Well here we are on another Friday, the first of its kind for August, and the market has confidently settled into the 1700 handle, using the overnight session to familiarize itself with the price level and digest the progress made.

The markets took a pause overnight, printing a quiet and balanced session.  We have payroll data out in about 20 minutes, and I suspect we’ll see some action leading into the announcement.

Yesterday was an upward auction all day after gapping higher, the market never suggested a gap fill to be in the cards, thus we’ve left a large gap open.  It’s not clear on the profile because we closed near the low of the day on Wednesday and the market came down and tested the high-of-Wednesday to the tick before proceeding higher, but a gap in fact does still exist.  And I have a strong feeling there are participants looking to buy that gap down at 1681.50.  However, they may not see the level print before confidence resumes in the marketplace.

The market is extended, but it’s Friday and we could enter the realm of irrational.  Again, I suspect we’ll have more visibility of the rotations after the data at 8:30.

On any pullbacks, I’ll be looking for signs of buyers at 1696.50 than 1693.  The measured move upside target is 1708.50.

I’ve highlighted these observations on the following market profile chart:

The overnight session was all buy side as the /ES contract continues to print a near-perfect sine wave across time.  The action looks to be building up plenty of energy, and I suspect the next move away from the large balance area will be a meaningful one.

The bracket extremes on this gyration range from 1694 – 1680.  The action within these prices encapsulates all of this week’s trade.  As I type, the bulls are pressing up against these upper limits, printing the 1694 handle about an hour back.  The momentum is certainly theirs to run with, should the buyers press their initiative early on.

Let’s not make this any more difficult than it needs to be, if we sustain trade > 1694, we’ll be targeting the 1700 century mark. 

Should we trade decidedly lower, or perhaps see a failed push by the bulls, I’ll be looking for signs of buyers first at 1687, then again at 1683.  Failure to hold these levels could introduce selling into the market, pressing us to test 1676 and perhaps even Friday’s low at 1670.50.

I’ve noted these interesting levels on the following market profile chart:

We printed a very balanced, very symmetrical profile overnight as it appears the broad market is on pause awaiting the GDP and Fed data.  We had a rotation higher overnight the stalled before the 1688 level I mentioned earlier as the bull target.  Sustaining trade above this price could bring in the buy flow at an accelerated rate.  I’ll be looking for price to run up to 1694 in this instance.

We auctioned back through Monday’s inside day yesterday and found buyers in the process.  The auction was healthy and produced a quality excess low we can monitor if any weakness presents itself today.

Should we trade lower, our expectations would be for buyers to show the same reactive nature at 1678, if they don’t show up, I’ll be on guard for liquidation lower, retesting Friday’s low at 1670.50.

I’ve noted these observations of the following market profile chart:

The overnight market was relatively quiet and balanced and has begun showing early signs of upward momentum.  Pair this with the fact that we printed an inside day on the market profile and it suggests a reversal higher may be at hand after a mild drift lower.

To be sure, we’ll need to see price recapture and hold above 1688.75.  We’re currently only an earshot away as we approach 8am.  Given the small gap present from yesterday’s close however, we may see sellers coming into the market early and attempting to press us back down into the large value area from 07/26.

With a long bias, I want to see the market reject lower prices at the 1682.75 area.  Secondary support exists at the VPOC 1680 then the VAL 1678.50.

I’ve presented these thoughts visually via the following market profile chart:

The globex market opened up Sunday evening without much fanfare and has drifted sideways-to-lower overnight in a balanced manner.  As of this writing, the futures are off about 3 points from Friday’s close.

We’re entering a week of moderate headline risk with the S&P 500 hanging around all-time highs.  The buyers may attempt to carry their Friday momentum into today’s session and their first matter of business is sustaining trade above 1688.50 where the liquidation break began last Wednesday.  If they’re able to accomplish this target, I’ll be on the lookout for a swift trade to 1690 then 1694.50.

