After a volatile start, NASDAQ futures have seen sellers take charge once more. An initial rally from a low to near a high was short-lived, as sellers reestablished dominance.
During the initial surge, extreme aggressive buying was evident, indicating institutional activity. However, the rally ended near a double top resistance, where sellers firmly reentered.
Understanding Cumulative Delta
Even when the market bounced, the Cumulative Delta remained negative, confirming that the buying was more short covering than a true reversal. This resulted in a lower double top, leading to another market downturn.
OrderFlow Intel examines metrics like Delta to differentiate between genuine demand and short covering. It also uses AI to filter out noise, helping traders pinpoint when a true shift in control occurs.
For traders, recognising genuine trend shifts is crucial for decision-making. Even with strong intraday reversals, confirming whether control has switched is essential, as sellers showed they remain the dominant force today.
InvestingLive.com uses AI-driven OrderFlow Intel to provide market context beyond mere levels and setups. The key levels to watch now are 23,088 and the 23,000 round number, which act as downside targets.
The failure of buyers to hold the rally this morning confirms our view that sellers remain in control of the NASDAQ. Despite a sharp bounce off the 23,000 level, the move was identified as short covering rather than new, committed buying. This is a classic sign of a weak market where bounces should be sold.
This technical weakness is happening as we absorb fresh economic data. The August 2025 CPI report, released last week, showed core inflation unexpectedly ticking up to 3.8%, dimming hopes for any further rate cuts this year. This macro pressure validates the seller-dominated order flow we are currently seeing on the tape.
Trading Strategies in a Bearish Market
For the coming weeks, derivative traders should consider using these brief rallies toward resistance, like the one we saw near 23,282, to initiate bearish positions. Strategies like buying puts or establishing bear call spreads could be effective in this environment. The goal is to capitalize on the underlying downward pressure, not to chase fleeting bounces.
Market sentiment indicators support this cautious stance. We’ve seen the VIX index, a measure of expected volatility, creep back above 20, a level it hasn’t consistently held since the spring of 2025. Furthermore, the equity put-to-call ratio has climbed to 0.85, showing a clear preference for downside protection among traders.
This price action is reminiscent of the market conditions we observed back in the fall of 2022. During that period, every rally was met with significant selling pressure as the market grappled with hawkish central bank policy. We appear to be entering a similar phase where upside is capped and sellers are quick to re-engage.
Therefore, we will be watching the 23,000 level very closely. A sustained break below this psychological support would likely trigger a new wave of systematic selling. Until buyers can prove they can absorb supply and push cumulative delta positive, any strength should be viewed with skepticism.
