NASDAQ E-Mini day trading commentary for 12/15

The NASDAQ created about a 1300 point range in the first hour Tuesday without damaging either support or resistance.  After the FOMC meeting adjourned they took out each side just marginally and then closed back above the midpoint and higher on the day.  What does this tell us?  Well … nothing really.  They could still start down from here but they don’t have to, and I think the wisest move is to just wait for them to do something.  I don’t think we should believe a move is heading higher unless we see them above 1230 and I’m not sure how likely that is.  This isn’t a pure breakout price action so I’d really rather see them head lower, and I think taking out 2200 is probably enough to suggest that a move lower is underway.  There is still move support near 2190 but I think 2170 is a much more likely downside target.  The lack of any real new information in the Fed statement was pretty disappointing Tuesday.

The NASDAQ opened up near 2225 Monday, but despite a serious attempt in the first two hours they never got above that level let alone the 2230 we were looking at.  Of course they also never got below 2205 despite selling off fairly hard late in the day so it isn’t like they did any real technical damage.  If they can stay below 2220 Tuesday it would greatly increase the chances that at least a 2-3 day sell off is underway, and I think there is a chance they could open below 2208 and stay there.  The best support is about 2 points either side of 2200 and a break of 2190 could lead more than another 20 points lower.  As with all the financial markets, the PPI and FOMC meeting on Tuesday could be tremendous wild cards.  Either or both of them could change the price action in a flash and they also make it questionable if risk control could be accomplished even if you have the direction correct.  If we had no news at all I would be looking for prices below 2170, but risk control is always the most important criteria to consider.

The NASDAQ took a quick trip below 2200 in the first hour Friday and then spent the rest of the day drifting higher.  They even poked briefly to new highs for the year in the last 30 minutes but were unable to close up there.  This entire month rally looks like a house of cards ready to collapse, but looks can be deceiving and they just continue to work higher.  There is a chance they could fail right in here as they appear to be struggling at the highs for the year, but if they start trading above 2230 it will begin to get difficult to find additional resistance.  2210 should act as support if they are really, really strong, but I think that might be asking too much.  As long as they hold above 2200 they still have a good chance to rally and I don’t think they will be exhibiting any weakness unless they go below 2189.  They could rally right into the new year but I really think we ought to see a 2-3 day sell off somewhere in here even if they do.  They look a bit vulnerable.

The NASDAQ continues to play the weaker sister to the S&P currently, and this remains in stark contrast to the clear role as the leader most of the way up.  They have not begun to leader the rest of the stock market lower yet, though.  They did not quite reach the previous high for the year Thursday and they only closed marginally higher, but they had no problem holding above support.  This leaves support near 2196 as the area that could drive them higher Friday with no real weakness revealed unless they start trading below 2185.  Resistance is fairly tight around 2210, but with the high for the year just up at 2215 it might only take 2-3 points higher to really light the wick on this candle.  The logic here is pretty clear:  They really should be backing off.  The longer they do not, however, only increases the odds that they are preparing to do exactly the opposite of what they “should” be doing.  You can almost feel the tension.

The NASDAQ looked negative early Wednesday when they held resistance early at 2202 and started down, but holding 2183 less than 90 minutes later and turning back up prevented any serious ugliness.  The rest of the day was a rather slow, steady grind back up to marginal new highs.  The March 2011 contract becomes front month Thursday and they are trading very close to the same levels as the December 2010 contract.  Resistance could again be near 2202 and up to about 2207 with the current high for the year at 2215.  Support could hold as high as 2193 if they are heading to that yearly high, but I don’t think we should assume we are seeing any real weakness unless they start trading below 2080.  They really have been acting like they should have a multiple day back off here, but if they do not it may be because they are ridiculously strong and just ready to explode.

The NASDAQ gapped up far above 2200 Tuesday but stalled above 2216 almost immediately.  They did have one major intraday swing back up but they basically fell lower for most of the day and dipped below 2190 before closing right there.  This is not a very bullish looking price pattern but if they get above 2210 again they could change that picture fairly quickly.  Holding without going very far above 2200 would be more negative while breaking below 2175 could really start everything rolling down hill.  I hate to keep hoping instead of analyzing, but I really would like to see a nice 2-3 day break so we can see if traders will come in and buy them strongly.  Maybe they can start that for me Wednesday … but they don’t have to.

The NASDAQ matched the S&P with a very small range inside day Monday and looks every bit as prone to a breakout for Tuesday.  I think they have to break clearly above 2200 to be considered an upside break and I think we could be looking at 15-18 points higher before finding additional resistance.  It might be possible to get short on a break of 2180, or at least that would be the earliest possibility.  I think even waiting for a break of 2165 might still leave enough room for nice profits though.  I’m not sure there is any more support until they start approached 2140.  This is similar to the S&P in that an upside move is every bit as likely as a move lower, but heading down could get very nasty very quickly.  I’m not a sadist, but I’d kinda like to see that.

The NASDAQ has been the leader on the upside pretty much since the stock market rally began at the end of August. The fact that they remained 10 points below their old high while the S&P came within 1.5 points of theirs might indicate a significant change …. or it may get completely resolved by reaction to Friday’s employment report. Resistance is pretty obviously right at the old high for Friday … Perhaps too obvious. It seems likely that they either won’t get there or will blow right thru it, but resistance is still resistance. They should hold support in the 2170 range if they have enough strength to continue higher or head down to 2150 if they are prepared to weaken. Somehow it would seem ironically perfect if they do almost nothing Friday and the employment report is a complete non-event. It could happen. If they do blow thru resistance it will probably be to start a major blow off leg to the upside.

The NASDAQ may have closed below 2120 Tuesday but they were almost at 2150 on the open Wednesday and continued up to 2174 before topping out.  They only closed about 10 points higher than they opened and well off the highs, but it is still hard not to be impressed with this move.  Unless they stall around 2185 or even fail testing Wednesday’s high I think we have to assume they want to test 2200.  Opening higher and remaining above 2160 would be the most bullish price action but they would need to break back below 2135 to show any serious weakness.  I think caution is necessary because Friday’s employment report can impact things so violently, but they look pretty good at the moment.

The NASDAQ needed to hold 2135 as support to look bullish Tuesday but instead they opened below that level and never got back up to it.  The close was actually below Monday’s low and looked about as far from bullish as possible.  Support sets up right around the 2100 level for Wednesday and it certainly could hold, but if it breaks I doubt the previous swing low at 2083 will hold either.  I think we could see them dump all the way down to 2025, although I’m not predicting a major crack like that all in one day.  Then again … it could happen.  They could have resistance come in as low as 2120 and they would need to start trading back up above 2135 to look anything other than weak.  I really wasn’t expecting this much weakness this quickly … It could get ugly unless they get back above 2135 and stay there.