Daily Analysis - Tuesday, 12/31/24
NQ saw a moderate increase in new business yesterday. We are at a key support area in the higher-level structure. Will we break down or hold?
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.
Market Holiday Schedule
New Year’s Eve, 12/31/24 - NQ Market closes @ 5pm EST
New Year’s Day, 1/1/25
NQ Market closed for the 1/1/25 trading session.
NQ Market opens at 6 pm EST on 1/1/25 for the 1/2/25 trading session.
News Events this Week
It will be a light news week with the New Year’s holiday.
Thursday - 1/2/25
8:30am - US Initial Jobless Claims (Expected: 222k)
8:30am - US Continued Jobless Claims (Expected: 1.8825M)
9:45am - US S&P Manufacturing PMI Final (Expected: 48.3)
Friday - 1/3/25
10:00am - US ISM Manufacturing PMI (Expected: 48.2)
Prior Day Stats and Analysis - Monday, 12/30/24
Session Open: 21,409.00
Session High: 21,571.00
Session VAH: 21,579.75
Session POC: 21,506.75
Session VAL: 21,384.75
Session Low: 21,253.00
Session Close: 21,411.75
Session Settlement: 21,416.25
Session Range: 318 pts, 1272 ticks
OI Change (Prelim): +6,775 (NQ)
Prior Session Analysis
First, let’s start with the Daily chart because it’s always good to keep an eye on the higher timeframe perspective. NQ is in a very important area right now. It has found consistent support below 21,400 down to around 21,200 on multiple days, including yesterday. This has been a key zone that buyers have stepped in and defended, which indicates that other timeframe participants see this as an essential level. I think 21,200 is a key level to watch; if it breaks, that is a risk-off indicator, and we may see capitulation from longs. In the scenario that 21,200 fails to hold, it would confirm that the uptrend is over, and then the question is, do we enter a range-bound market or a bear market?
If we see this area hold again, it will be key to watch if NQ bulls can retake the 22,000 level and then take a higher high above 22,100. This would be a bullish indicator and could indicate a continuation of the uptrend. In this scenario, a failure to break the all-time high of around 22,450 could also indicate a range-bound market. This range-bound scenario, I believe, is the most likely to happen as the market waits for new information from data releases, Fed meetings, and the new administration coming into office.
I’m showing the profile from yesterday’s session and the prior session on Friday in today’s graphic. I also kept my levels on the chart today because it will make it easier to see some of my analysis from yesterday’s price action.
To start, yesterday’s session opened with a gap from the prior day’s low. Typically, gap rules indicate that if the gap does not close within a reasonable time period, usually the first hour, you should trade with the gap. In true market fashion, nothing is ever certain, and that rule would not have worked yesterday. Most of the short opportunities were before the market opened at 9:30am, the selloff started at 7:10am. There were a few short scalp opportunities off the open, but price largely consolidated as longs and shorts battled for control until approximately 10:30 when buyers gained the upper hand.
Buyers attempted to auction price back up into the gap between 10:45am to 11:30am, meeting resistance until they were ultimately successful and shorts capitulated. We then saw a nice uptrend all the way up to Friday’s value area low, with plenty of opportunities to get long between 11:30am to 1pm.
Once the price was able to auction above Friday’s low, it ran into resistance at Friday’s value area low, and the price was squeezed into a range between these two price levels; Friday’s VAL was resistance, and Friday’s low became support for most of the afternoon.
This resistance at Friday’s VAL indicated that participants were strongly opinionated that the fair value for NQ was less than Friday’s fair value.
Around 3:15pm, sellers were able to take back control and auctioned price back lower into the close, taking away more than half of the move up from earlier in the session.
The market profile is often called “antiquated” or “outdated”. I can tell you with certainty that those opinions are wrong, and if you need evidence, yesterday’s price action in relation to the profile from the prior session is clear evidence that larger participants in the market do use it and pay attention to the levels it indicates.
Thesis for Today - Tuesday, 12/31/24
At the time of this writing, overnight inventory is slightly long at 21,470, right in the middle of yesterday’s value area. If this holds, we will open in balance.
NQ added a moderate amount of new business yesterday, with 6,775 contracts in new open interest. It is not possible, however, to say whether those new positions are long or short.
The overall market sentiment right now is fearful, and I believe caution is in order. The way the market is behaving indicates to me that other timeframe participants are adjusting inventories based on the new reality of fewer rate cuts by the Fed in 2025 and beyond that expected, and a new administration coming in with little confidence around what that new administration will follow through with in regards to tariffs and budget cuts.
As I wrote above, keep an eye on the 21,200 level. If the price breaks below it and holds, I believe that is a significant risk-off indicator, and we could see a significant downtrend develop.
Other levels to keep an eye on today:
21,570 - a break and acceptance above this could indicate further upward price action.
21,350 - a break and acceptance below this would indicate participants again view fair value as less than yesterday’s session and would be a further step down against the higher level uptrend. The 21,200 level could come into play if price breaks and holds below this level.
"Amateurs focus on how much they can make. Professionals focus on how much they could lose." – Jack Schwager