S&P Futures Update for Feb 3, 2014

Perspective: So far January is an inside month i.e. we are still 1-timeframing higher on a monthly basis. The weekly trend is down. The daily chart (short term) below shows the market in a 5-day Balance. Coming into today - Friday, the overnight session tested the 1761 area and found buyers. The overnight low of 1761.25 was not tested in the pit session. For next week - Monday, Balance trading scenarios apply:

1. Scenario 1 is that the Market remains within balance - limited opportunity.
2. Looks below 1764 and finds acceptance - first destination becomes the December Low of 1754 made in an overnight session and one I discussed in last week's blog post. Notice that the 1767 level has been tested 3 times already and the market has so far settled above that level. The next test down may not hold. Think of these balance area extremes as a thin membrane - the more you poke it - the greater the odds that you will pierce through that level.
3. The other scenario is that the market having tested 1767 level may now test the other end i.e. 1805-1806 area of the larger balance shown in the chart below. 

 

 The market profiles for the last 5 days do not provide me any additional info. The weekly Value Area Lo/Hi are 1773.25/1787.75. Overlapping to higher Value next week is positive short term. Overlapping to lower Value will be reinforce the current intermediate trend - which is down.

S&P Futures Update for Jan 27, 2014

Failure to take out the all time high at 1846.50 resulted in the market breaking hard last week. Wednesday was an inside day - a formation referred to as Balance within Balance. Thursday, the market gapped lower from this 2-day balance. A gap is a form of Excess. Excess marks the end of one auction and the beginning of another.  Friday saw the market break out of a 4-week balance and enter the lower weekly balance between 1765-1807. While the monthly trend is still up, the intermediate term trend has turned to the downside. Friday's close at 1782 - was on the lows. Acceptance within this lower weekly balance area targets the balance area low at 1765-68. While there is still a lot of structural repair that is needed below these levels - all the way down to 1700, I would take it one step at a time. Both Thursday's and Friday's sell off was not accompanied by extreme NYSE TICK readings. However, Friday's NYSE Volume was above recent averages at 4.4 Billion. Some information to carry forward - 

• Both the Nasdaq and Russell index made new all time highs in the overnight trade coming into Thursday's pit session. It is unusual for markets to make leg highs in the overnight session.
• A poor high and a very prominent POC (1839.25) from Wed, Jan 22, 2014.

Lets look at the Profiles next. I view Friday as a triple distribution day and treat each distribution as a "separate" day even though they were formed on the same day. For Monday, if we get overlapping to lower Value relative to Distribution 3, it shows that the auction is not complete to the downside. The odds of then reaching the 1765-68 area increase. If we open within Distribution 3 and enter and find acceptance within Distribution 2 - the target becomes the 1805 area which is also close to the high of this lower weekly balance area shown in the bar chart above. So, take it one step at a time and reassess based on the overnight inventory conditions coming into Monday's pit session.