The Trader Daily

 | May 02, 2014 | 7:00 AM EDT
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Friday's headline event is the release of the all-important, but rarely-accurate, monthly employment situation report. Consensus estimates are calling for month-over-month job gains of 215,000 and an unemployment rate of 6.6%.

Similar to Wednesday's ADP employment report, I have no edge in guessing what the actual figure might be. I plan to sit on my hands until after the report has been released and then determine whether or not the SPY is being accepted above $188.60 (see my SPY trading plan below of additional details).

Aside from Friday's payroll data (which will be digested and forgotten by 10 a.m.), the biggest story of the week has to be the unstoppable strength in longer-duration bonds. Wednesday's duel advance in bonds and equities following the FOMC statement prompted me to suggest that one of the two would likely give back their post-FOMC gains during Thursday's session. But that did not come to fruition the way I thought it might. The SPY finished the day flat, while bonds continued to power higher.

Regardless of your view on rates or equities, take a look at varied performance among the fixed-income futures contracts. Whether or not you are bullish on fixed income has been directly related to the duration you've been holding.

For those that prefer to see the price of bonds, rather than their respective yields, take a look at the chart below.

Friday's SPY trading will likely hinge on which side of $188.40/$188.60 the stock is trading. As value migrates above $188.60 (consider using a 15- or 30-minute bar close if unfamiliar with volume profile), the bulls will gain a meaningful advantage and likely begin driving prices towards $189.55.

Continued rejection from $188.40/$188.60 begins to attract sellers back into the market and as prices break $187.90, the selling would be expected to intensify. Day-timeframe traders are likely to position themselves slightly bearish beneath $187.90, with higher-timeframe participants joining their side beneath $187.27.


5-Minute SPY Volume Profile
Source: eSignal


In Thursday's report we laid out $86-88.10 as being our most immediate trading range of interest in the QQQ. And as luck would have it, prices were quickly rejected from the upper end of that range early Thursday's afternoon. As we prepare for Friday's session, we'll once again be focused on the $88.10 level. A sustained trade (15- or 30-minute bar close) above that level sends the bears back to their dens and encourages buyers to begin targeting $88.88.

Continued rejection from $88-88.10 gives sellers room to sell the QQQ back down toward $87.41 and $86.97/$87.05. But we'll need to see a sustained break of $86.97 to consider returning to a more aggressively bearish posture. 


15-Minute QQQ Volume Profile
Source: eSignal


Similar to the QQQ, the IWM ran into a wall of supply inside its noted resistance zone of $112.55-112.68. Given the undeniable rejection from within that area during Thursday's session, I see no reason to adjust its location.

A sustained trade above $112.68 gives the bulls an opening to push prices up towards $113.70 and $114.25. Continued rejection from that same zone encourages two-way trading and a renewed focus on $110.55. To be clear, a collapse in demand near $110.55 would be expected to send the IWM down towards $109.32 in a hurry.


15-Minute IWM Volume Profile
Source: eSignal


Additional Notes:

  1. Several of our bullish trading stocks encountered a bit of selling on Thursday. Peabody Energy (BTU) found sellers near $19.25, with Facebook (FB) doing the same between $61.75 and $62.25. I continue to like both stocks on dips.
  2. I began discussing Walter Energy (WLT) in the April 29 Trader Daily. But as you'll recall, I was only interested in monitoring the name for signs of a sustainable, and tradable bottom. Suffice to say, we continue to lack such signs. I'll continue to review the name on a daily basis, but at this point see no reason to consider even a speculative position.

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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