Trader's Daily Notebook: Where'd the Buyers Go?

 | Apr 20, 2017 | 7:00 AM EDT
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Stock quotes in this article:

xle

Wednesday's overnight and early morning buyers were more than happy to ignore the premarket collapse in shares of IBM IBM. The E-Mini S&P 500 futures (Es) opened Wednesday's regular session within a few ticks of Tuesday's intraday high. I wish I could say I understood why the Es futures were so strong ahead of the regular-session open. But I can't. 

Day timeframe buyers did their part, supporting prices above the opening print during the initial 20 minutes of trading. But as traders began auctioning prices above the opening swing highs, and breaking the contract to new multisession highs, bids and buyers evaporated in a hurry. Shortly before 11 a.m. ET, the contract was probing levels beneath its opening print, and aside from a brief backtest of the session's developing volume weighted average price (VWAP), the rest of the auction was dominated by bears. Suffice it to say that whatever positive developments buyers saw during the Globex session didn't last very long. 

Daily S&P 500 Futures Volume Profile

Monday's rally and Wednesday's bearish reversal notwithstanding, very little has changed over an intermediate timeframe. The Es is still struggling to recapture its shorter timeframe, eight-day and 21-day exponential moving averages (EMA). And supply continues to vanish any time the contract begins to break beneath higher timeframe reference points such as the 50-day EMA and year-to-date (YTD) VWAP. 

The bottom line is shorter timeframe active participants are likely to remain flexible (rather than committed to a particular bias), and generally neutral from a positioning standpoint until prices begin to hold above the 21-day EMA, and chipping away at 2360, or break beneath the YTD VWAP and 2320. 

Given our discussion of the Energy Select Sector SPDR (XLE) in Wednesday's Trader's Daily Notebook, and how poorly the space performed during the auction's bearish reversal, I wanted to reiterate my view that potential buyers should simply ignore this sector altogether. From an industry standpoint, the weakest areas within this poorly performing sector appear to be oil and gas refining and marketing, and drilling. 

Moving on to Thursday's Es auction, we'll begin the day focused on 2336.25 to 2337.25. As long as the contract opens beneath that area, any early decline (beneath the opening print and developing VWAP) would be expected to find sellers hammering away at 2331. As that level breaks, we can resume our focus on 2324 and 2318. As a reminder, the YTD VWAP currently sits near 2324, while 2317.75 marks the swing low from March 27.

5-Minute SP 500 Futures Volume Profile

A trade above 2337.25 doesn't give buyers much of an advantage, but it does encourage two-way trade toward 2341. As price gains acceptance above the low 2340s, our focus shifts right back toward 2346.25 (yesterday's value). 

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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we like this chart here, it appears ready to move higher. BOUGHT BZUN OCT 35 CALL AT 3.40
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