Looking at the 24-hour profile, it suggests we’re accepting the large value area from early Friday morning and may work back through it to ensure the marked has sopped up all the buyers below.  Bulls will want to see the market significantly slow down in the heavy volume range from 1679.25 – 1678.  If we blast right through that range it would suggest a shift in sentiment and a possible retest of Friday’s ‘buy the dip’ lows.

I’ve highlighted the levels mentioned in the above scenarios in the following market profile charts:

Weak market overnight, with the sell flow picking up around 5:30am.  I think it’s important not to locate the driver of this weakness as if it’s derived from some other market or currency, but instead to understand where the S&P 500 is trading contextually and where it could potentially go.

Although we’re pressing upon all time highs, it wouldn’t surprise me to see the market settle into a range over the coming week which means we need to be prepared for possibility.

The bulls will want to give up as little of the progress made on 07/11 (the Bernanke move) as possible to show their faith in The Fed.  Bears want the 1688 level to hold, where they flexed their liquidation muscles and pressed the market lower.

The overnight profiles suggest a lack of balance and potential for large directional movement today if we see a breakout above 1680 or a breakdown below 1675.

Breaking 1675 sets up a test of yesterday morning’s globex low down at 1671.75.  If that price fails to hold, the market will look to work down to 1666.

However, the market is showing significant signs of being oversold this morning, and given the weekly opex nature of Friday, we may see aggressive buying coming in early on.  Buyers need to get us on the other side of 1680 and hold it if they want to hold the upper hand.

I’ve highlighted these levels in the following profile charts:

As we approach month end and work through earnings we’re seeing our first bit of weakness since the v-shape recovery off recent lows.  The move has been more selective as ChessNwine has been reiterating, but for the indices it has been a unidirectional move.

The weakness spilled into the overnight session when European markets opened up.  We pressed through yesterday’s low and price was driven lower by sell flow bringing us to prices as low as 1671.75.  This price level has multiple confluence on the market profiles and should be monitored in relation to the other highlighted levels in the below chart to gauge the conviction of the sellers.

For the morning session, I’ll be closely watching yesterday’s low at 1677.25 and how the market treats it.  After breaching the level around 3am, we’ve clawed our way back up to it.  It will be interesting to see if sellers enter the market early and aggressive like we saw yesterday, or if something different occurs.

I’ve highlighted the aforementioned price levels and a few others in the following market profile charts:

We’re experiencing a big of strength again in the overnight market, pressing us up against the all-time highs we experienced during yesterday’s globex session.  The important matter becomes how we handle these high water marks early on in the session.  Yesterday they were aggressively faded and we spent the remaining session stuck on support until an early afternoon rally which was faded.

If we can see price holding above 1693 during the first hour of trade, that alone would be an impressive achievement and could suggest the pain trade is on, pressing price higher when everyone is becoming more conservative.

I’ve highlighted some measured targets to monitor in the event we trade higher, and also a key support level and some notes about the large auction occurring this week in the following profile charts:

I don’t have much by the way of commentary this morning.  The market proved strong overnight mostly during the European session and since printing new all-time highs at 1695.50  we’ve seen a bit of digestion.

Continuation seems the most likely scenario, first to the measured target of 1696.50 and perhaps the 1700 century mark.

In case the market begins to break down and trade lower, we have several key reference points, including a bias zone from 1688 – 1687.25 meaning, you want to stalk long entries above, and shorts below when day trading.

I’ve noted the aforementioned levels and made note of the healthy auction taking place this week on the following market profile charts:

There was a notable shift in the character of the S&P last week as we reached new heights.  There was a compression to the daily ranges, a drop off in the volume, a decrease in broad equity participation, and well structured auctions.

Starting yesterday evening with a small burst of strength, the globex session managed to print a six handle range which balanced out and shows a slight edge going to the sellers.

Longs want to see 1686.50 holding as support.  Otherwise we may begin retesting the pockets of low volume below in the composite profile built late last week.

Above, we have the current globex high at 1694.25 then the measured move target of 1696.  The close proximity of the measured target to the 1700 century mark means we should all have the level on our radar if the market sees early strength.

I’ve highlighted the levels I’ll be watching using the 24 hour profile today, to give visualization to the balanced overnight session.