesitate to discuss these strategies and share any inputs you may have.

For additional insight into the overall context from each day you can review my morning context reports.

MONDAY:

TUESDAY:

WEDNESDAY:

THURSDAY:

FRIDAY:

 

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We began seeing sellers abate yesterday after they gave the marketplace a solid push at the opening bell.  Their activity early in the day was dynamic enough to print a very wide initial balance, but as the day progressed we saw their control give way to balanced, two-way trade.  This type of market profile print is referred to as a Normal day although the name is misleading as these types of sessions are more an exception to the rules.  A normal day lacks any real directional conviction and often shows up near inflection points.  We can see the short term coming into balance on the following market profile chart:

The intermediate term auction is seller controlled however, which leads warrants caution until balance can be achieved at the least.  I covered my hedge early yesterday into what I deemed price becoming extended to the downside.  However markets can certainly continue to press their momentum both directions.  I have highlighted the key downside levels on the following volume profile chart:

The long term auction is still buyer controlled.  It is damaged.  The trend is not as clean cut as we have seen for many months, but the pattern of higher highs and higher lows is still in place.  And we are nearing one of my favorite reference points, see below:

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Sellers gained quite a bit of confidence yesterday.  The day started with responsive selling into the overnight strength which morphed into initiating selling for the rest of the day.  The session ended up printing a new swing low and solidified the seller control on the intermediate term timeframe.

The long term timeframe is still buyer controlled in the NASDAQ composite even through this selling.  This can be seen as a series of higher highs and lows on the weekly chart.  We are watching the market follow through this week on an outside candle print two weeks back.  The outside candle print often occurs near inflection points.

The intermediate term is seller controlled.  I had to rebuild my volume profile back to November 25^th to get all the data needed for a proper composite profile representation.  I have highlighted some key levels and observations on the following intermediate term volume profile chart:

The short term auction is seller controlled.  Value is being pushed lower and prices are testing lower into areas of unfinished business (naked VPOCs).  I have highlighted the key levels I will be watching today, as well as a few scenarios on the following market profile chart:

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NASDAQ futures are higher overnight and we are currently priced to open inside of yesterday’s range but outside of value which presents an elevated potential for big intraday moves.  The overnight profile is also interesting because it shows no real consensus on value.  Instead we have a toothy profile with buyers pushing higher.

Price traversed through the volume cave which delineates where our upper-most intermediate term balance zone exists.  We are currently trading just above it which creates the potential opportunity for an overnight gap fill more possible and rapid due to the low volume structure beneath our current pricing.  The intermediate term is seller controlled but showing signs of balancing.  Yesterday morning sellers were unable to press to new lows verses Monday.  Instead we stabilized at a low volume node just above the Monday low and reversed higher.  Sellers need to prevent acceptance of trade above 3645.75 to sustain their control of the intermediate term. The long term auction is still buyer controlled as seen on a daily chart.  I have highlighted this key price level and the volume cave below on the following volume profile chart:

The short term auction is out of balance and buyer controlled.  This can be seen as value migrating higher.  Buyers need to make a new high above 3645.75 (overnight high) to firm up their control in the short term.  I have highlighted this level and a few potential scenarios on the following market profile chart:

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The NASDAQ futures are higher overnight, drifting quietly through the globex session after buyers put together a decent bounce yesterday afternoon.  As the USA comes online, prices are currently trading just above the afternoon swing high.

The long term auction taking place in the NASDAQ composite has become an interesting picture.  On one hand, the weekly chart is very much still in buyer control.  The series of higher highs and lows is still intact.  Yet the weekly chart offers us a bit of contex that we continue to watch develop. Three weeks back it printed an outside candle and this week has the potential to confirm it to the downside.  Of course, this is very early speculation since we have only seen one trading day, but something to keep in mind nonetheless.  The daily chart suggests buyers are still in control but with a more confident seller pressing down below recent support.  We have not seen a swing low support broken since late January.  In that instance the market quickly V-shape recovered, should one expect the same outcome again?

The intermediate term auction is seller controlled.  This can be seen as a series of lower highs and lower lows.  The sellers also pressed us out of the intermediate term balanced volume profile.  There now exists a large void in volume where the lower end of balance once existed.  It would not surprise me if price were to traverse this area several times the next time we come to it before the market ultimately decides which side of the cave it wants to trade on.  I have highlighted this volume cave and some other interesting observations on the following volume profile chart:

The short term auction is buyer controlled.  We saw responsive buying yesterday afternoon which resulted in some tail prints which demonstrate strong demand.  When the NASDAQ came into the bell while forming balance and that profile print has a long tail on it also.  There exists a stronger potential for an opening drive this morning for two reasons.  First, the market is currently trading only a few points below the volume cave highlighted above (intermediate term).  Second the market profile prints are single prints like a zipper, and prices tend to run right up these.  Thus, any aggressive attempts to fade early strength are at an elevated risk of a drive.  Otherwise,  we have a solid profile structure to trade against below us.  The play would be to short into any early overbought positions and target an overnight gap fill.  If price trades inside of the prior value for an hour, find another entry onto the short side to trade through value to the VPOC and then the VAL.  I have highlighted this trade as well as a few other observations on the following market profile chart:

 

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