The Trader Daily

 | Apr 16, 2014 | 7:30 AM EDT
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I've always found the volume profile data on the Es S&P 500 futures contract to be more pure and accurate than the SPY. So, given the short-term importance I am placing on Tuesday's session, I want to shift this morning's focus from the SPY to the Es futures contract. 

In market profile parlance, Tuesday's Es trading registered a neutral-extreme day type. All this means is that the Es traded above and beneath its initial balance (the trading range established during the first hour of regular-session trading) and closed at one extreme. Suffice to say we're dealing with a situation where the Es and SPY closed at session highs. This day type speaks directly to the directional conviction of Tuesday's higher timeframe participant (flipped from aggressively bearish to aggressively bullish).

Let's begin Wednesday's trade prep by establishing 1828.25 as our most important intraday reference point. As long as we aren't closing 15-minute bars beneath 1828.25, my baseline expectation is for the Es to work its way higher. For additional reference, please note that Friday's intraday high was 1828.50, Monday's high was 1828 and there is an obvious low volume node at 1828.25 on Tuesday's profile (see volume profile chart below).

Assuming the bears don't seize control of Wednesday's auction by hammering the Es contract through 1828.25, my most immediate upside reference points are 1833.75, 1842, 1847, 1851.50 and 1856.50. An RTH open beneath 1842 will have me lurking on the bid as soon as the contract is sold back down to within the vicinity of Tuesday's 1836.50 volume point of control and 1833.75 (the lower end of composite balance). As stated above, a complete collapse beneath 1828.25 will be needed to knock the day timeframe horns from my head.

In the event the Es opens above 1842, aggressive day timeframe buyers will want to measure the depth of demand on any initial dip (preferably no lower than Tuesday's 1836.50 volume point of control), and consider hitting offers upon any subsequent new high. This sort of scenario would have me targeting an immediate drive through 1847 and 1851.50 and up toward 1856.50. Please note that any rally toward the low- to mid-1850s would be expected to attract the interest of both bulls trapped in unwanted and underperforming longs and aggressive short sellers with an eye on the 200-day simple moving average (currently located around 1760). Put another way, chasing longs into the low- to mid-1850s will likely result in horrid trade location.

The bottom line is as long as the Es is trading above 1828.25, I want to maintain a bullish bias with an eye toward 1842 and 1851.50. A sustained break beneath that level (such as a 15-minute or 30-minute bar close) would have me looking for an immediate retest of 1817.50 and 1812.25.


15 Minute Volume Profle Es
Source: eSignal


Toward the close of Tuesday's session, the Twittersphere was all abuzz about, what else, but the scorching rally in shares of Twitter (TWTR). After sliding in a straight line to $40 from $55 over the past four weeks, the stock exploded higher from beneath $42 to above $45.50 in a matter of a couple hours. The question everyone wanted answered was "why now?" What triggered this move?

The bottom line is that it really doesn't matter to the day timeframe trader. All that mattered to us was that TWTR was holding incredibly strong while shares of the QQQ were being hammered to beneath $83.50 from $85.50. This sort of relative strength told the observant day timeframe participant to stalk TWTR for a long position the second supply began to wane in the QQQ.


Twitter (TWTR) with QQQ Overlay
Source: eSignal


Additional Notes

  1. Note the huge buying tail in the iShares Nasdaq Biotechnology (IBB). This tail is a clear sign that buyers lurk beneath $213/214 support. I remain long shares of IBB and am looking for a bounce toward $230. Three consecutive closes beneath $212 would have me kicking the position from my sheets.
  2. The strength in the Utilities Select Sector SPDR ETF (XLU) can only be described as a thorn in the side of every bull. The bottom line is that equity bulls do not want to see continued outperformance in the XLU. Prospective sellers should proceed with caution as long as XLU is closing above its 20-day moving average and the prior $41.50 swing high.
  3. The iShares U.S. Home Construction ETF (ITB) bounced from its 200-day SMA on Tuesday, but this ETF looks destined to break lower. Several closes beneath $23 would have me stalking this ETF for a swing short.

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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