Trader's Daily Notebook: You Call That Volatility?

 | May 12, 2017 | 7:00 AM EDT
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A total of 1.2 million contracts over a 14.5-handle intraday range wouldn't generally register as a heavy-volume or particularly volatile day in the E-Mini S&P 500 futures (Es). But since that's the highest volume and widest range we've seen over the past 10 days, I suppose we should be grateful.

For all the day timeframe excitement, however, the contract still closed above all short and intermediate timeframe moving averages, and within four handles of where it's closed each day this week. Put another way, Thursday's volatility was great for the day timeframe scalper, but it failed to meaningfully alter the contract's overall trend.

Daily S&P 500 Futures Volume Profile

As you review the daily Es chart above, it's easy to spot the bearish divergence in the Relative Strength Index (RSI). And clearly a number of readers are watching it, because several emailed asking if it was on my radar. And while I do have my eye on it, I believe our primary focus should continue to be on where price is closing relative to the eight-day and 21-day exponential moving averages (EMAs). As long as we're holding above those two shorter timeframe EMAs, I don't see the point in wasting energy (or money!) trying to pick a top. 

Thursday's disaster du jour, aside from Snapchat (SNAP) , was nearly anything in the department store industry. Macy's (M) and Dillard's (DDS) were both cut off at the knees, losing between 17% and 18% on the day. Other players in the space, such as Kohl's (KSS) , J.C. Penney (JCP) , Sears Holdings (SHLD) and Nordstrom (JWN) , all lost between 6% and 10% on the day. The charts of these department store stocks looked questionable at best to begin the day, and finished the session looking like death. The easiest course of action is simply to avoid this industry altogether. 

Just to show I'm not entirely unwilling to consider a stock in the retail space, I will note the slight improvement in Under Armour's (UA) chart since late April. As long as the stock continues to close above $18.15, I'll keep the name on my watch list. And once it's above $20 I'll likely begin trading it. 

Moving on to Friday's Es auction, we'll end the week with a continued focus on the upper 2380s. As long as we're trading above 2387, our baseline expectation will be for continued leadership by responsive dip buyers, and an eventual test of 2400. 

15-Minute S&P 500 Futures Volume Profile

Failure to hold above 2391.75 at Friday's open provides sellers with an opening to test 2387. But flipping to a bearish posture is not something I'd want to do too quickly. In the event value migrates beneath the upper 2380s and attempts to recapture the session's developing volume weighted average price (VWAP) fail, we'll again begin targeting levels between 2375 and 2377.75. If bears want to end the week on a strong note, they'll need to close the auction beneath 2377.75. 

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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