Trader's Daily Notebook: S&P 500 Futures Are Approaching a 'Do or Die' Moment

 | Apr 10, 2017 | 7:00 AM EDT
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"Chop, chop, choppity chop. Cut off the bottoms and cut off the tops! What there is left, we'll put in the pot. So chop, chop, choppity chop!" -- A popular children's song

Between the U.S. air strike on a Syrian airbase and a jobs report that fell well short of estimates, you'd think the indices would finally succumb to downside pressure. But you would be wrong. In fact, of the four major index ETFs, the worst performer, the SPDR S&P 500 Trust (SPY) , lost a whopping 0.1% on the day. And all ETFs traded fewer shares than their 21-day averages. In a nutshell, Friday's auction was a monotonous chop fest.

While I desperately hope I'm not jinxing us into enduring another prolonged period of narrow range consolidation, I believe the daily E-Mini S&P 500 futures (Es) chart below clearly shows the contract is approaching a do or die moment. And with a little luck, perhaps the next move, be it bullish or bearish, will sustain itself for more than a week.

S&P 500 -- Daily Volume Profile

Now, while the equity indices spent all day Friday rotating within a choppy range, bonds, gold and gold miners all forfeited their bullish opening gaps. In the case of the SPDR Gold Shares (GLD) , the ETF gapped above its 200-day simple moving average -- a reference point's it's been trapped beneath since falling below it in early-November 2016 -- only to fall flat on its face and close back under $119.50. Barring a stunning turn of events in the days ahead, I suspect most traders will be trading for a retest of the 50-day exponential moving average ($117.40).

Gold miners didn't fare much better, with the Vaneck Vectors Gold Miners ETF (GDX) finally gaping outside it's multi-week $22.50 to $23.50 horizontal channel, only to be sold back down to Thursday's intraday low, finally closing at $23.50.

Similar to the GDX, the iShares 20+ Year Treasury Bond ETF (TLT) opened Friday's auction at the upper bounds of its 12-day horizontal range between $120 and $122, but failed to attract additional buyers. Despite an opening drive above $122, the TLT was hammered back beneath its volume weighted average price (VWAP) and opening print roughly 45-minutes after the open, and it was all downhill from there. The ETF closed the session at $120.70, and within $0.20 of Thursday's intraday low.

When it comes to the TLT, I don't believe there's a particularly easy setup to follow. While the resistance at $122 was made even more obvious (which may not be a good thing) with Friday's bearish reversal, the fact that price is hanging above the year-to-date (YTD) VWAP and 50-day exponential moving average keeps me from wanting to sell it short. That said, I also don't want to consider getting long until it closes above $123.15 (the mid-January swing high). If I was forced to initiate a swing trade here (which, thankfully, I am not), it would likely be short, with a stop on close above $123.15 and a target of $116.50 to $117 (the mid-December and mid-March lows).

Moving on to Monday's Es auction, we'll begin the trading week with a focus on 2350.50 to 2351.75. As long as we're trading above that area, the path of least resistance, while choppy, will remain to the upside. Our baseline expectation will be for repeated attempts to build value above 2357.75 and chip away at 2360.75. As price gains acceptance above the low-2360s, we'll begin looking for more aggressive buyers to move in and push prices toward 2368.75 and 2375.

S&P 500 Futures -- 15-Min Volume Profile

While upside drives have failed of late, I don't expect more aggressive sellers to enter the auction until value begins to migrate beneath 2350.50. As that occurs, we can shift our focus down toward 2340.50 and 2334, with a sustained break of the mid-2330s clearing the way for a second test of the YTD VWAP (between 2320 and 2323).

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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