Trader's Daily Notebook: Keep an Eye on Responsive Buyers

 | Mar 20, 2017 | 7:00 AM EDT
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Friday's quadruple witching expiration turned out to be a complete snooze fest, with the E-Mini S&P 500 futures (Es) trading roughly one million contracts over a 9.5-handle range. The only positive that came out of Friday's Es auction was scalpers had an opportunity to fade the opening strength against our 2380.25 day timeframe pivot, and/or or get long against the 2374 to 2375.25 support zone. Aside from those two ideas -- which, let's face it, really only appealed to the day timeframe scalpers in the audience -- Friday's auction was a waste of time.

S&P 500 -- 5-Min Volume Profile

As we begin a new trading week, it's important we take a moment to recognize how the prior one ended. As you study the five-minute intraday chart above, note where Thursday and Friday's trading took place. The space between the two areas shaded in blue represent nearly all of Thursday and Friday's activity. That space also represents the area between Wednesday's value area low (the lower bound of where 70% of Wednesday's business occurred) and volume point of control (VPOC/Value). Put another way, we spent the last two days of the week more thoroughly auctioning the thinly auctioned area left over from Wednesday's post-FOMC meeting announcement price surge.

S&P 500 -- Daily Volume Profile

In my view, short-term traders should plan to enter Monday's regular session with a close eye on 2371.50. That level represents the bottom of Wednesday's value area. And as long responsive buyers remain active in the market above that level, I believe the contract's most likely next move will be higher. On the flip side, a break of 2371.50 is likely to put an end to the excitement that began following last Wednesday's FOMC meeting announcement, and immediately find traders targeting levels closer to the mid-2350s.

Moving on to Monday's Es auction, we'll enter the session with a focus on 2371.50. As long as responsive buyers remain active above that level, my baseline expectation will be for repeated attempts to auction price beyond 2382, eventually pushing toward 2387.50, 2393 and 2397.50. Those stalking shorts beyond the day timeframe in the Es would be wise to approach the market with a bit more care, as price gains acceptance above 2382. A break above that level has little resistance between it and the big figure (2400).

S&P 500 -- 15-Min Volume Profile

Short-term traders are likely cheering for a break beneath 2371.50, as that's our most likely catalyst for an increase in day timeframe volatility. All trading beneath 2371.50 encourages selling toward 2360 and 2354.50, but at least initially, we probably shouldn't expect buyers to give up much ground toward the mid-2350s. If you're operating during the day timeframe and selling the market beneath 2371.50, it'll probably be a good idea to have an exit strategy in mind as price breaks 2360 and begins testing levels toward the mid-2350s.

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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