The short term weakness we have seen over the last week in the US markets, was once again signalled on the NQ emini, which seems to have adopted the role of the leading laggard. The self evident weakness of late May, duly delivered a rollover in June as the exhaustion point of the rally was finally reached.
The catenary price action formed in the move higher was a classic example of price action weakness, with ever narrowing spreads as the index attempted to crawl higher, with the associated volume falling away in tandem. The ceiling of price action had been established in the 4520 area, and it was only a question of time before the index capitulated and rolled over.
This occurred last week with Friday’s price action breaching the 4400 area and closing the week at 4359.50 with a test of the support region now coming into play at this level. Once again, it is the NQ emini which is leading from behind, and the clear lack of bullish intent was evident on the index, and also reflected on the ES and YM accordingly.
With the US economy allegedly emerging from recession, it is strange to see the NQ behaving in this odd way. Nevertheless, this appears to be its new role, leading from behind, and indeed this was also the case in the recent rally. The NQ emini lagged well behind the other two indices, both of which broke out above old resistance regions, outpacing the NQ in percentage rally terms.
With the index now approaching the volume point of control at 4340 and given the depth of price congestion now awaiting in this region, we are likely to see further consolidation between 4300 and 4400 – Brexit notwithstanding!