Daily Analysis - Friday, 1/3/25
Will we get a fifth straight losing session in NQ? Or did the strong buying support at 21,000 in yesterday's session indicate price has become cheap enough for bulls to take back some control?
Disclaimer
This publication and its authors are not licensed investment professionals. Nothing posted on The Shmuts blog should be construed as investment advice. Do your own research.
News Events this Week
Today - Friday - 1/3/25
10:00am - US ISM Manufacturing PMI (Expected: 48.2)
Prior Day Stats and Analysis - Thursday, 1/2/24
Session Open: 21,347.75
Session High: 21,444.00
Session VAH: 21,337.50
Session POC: 21,178.50
Session VAL: 21,075.00
Session Low: 20,983.75
Session Close: 21,169.00
Session Settlement: 21,167.50
Session Range: 460.25 pts, 1841 ticks
OI Change (Prelim): +2,993 (NQ) / +7,351 (MNQ)
Prior Session Analysis
Yesterday’s session was a bit of an anomaly, I say it was a Double Distribution day in terms of profile categorization, with the 21,200 price area essentially splitting the middle of the distribution.
As predicted, session volume yesterday was the highest it has been since Dec 20th, and we saw plenty of volatility to go along with it.
Price spent the morning above that price level, then a strong auction down to break below at approximately 12:20pm resulted in price spending the afternoon auctioning below that key price area.
During the first hour, a pretty wide Initial Balance was formed, which was roughly 300 points. Price attempted to auction down below the 21,200 level twice, once off the open and then later, around 11am. Both attempts were rejected, and bulls seemed fairly strong during the morning. Around 11:30, given the wide IB and failure to auction lower on two occasions, I felt that the extremes were likely put in for the day and expected volume to begin to tail off. We felt we were looking at a range-bound day.
At approximately 12:20pm that opinion changed, and we saw a very strong auction downward with continuation through the key 21,200 level. At this point, I tweeted (@TheShmuts) that I felt the 21,000 level was in play.
Price rejected off the 21,000 level and bears repeatedly tried to auction price lower for the next hour from 12:45pm to 1:45pm, each time running into a wall of buying at the 21,000 level. That price level held very firm.
Sellers eventually exhausted, and buyers took back control, auctioning price back up near the 21,200 level into the close.
Plan for Today - Friday, 1/3/25
At the time of writing, overnight inventory is long, approximately 85 points above yesterday’s settlement. However, outside of an initial push-up shortly after opening last night, price action has largely been sideways and range-bound overnight. Price has respected the 21,200 level overnight, we will wait and see if the NY session does the same.
If this price action continues into the open, we will open in-balance, not just inside of yesterday’s value area but also inside the value area from Tuesday, 12/31/24.
NQ added a modest amount of new business yesterday, +2,993 contracts for the third straight session.
I will dive more into the higher timeframe charts on Monday, but for now, with four straight negative sessions, NQ is still in an uptrend in the Weekly timeframe but no longer in the Daily timeframe. NQ is currently -5.3% off the all-time high set on 12/16/24 at 22,450. For traders with a mostly bullish bias, I would advise caution. Market sentiment has changed to bearish since Powell's hawkish comments after the FOMC meeting on 12/18, and there is currently nothing to change that sentiment.
My trading plan for today:
Bullish: If the 21,200 level can hold off the open and provide support, that would be a good bullish indicator. Above this, my two areas to watch for resistance or continuation are:
21,360 - 21,325: The area where yesterday’s selloff after 12pm began and also yesterday’s value area high. A break above this would take out the selloff and imply higher value than the sentiment from yesterday.
21,455 - 21,432: this has been an area with strong rejections both in yesterday’s session and in the Tuesday, 12/31 session.
Bearish: The 21,200 level does not hold off the open and price auctions below and does not reject back upwards. Below this, my two areas to watch for support or continuation are:
21,075 - 21,063: Yesterday’s value area low and provided some support during the late afternoon uptrend. A break below this would indicate participant sentiment that value is lower than yesterday.
21,000 - 20,980: Was a very strong area of support in yesterday’s session and also a psychological level for the market. If price auctions down to this level it will be interesting to see if bulls step in again and are willing to buy, or stand aside and let sellers auction price even lower.
"The trend is your friend until it ends." – Ed Seykota