Nasdaq futures are up on 2^nd sigma range and volume suggesting we are seeing an abnormal globex session. The ranges the Nasdaq has printed this week have all been quite abnormal. Macro waves tend to cause this uptick in volatility and correlations, and we are certainly experiencing such an event as oil explores lower prices.

At 8:30am Initial and Continuing job claims came in better than expected and we saw a slight bounce on the news. This is a slight shift in character. Recently participants have been rewarding worse than expected job stats because an improving labor market is influential on Fed policy. Of course the monthly NFP report carries more weight than this morning’s data.

After the open we have Markit PMI stats at 9:45am and Philadelphia Fed at 10am. This may cause some choppy trade early in the session until participants hear the data. Or it may not.

Turning to the charts, you can see on the daily bar chart (right-side chart) how we are pricing inside of two volume pockets. These thin volume areas are prone to rapid price discovery. We initially found buyers at the first high volume node separating the two pockets, then we slid through and tested the bottom of the second pocket.

We came into solid structure Tuesday afternoon and I noted that we were likely to find support here. I do not say this to pat myself on the back, but instead to draw your attention to the fact that the market has memory and this isn’t just some random walk by prices. We also tested a prior zone of resistance. Piror resistance often converts into support and vice versa. The former is an attribute of a market trending up, which, long term, the Nasdaq is still trending higher.

Intermediate term we are seeing overlapping value. Balance. On the left-side chart I have noted the key price levels I will be observing today. There are several points of resistance up above current prices. They will be key in assessing whether we again V-shape higher or instead churn out a balance. Please see below:

Primary hypo is choppy open which squeezes higher to take out overnight high 4225 and test MCVPOC at4223 before finding some sellers and chopping.

Secondary hypo, given the large gap up, is to see sellers work into the overnight inventory. I will look for signs of buyers at 4190 then again at 4182.50. Otherwise look for a range gap fill to 4173 and potential full gap fill to 4160.25. This hypo might take on some driving characteristics (down) early in the session.

Third hypo is a gap-and go run higher. Given the large, ‘pro gap’, the markets are out of balance and the risk of a drive is elevated.

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Overnight volumes are elevated to the 2^nd sigma on the Nasdaq while the range has been contained and normal. Prices are higher on the globex session however the gap up has been a questionable show of strength for several sessions.

This week the price fluctuations of the Nasdaq have been highly correlated with oil. Oil volatility has become a key driver to investor sentiment and price action and likely will continue to do so until we see it come into balance.

Today is FOMC day. Earlier this morning we heard from the Bank of England and their commentary produced a modest bounce. During today’s trade, my expectation is for an hour or two of action followed by chop as the market waits to hear from The Fed.

Prices are currently trading in the range of October 30^th which, if you recall, was the session before Japan announced their massive stimulus package which led to a big gap up and a subsequent grind higher for several weeks. Now we have returned to the ‘scene of the crime’ to see if buyers are still motivated at these levels.

We slid through the second pocket yesterday and now we are coming into some solid structure. Given the velocity we have in our approach to this region, we may overshoot the CHVN at 4053.75. I have noted on my chart a few price levels just below that CHVN which are about 50 Nasdaq points away from current prices.

Early on my primary expectation is for sellers to push into the overnight inventory and work a gap fill down to 4084.50. This puts us near the lows to target 4081.50 (ONL ) then 4080.75 (YLow).

Secondary hypo is a sharp move back up the volume gap which takes out overnight high 4116.75 and builds acceptance in yesterday’s value region up near 4130. This puts us into a holding pattern until Fed.

Hypo 3 is a drive down, which is still in the cards given the current speed of the market.

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The macro waves we began to see last week continue to swell as we head into trade this morning. Late yesterday afternoon The Russians significantly hiked their interest rates. The Nasdaq shrugged the news off initially but around 6am, amid the Russian markets trading down significantly, sell flow rushed onto the tape.

The resulting globex auction carries the second highest volume dating back to July 2012 and a 2^nd sigma range. In short, statistically this was a highly abnormal session.

As we approach US trade, prices are trading higher and retesting Monday’s low print at 4141. I suspect this level will be of interest in early morning trade, especially as it also nearly marks the globex session midpoint.

The market is heading lower. It is doing so in a process we call discovery in auction theory. The market will continue to head lower until it finds buyers. You can now simplify your job down to answering one question—is the market done finding buyers?

Answering that question is a matter of observing characteristics of a quality swing low and making an educated guess. There are no guarantees in trading.

Taking to the charts, yesterday appears to be a continuation of Friday’s selling where we trading out the week on the lows. Once it breached the very low volume node near the middle of the breached volume pocket, our expectation was for price to continue to the high volume node on the other end. This is basic pocket play.

The responsive buyers were active at this level (about 4144.75) and produced a decent looking low. I initiated a weekly call option in NFLX right around this level and it immediately caught a strong bid as well.

