Trader's Daily Notebook: Be Happy With the Close

 | Apr 12, 2017 | 7:00 AM EDT
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Stock quotes in this article:

IWM

,

QQQ

Similar to Monday's auction, Tuesday's trading provided some wonderful opportunities for day timeframe scalpers. But for the most part, anyone trying to take a higher timeframe approach to trading the major indices was left with little worthwhile information. 

Small-caps ruled Tuesday's session, with the iShares Russell 2000 ETF (IWM) finishing the day roughly 0.8% in the black. However, before we get too excited by the Russell's performance, let's remember the session's range only eclipsed Monday's range by a few pennies. For now, bulls will need to be satisfied with how the session closed, which was at session highs rather than toward the middle or lower end of the range (as we saw on Friday and Monday). 

Once again, those trading the Russell on a higher timeframe should consider either fading range extremes near $138 and $133, or remain on the sidelines until a more directional trend begins to emerge. I don't believe we should read too much into Tuesday's rally. 

On the opposite side of small-caps Tuesday was technology, with the PowerShares QQQ Trust (QQQ) finishing the day a bit more than 0.4% in the red. This decline, despite coming on very heavy volume (nearly 61% above the 21-day average), failed to land the ETF meaningfully beneath the 21-day exponential moving average (EMA). And we're still nowhere near closing beneath the 50-day EMA. 

Daily S&P 500 Futures Volume Profile

As far as the E-Mini S&P 500 futures (Es) are concerned, we have completed our fourth auction with nearly no volatility in regard to where sessions are closing. Beginning with last Thursday's auction, the Es has closed at 2353.50, 2352.25, 2352.75 and 2351.25. So despite the brief hiccups and bouts of day timeframe volatility, the contract continues to close in a remarkably tight range. I'd love to say I expect the contract to sustain a meaningful break in one direction or the other on Wednesday, but the fact is, we've nothing to base such a guess on. The best we can do is trade the day timeframe rotations based on our areas of interest, and wait for a more dramatic move to develop outside our current range. 

We'll enter Wednesday's auction with an initial focus on 2347 to 2347.75. As long as we're trading above that area, we should be on the lookout for buyers to re-enter the auction, driving prices toward 2356.25 and 2360. Based on Tuesday's volatility beneath 2347, my inclination is to look for the same type of behavior if buyers auction prices above 2360. Meaning I'd be very careful aggressively chasing strength above that level. That said, a session close (which is what I'll be tracking) above 2360 would greatly increase our chances of seeing bullish continuation toward 2380 to 2385. 

15-Minute S&P 500 Futures Volume Profile

Should the contract slip back under 2347 at Wednesday's open, we'll look for continued rotation between it and 2339. Failure to attract buyers near 2339 provides sellers with another opportunity to sell the contract beneath 2333.50, and make their way toward 2323.75 and 2318.

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

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