E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Trader Reaction to 6098.00 Will Determine Direction Today

December E-mini NASDAQ-100 Index futures are trading lower shortly after the opening. After hitting a new contract high at 6125.00 earlier in the session, investors started taking profits, driving the index lower into the opening.

The early session rally was attributed to follow-through buying after Netflix reported strong earnings and revenue after Monday’s close. The weakness is being blamed on concerns that the rally may be over-extended and general worries ahead of the release of the earnings report from IBM after today’s close.

Daily Technical Analysis

The main trend is up according to the daily swing chart. It was reaffirmed earlier in the session when buyers took out yesterday’s high.

The index is now in a position to post a potentially bearish closing price reversal top. We’ve had the prolonged rally in terms of price and time and we’ve had the higher-high. Now a close under 6120.25 will from the reversal top.

A closing price reversal top will not mean the trend is changing to down, but it could lead to a 2 to 3 day correction, or at least a 50% correction of the last rally.

The main range is 5842.00 to 6125.00. Its retracement zone is 5983.50 to 5950.00. If weakness develops then this zone will become the primary downside target.

Daily Forecast

Based on the early price action, the direction of the index the rest of the session is likely to be determined by trader reaction to the steep, long-term uptrending angle at 6098.00.

The Gann angle at 6098.00 has been guiding the index higher since the September 25 main bottom at 5842.00.

A sustained move over 6098.00 will indicate the presence of buyers. This could lead to a retest of today’s intraday high at 6125.00 and a possible acceleration to the upside if this level is taken out with conviction.

A sustained move under 6098.00 will signal the presence of sellers. If this angle breaks on rising volume then look for an acceleration to the downside. The daily chart indicates there is plenty of room to the downside with the first major target the 50% level at 5983.50.

I don’t think we’ll see a direct move into 5983.50, but it is a valid target today. However, breaking the angle at 6098.00 today is more likely to start a gradual decline into our target.