Trader's Daily Notebook: Bullish Momentum Lives

 | Apr 26, 2017 | 7:00 AM EDT
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GDX

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x

Tuesday's auction was another successful one for buyers, with the E-Mini S&P 500 futures (Es) opening inside our 2377.75 to 2379 area of interest and immediately pushing higher. While the majority of the auction's price gains occurred within the initial 45 minutes of trading, the fact that we remained above the session's developing volume weighted average price (VWAP) until the last few minutes of the session should have kept prospective short-sellers on the sidelines and largely unscathed. 

Setting aside the fact that the market began to soften during the final 45 minutes of Tuesday's regular session (more on this below), it's important we recognize bullish price momentum is still intact. While tomorrow's auction results are promised to no one, for now, I believe we should expect any near-term, intraday weakness to attract an aggressive group of responsive (dip) buyers. 

Away from the equity futures, did anyone not notice the carnage in the gold sector yesterday? Every stock within the VanEck Vectors Gold Miners ETF (GDX) with a market cap greater than $1 billion finished in the red, with most names declining more than 3.5% to 4%. 

Those of you who actively deal in the gold mining sector may remember our discussion from late February, when we noted it was becoming increasingly difficult to find a reason to be bullish on the GDX. Given that the GDX is still beneath its (now declining) 200-day simple moving average (SMA), I'm obviously no more interested in buying the stock today that I was in late February. However, I believe we've come quite a bit further in our quest toward identifying an area where we'll want to pay attention. Our new area of interest is $24.75 to $25.30. 

VanEck Vectors Gold Miners ETF (GDX) -- Daily

I know some of you plan to take a stab at catching a falling knife between $21 and $22. But for those only interested in getting involved on strength (I fall into this camp), highlight the area between $24.75 and $25.30 and ignore the ETF until we begin testing levels within that 55-cent zone. 

Before we get to Wednesday's Es trade plan, I wanted to quickly comment on Tuesday's after-hours selling in shares of U.S. Steel (X)

Shortly after Tuesday's regular-session close, U.S. Steel reported a loss of $0.83 a share, on sales of $2.725 billion. Estimates, according to Investor's Business Daily, were for a $0.34 gain on sales of $2.928 billion. Suffice it to say traders immediately sold shares upon seeing these results. And the stock was trading around $25.80 (at 6 p.m. ET) after closing the day at $31. 

The stock's 200-day SMA sits around $28.10, and there's a huge open gap between approximately $21 and $23.85. If you're planning on bottom-fishing in shares of X, consider doing so with that open gap as your max risk level. For my money, however, being long U.S. Steel while it's beneath the 200-day SMA hasn't been a particularly stress-free venture over the past four or five years. Scalping day timeframe volatility aside, the safest approach (for swing traders) is probably to ignore the stock until it's back above the 200-day SMA. 

Moving on to Wednesday's Es auction, our baseline expectation will be for increased participation on the part of both responsive buyers and sellers. As long as demand remains solid above 2381.25 to 2382, which remains questionable given Tuesday's late-day decline, the path of least resistance remains higher, toward 2390. Continued buying shifts our focus toward 2397.50 and the big figure (2400). 

While little natural resistance exists above 2390, Tuesday's late-day decline leads me to believe supply may begin to enter the market above 2390 (responsive selling). This doesn't mean a decline of any material amount is in our immediate future. Simply that we should begin to see slightly wider day timeframe rotations. 

5-Minute S&P 500 Futures Volume Profile

Failure to hold above the low 2380s doesn't give sellers a foothold, as I'm expecting responsive buyers to remain active in the market toward 2376.75 to 2377.75, and again into 2371. 

Active traders looking to sell short would be better off stalking exhaustion above 2390, but then flipping back toward the buy side as levels toward 2371 are probed. 

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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