However, the session moved forward, and the buyers were unable to defend their bounce and instead gave back nearly all of it by the close. This was a clue. If the market had truly found a buyer here then we likely should not be back down near the lows. I cut NFLX for this reason, as it too was hovering near my entry.

Overnight price breached the next very low volume pocket. Whether sell flow pushes prices below 4115 during RTH will be my clue regarding lower prices. Swing high/low are often not established during globex, thus sellers have the edge.

My primary expectation is for and open auction outside of range where prices to attempt higher early on. Whether buyers can reclaim Monday’s range (4141) and the overnight mid (4143.50) will be important. If they can, we might see a test of the overnight high 4176.50. Otherwise we continue trading lower to test the pocket mid at 4115 and if that breaches then my expectation is for trade to continue down though the pocket.

The HVN on the bottom of this pocket is not as peaked as the one we experienced yesterday, thus trade could become a bit muddy in this region. 4053.75 is the ultimate target on the pocket fill but we may see responsive buyers before then.

Hypo two, with an elevated expectancy, is and opening drive down. This would take out the 4115 pocket mid early and work down to the 4053.75 target quickly. In this case we may blow through the level before finding a responsive bid.

Third hypo is buyers sustain Monday’s range, take out the overnight high (4176.50) and make a run for 4200.

You can see these observations and levels indicated below:

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Nasdaq futures are higher to start the week after a weak close on Friday. The market found a bid at an interesting level, 4180.25, just a few ticks above the midpoint/LVN of the volume pocket we entered during Friday’s close. The range is just beyond 1^st sigma suggesting an elevated risk environment and volume is running high 1^st sigma as well.

Just before the open the Industrial/Manufacturing Production data is coming out and shortly after the open at 10am the NAHB Hosing Market Index. More housing data is due out later in the week but the highest impact news comes Wednesday when both the Bank of England and the US Federal Reserve will be releasing minutes, employment, economic projections, and rate decisions.

Last Friday, after printing an abnormally wide initial balance (52.5 points) during the first hour of trade, prices spent most of the session churning inside the wide range. Then, in the final hour and fifteen minutes the market sold off sharply. The move carried into last night’s globex for a short bit before reversing higher.

Prices of crude oil are still drawing the attention of macro players and a rally overnight in the commodity is being at least partially attributed to the strength in equity indices.

Early on I am looking for sellers to press into the overnight inventory. Whether those sellers are able to take prices below 4200 will be telling early on. Initially I will be looking for signs of buyers at these levels who work higher toward overnight high 4227 and ultimately target Friday’s VPOC at 4231.

Secondary hypothesis is for sellers to accelerate below 4200 and target overnight low 4180.25 which opens us to the idea of continuing to explore lower prices especially below 4179.

Third hypo is a strong buying move to test the weak high up at 4251.25.

I have highlighted the levels mentioned on the following volume profile chart:

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News flow starts to accelerate a bit today. At 10:30am the weekly energy statistics (oil and gas inventory) will be released. At 2pm there is a monthly budget statement from the Department of the Treasury. Than ahead of the open tomorrow there is a Swiss rate decision, ECB Monthly Report, and US Advanced Retail Sales for November.

Also note that tomorrow futures trades will roll forward to the March 2015 contract. This can cause some wacky delta readings and offset order flow as positions are moved to the new front month contract.

Turning our attention to the market, Nasdaq prices are a bit lower from where they left off Tuesday afternoon and have traded in a balanced range for most of the session. Range and volume are normal and the low of the session looks a bit weaker than the high.

If you recall on Monday we discussed how once price entered the below pocket we were likely to test through to the other side down to 4242. Yesterday prices went gap down below this level and found responsive buyers. What followed was a stronger-than-expected neutral extreme day type which recovered the entire gap (recapturing the volume pocket) and more.

It was an interesting profile print because it spent nearly 2 hours building value down near 4242 before accelerating into the pocket/gap zone. This left the VPOC of the session down at 4239.25 almost 50 points away from current prices.

My primary expectation for today is to see a constructive inside day with buyers defending the upper half of yesterday’s range. Typically the day after a neutral extreme or trend day I look for continuation or exceeding the prior day high but the curious nature of yesterday’s print has tempered my expectation a bit.

I have highlighted the key levels I will be observing on the following volume profile chart:

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A mix of concerns over China loans and Fed rate concerns are being cited as ‘the why’ behind this morning’s sharp selling of index markets. As we head into US trade there is little on the economic calendar.

Aiding in the movement was the volume pocket formation we fell into yesterday. When prices entered this thin region yesterday I noted that we were likely to test through to the other side, down to 4242 with perhaps a few pivot points along the way represented as low volume nodes. Sellers are not wasting much time it seems.

The definitive break of balance yesterday put the market into intermediate-term discovery mode down. Sellers took control of this timeframe. They continued to press their control overnight and we are now trading on the other edge of the volume pocket.

