Trader's Daily Notebook: This Doesn't Mean the Advance Is Over

 | May 09, 2017 | 7:00 AM EDT
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IWM

With roughly 730,000 E-Mini S&P 500 futures (Es) contracts changing hands during Monday's regular session, it's safe to say neither Friday's initiative buyer nor our responsive seller was interested in doing business following the weekend's French elections. For those keeping track, Monday's regular session was the second-lightest of 2017, after March 13. 

Daily S&P 500 Futures Volume Profile

As tempting as it may be for some traders to interpret Monday's low volume, narrow range and lower close to mean the recent advance is nearing an end, I'd remind you that value during the regular session did migrate higher from Friday's session. Yes, trading was exceptionally dull. However, the dip beneath 2392 was short-lived, and that suggests lower prices are still attracting responsive (dip) buyers. As discussed in Monday's Trader's Daily Notebook, we'll continue to give buyers the benefit of the doubt as long as value remains above 2387 to 2388. 

Before we move on to Tuesday's Es trade plan, I want to shift gears for a moment and quickly review the iShares Russell 2000 ETF IWM. 

iShares Russell 2000 ETF (IWM) -- Daily

While the SPDR S&P 500 Trust SPY and PowerShares QQQ Trust QQQ continue to probe new highs, the IWM remains in the penalty box. We've been focused on a roughly $134.30 to $138.10 price channel, and that still appears to be a logical zone to trade against. For my money, as a responsive and potentially initiative buyer, I am interested in buying dips toward $137.80, or chasing strength above $138.75 to $139. While momentum buyers are unlikely to enter the market prior to a sustained trade above $139, I believe day timeframe value migration above $138.75 would offer strong evidence that an aggressive buyer was in the process of taking control. 

Moving on to Tuesday's Es auction, we'll continue to anticipate upward pressure on prices as long as value remains above 2387 to 2388. An open above 2392.50 that holds above the session's developing volume weighted average price (VWAP) will be expected to drift toward 2397.50 and the big figure (2400). 

15-Minute S&P 500 Futures Volume Profile

An open beneath 2392.50 could easily decline into the upper 2380s fairly quickly, but again, that's where we expect responsive buyers to move back into position. If demand falls flat near 2387 and price remains beneath the session's developing VWAP, day timeframe traders will be expected to adopt a more bearish posture, and begin auctioning prices down toward 2379.50 to 2380.50. 

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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