Trader's Daily Notebook: Market Could Use Jolt From Fed, Earnings

 | May 03, 2017 | 7:00 AM EDT
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Stock quotes in this article:

amd

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OIH

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twlo

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oclr

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etsy

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akam

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aapl

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gild

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fslr

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feye

Tuesday's E-Mini S&P 500 futures (Es) auction was another quiet one, with roughly 835,000 contracts changing hands over a seven-handle range. Frankly, the only difference between Monday's auction and Tuesday's is that Tuesday's was even less eventful. Here's hoping a slew of high-profile earnings along with an FOMC meeting can jolt the market out of its springtime slumber. 

As is always the case, a quiet session in the Es futures pits doesn't mean everything is stagnant. We watched as traders pummeled Advanced Micro Devices (AMD) into the ground. The stock shed roughly 25% and is quickly approaching its 200-day simple moving average. 

In the oil patch, nearly anything associated with oil and gas drilling was crushed. The VanEck Vectors Oil Service ETF (OIH) closed Tuesday at its lowest level since late September. Suffice it to say the weakness in the space has heavily correlated to the sharp decline in light crude oil futures. For those who don't actively track trading in the crude market, front-month crude fell beneath $47.50, testing lows last seen in mid- to late March. The potential saving grace for crude bulls is the American Petroleum Institute's (API) weekly injection report, released after Tuesday's close, and crude inventories declined around 4.16 million barrels. This was well in excess of the 2.16 million barrel decline analysts were expecting. In post-market trading, crude rebounded from $47.50 to above $48. 

As a reminder, the only two areas I'm actively concerned with when it comes to crude oil are $45 and $55. My guess is a close under $47 gets us to $45 in a bloody hurry. 

As far as Tuesday's after-hours earnings reports are concerned, we received poor reports from Twilio (TWLO) , Oclaro (OCLR) , Etsy (ETSY) and Akamai Technologies (AKAM) , mediocre reports from Apple (AAPL) and Gilead (GILD) , and positive results from First Solar (FSLR) and FireEye (FEYE) . Given the low expectations surrounding First Solar and FireEye leading up to their reports, those are the two I expect to keep my eye on (to go long) in the coming days and weeks. 

Moving on to Wednesday's Es auction, I believe we can all agree the recent consolidation above 2380 has become both annoying and tedious. While the lack of bullish price momentum near all-time highs is a concern, and should keep current bulls from becoming too comfortable with their positions, I simply can't get behind an aggressively bearish stance with price trading above all short and intermediate timeframe moving averages. In a nutshell, we require more than frustration and boredom to adopt a bearish trading posture. What we need is genuinely bearish price action. 

Daily S&P 500 Futures Volume Profile

We'll enter Wednesday's session with a continued focus on 2382.25 to 2389.75. My expectation is for traders to break free of this incredibly narrow range during Wednesday's session, but until value is established above 2389.75 or beneath the low 2380s, I'd rather anticipate a responsive trading session than bet on aggressive and initiative traders taking control. 

15-Minute S&P 500 Futures Volume Profile

A sustained break above 2389.75 refocuses our sights on 2397.50 and the big figure (2400), while a dip beneath 2382.25 is expected to trigger a slide toward 2371.50. As a reminder, the FOMC releases their statement at 2 p.m. ET Wednesday, so be sure you're comfortable with your positions ahead of that time. 

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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