Trader's Daily Notebook: Lots of Action, but Not Too Exciting

 | Feb 17, 2017 | 7:00 AM EST
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Thursday's regular-session E-Mini S&P 500 futures (Es) auction may have been the month's most active at roughly 1.54 million contracts, but the price action was anything but exciting. 

30-Minute Intraday S&P 500 Futures Volume Profile

We entered Thursday's session with an eye toward fading strength above 2349.75 and Wednesday's 2351 regular-session high, but no such strength ever materialized (#1 on the chart above). In fact, the regular-session auction opened at 2348, tested 2349.75 four minutes after the open, and promptly declined into our 2342.25 to 2343.50 support zone. While a second short-selling opportunity did present itself, the primary setup I was stalking (rejected excess above 2349.75) failed to trigger. 

Despite that, all was not lost for day timeframe traders stalking bearish scalping opportunities. Our second opportunity came when the contract's initial 30-minute bar closed beneath both the session's developing volume weighted average price (VWAP), and the prior session's value area high (the upper end of where 70% of that session's business was transacted). Once price demonstrated an inability to hold above both the developing session's VWAP and prior session value area high, a logical setup involved fading strength back toward that now-broken dynamic reference point (#2 on the chart above). 

When Thursday's auction came to a close, the contract declined 4.5 handles from the close of Wednesday's session. The point decline, however, was relatively meaningless. And while I still believe aggressive day timeframe traders should continue to stalk selling (fading) opportunities over the near term, the fact that price closed above the session's midpoint, VWAP and volume point of control (VPOC/Value) suggests Thursday's auction was not dominated by an aggressive higher timeframe participant. While a bit of short-term selling or consolidation may be in order, I see no evidence to suggest meaningful (bullish) excess has been established.

 Based on Thursday's close, the Es contract is set to end the week much like it began it, in an uptrend. Price remains in a bullish trend across all timeframes. And while a logical argument can be made that price has become very extended, I still see no reason why anyone other than aggressive day timeframe participants should be considering anything on the short side. Double-checking trailing stops and position-sizing algorithms for new positions (to manage open and new risk) seems like the most logical course of action for intermediate and higher timeframe traders. 

Moving on to Friday's Es auction, we'll end the week with a focus on 2343.50 to 2344.50. All trading above that area encourages scalpers to bid prices toward 2349.75, eventually probing levels above Wednesday's 2351 intraday high. As a reminder, no legacy supply issues exist above 2351. 

15-Minute S&P 500 Futures Volume Profile

A failed trade from 2343.50 paints a target on 2338 and encourages day timeframe traders to fade price toward the session's developing VWAP. As price breaks beneath 2338, bearish continuation toward 2332, and 2322 to 2323 become our next most logical expectations. 

Any trading or volume profile related questions can be posted in the comments section below, emailed to me at or posted to my Twitter feed @ByrneRWS

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