The market is now exploring lower in an attempt to find buyers. After overshooting the 4242 HVN my expectation is to test through down to 4227.75. This is ‘pro gap’ territory, meaning, fading the move is requires very deep pockets and the gap has a low probability of filling during today’s session.

The risk of an opening drive is also elevated given how out of balance we are.

In summary, I am expecting other time frame participants to be active in this out of balance market with a low likelihood of filling the gap. I have noted the price levels I will be observing on the following volume profile chart:

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Macro currents have put a damper of the price of the Nadaq as we head into the week. The most notable event was a warning out of Europe regarding their economic prospects. For full details from Reuters, you can click here.

In regards to seasonality trends in December, the second week of the month is its weakest. However the month is overall a bull one seasonality-wise. Therefore it makes sense to look for strong charts which pull-back and consolidate as opportunities into year-end.

The overnight profile on the Nasdaq formed a slide zone which can be seen as a series of single prints. This piece of context might result in a fast trade upward at some point today. It also has been lingering down on session lows leading me to expect a retest of the low early on.

The structures forming on the 24-hour profiles [which encompass both regular trading hours and globex after hours] show two ‘pinch points’ or low volume nodes which seem to define the current short-term balance structure. Please see the below chart for key short-term context:

Keep these levels in mind as we progress through the week. A breach of 4292 opens the path to a slide through the Nasdaq volume pocket which spans down to 4242. There are several low volume node reference points between those two levels, however the major traverse would be all the way down to 4242. I have noted this pocket and the relevant potential turning point LVNs on the following volume profile chart:

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The market is experiencing little reaction to the 8:30am data which featured a significantly stronger-than-expected NFP number and an inline unemployment rate. Just before the news was released there were short headlines out of Europe concerning a one trillion dollar bond buying program in the multi-country zone. The news sent the thinly traded Euro dollar reeling lower. The busy morning on the net however has produced a normal overnight range on normal volume as we head into Friday’s trade.

There has been a buyer in the Nasdaq defending around 4310 for the last 26 hours. What I am interested most is the low volume node formed just below this level, right at 4307.50

Since the sharp move lower on Monday prices has drifted higher on the index, and part of yesterday’s neutral print was a sharp excess high. The first reaction to the NFP data was a sell that took us right to the low of the globex session but did not breach it.

This structure leaded me to hypothesize we see sellers at the open who push into the overnight inventory and take out the overnight low 4310.75 to test the 4307.50. I will look for signs of responsive buyers at that level otherwise the MCVPOC at 4298 becomes an area of attraction for sellers to target. Below there the structure starts to get loose, especially below 4286.75.

If buyers defend the LVN at 4307.50 then I am looking for a run toward prior swing high formed last Friday.

I have noted the price levels mentioned above on the following volume profile chart:

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Nasdaq futures are on the move as we head into US trade as speculators digest the ongoing ECB commentary from Mario Draghi. Third reaction analysis of the news driven move showed sellers as the most active participant, however it will be interesting to see how we auction once the markets open for trade.

Shanghi composite surged over 4% overnight on fresh speculation of stimulus. During the Draghi comments we are seeing some big swings in the Euro and the DAX. The DAX covered 250 points of range on this move, first up nearly 100 then sharply reversing.   So overall these are very volatile market conditions as we head into the open.

Yesterday the Nasadq came down and touched the micro composite VPOC at 4290 and saw a sharp reaction higher. The action that followed managed to push the VPOC a bit higher to 4298 after price churned in this region for much of the session before ultimately moving higher.

Prices are set to open inside of yesterday’s range at the open, however prices are on the move as the markets continue to adjust in these volatile conditions.

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

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We started the month of December with an ‘event’ of sorts. The first half-hour of trade, also known as the initial balance, was spread far and wide (61.25 points) by an aggressive other time frame participant who predominantly sold the market. We must also give some credit to the buyers who pushed up 7.75 points before the move, the move largely driven by a fast sell in AAPL shares.

In case you are very new to the Nasdaq, Apple Inc. is the largest component of the Nasdaq 100, the underlying index of /NQ_F futures.

However, none of this activity was news driven, which makes it unique. We treat motivated, news driven moves a bit differently from big, participant driven moves.

Participant driven moves must be monitored for continuation. Does the responsive seller become initiative? Is the other-time-frame (OTF) still engaging the market? So far no, and maybe.

We have traded inside this initial balance since it occurred. And as far as I am concerned, we can shelf the volume profile I normally share which features very granular levels only useful to me and other day traders, and instead put your eyes, the swing traders eyes, on just a few key points.

Listen, we have Fed Beige Book coming out at 2pm today and it is usually not a high impact event. But before then ISM Non-Manufacturing Index is set for release. This number surveys all sorts of odd industries like services, construction, mining, agriculture, forestry, and fishing and hunting. It may be of interest during the great commodity liquidation of 4^th quarter 2014. Keep an eye on the price action around 10am eastern.

In the meantime, amid all that noise, keep these context levels close to your itchy trigger finger during today’s session:

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