Trader's Daily Notebook: Buyers Can't Seize the Day, or the Gains

 | Apr 19, 2017 | 7:00 AM EDT
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Buyers failed to build on Monday's gains during Tuesday's session, with the E-Mini S&P 500 futures (Es) stalling beneath 2346 during the auction's initial 30 minutes of trading, and remaining generally range-bound between 2337 and 2341 for the remainder of the day. Sellers made one attempt to break the contract lower roughly two hours after the open, but lower prices failed to attract additional supply and the contract quickly rebounded back inside the 2337 to 2341 price band. 

As far as the major index ETFs are concerned, overall movement was relatively benign, with the iShares Russell 2000 Index ETF (IWM) finishing essentially flat, while the SPDR S&P 500 Trust (SPY) and PowerShares QQQ Trust (QQQ) both lost between 0.3% and 0.15%. Between Tuesday's 4.7% decline in shares of Goldman Sachs (GS) and the 5.3% beat-down in shares of IBM (IBM) after hours, you'd think sellers are beginning to gain a foothold. Let's hope our overall direction will become a bit clearer as the week, and earnings season, unfolds. 

While we wait for the Es to break in a more sustained direction, let's take a look a look at a few recent reader requests. First up -- and this is a good one to review given its disappointing earnings report Tuesday evening -- is IBM. 

IBM was in a pretty good uptrend leading up to Tuesday's earnings letdown, but based on the stock's after-hours performance (trading around $161.75 as of 6 p.m. ET), the stock is clearly going to be punished at Wednesday's open. My inclination would be to avoid buying IBM on Wednesday, opting instead to give it a few days to settle down. However, those wanting a logical strategy to get long might consider buying on the first new high of the session, after the initial 15 to 30 minutes of trading. From there, I'd only consider remaining long the stock if it closed back above the 200-day simple moving average (SMA). I've included additional reference points indicating where one average true range (10-day ATR), and two ATRs beneath the 200-day SMA would be for those wanting increased flexibility. 

Next on our list is the SPDR S&P Biotech ETF (XBI)

SPDR S&P Biotech ETF (XBI) -- Daily

The XBI has been an incredibly difficult ETF trade since breaking above its 200-day SMA in late July 2016, because while the net trend has been higher, the pullbacks and lack of bullish price continuation have been brutally frustrating. The current pullback from the mid-March swing high may be worth rolling the dice on, provided you're willing to risk a close under $66.50. A close under that level would leave shares beneath their year-to-date (YTD) volume weighted average price (VWAP), and one 10-day ATR beneath the 50-day exponential moving average (EMA). A close under $66.50 would likely result in sellers targeting the 200-day SMA. 

Last on our list today is the Energy Select Sector SPDR (XLE)

Energy Select Sector SPRD (XLE) -- Daily

The XLE was blessed with reliable dip buyers from May through early November 2016. However, since the ETF topped out around $78 in mid-December, responsive buyers have been, well, unresponsive. The multiweek churning beneath the 200-day SMA should not give bulls a sense of safety, as the next most likely move is probably lower. Despite the recent rebound in light crude oil, I wouldn't consider trading XLE to the long side until it shows staying power above its short, intermediate and higher timeframe moving averages. Put another way, ignore the stock until it's back above $71 to $72. 

Moving on to Wednesday's Es auction, we'll begin the day focused on 2335.75 to 2336.75. As long as we're trading above that area, our baseline expectation will be for two-way rotational chop between the mid-2330s and low 2340s. Any continuation above 2341 paints a target on 2345.25 to 2346.25, but as with the past couple of sessions, we'll look for sellers to take a few stabs at selling the market in that area. 

15-Minute S&P 500 Futures Volume Profile

A failed trade from 2335.75 encourages traders to sell the contract toward 2330.25, with likely continuation toward 2324. As a reminder, the YTD VWAP currently sits near 2324. So any close beneath that figure would undoubtedly frighten recent dip buyers. 

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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