Trader's Daily Notebook: We Are Trapped in a Momentum-less Market

 | May 15, 2017 | 7:00 AM EDT
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Stock quotes in this article:

IWM

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hiiq

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data

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TROX

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ssnc

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blmn

Those of you who participated in Friday's E-Mini S&P 500 futures Es auction don't need to be told how dull a session it was. At roughly 875,000 regular session contracts traded over an intraday range of 5.75-handles, I can't recall an Es auction with a narrower range. To those readers that have asked what, if anything, we should interpret from this quiet trading: I really don't have a clue.

The lack of follow-through above 2390 (noted on the chart below) is a pretty good indication that initiative (breakout) buyers lack a sense of urgency. But when you consider how low trade volumes have been (even on the occasional down day), how muted the day timeframe volatility has become, and the total absence of downside follow through, it's fairly obvious no one's in a hurry to sell either. The bottom line is we're trapped in a momentum-less market which, while still supported by the ever-resilient dip buyer, remains unattractive to the more aggressive, initiative buyer.

S&P 500 Futures -- Daily Volume Profile

As uneventful as the trading in the Es has been, the trading in the iShares Russell 2000 ETF (IWM) hasn't been any better. All of last week's trading took place between $137 and $139.50, with approximately 70% of the volume occurring between $137.55 and $138.75, or a range of less than 1%. Every day that passes with the IWM closing beneath $139 provides yet one more reason for skittish bulls to view the late-April surge as another fake breakout. Unless you're adept at trading within a narrow range, it's probably a good idea to steer clear of the IWM until it's back above $139, or closing beneath $137.

In an attempt to remain active while we wait for the major indices to awaken from their endless slumber, those willing to venture outside the comfort of their index futures and ETF trading strategies might want to consider devoting a bit of time to following some lesser-known, but still actively traded stocks displaying strength near recent swing highs. A few names on my list are VipShop Holdings VIPS, Health Insurance Innovations (HIIQ) , Tableau Software (DATA) , Tronox (TROX) , SS&C Technologies Holdings (SSNC) and Bloomin Brands (BLMN) . A few of these stocks started to break out toward the end of last week, while some are still churning near highs. But if you're looking to remain active and comfortable trading stocks, this list should provide a few ideas.

Moving on to Monday's Es auction, we'll begin the week focused on 2385.25 and 2394.75. As long as Monday's auction opens above 2385.25, our baseline expectation will be for low volume rotation between it and the mid-2390s. As value migrates above 2394.75, buyers will once again have an opening to push past 2400.

S&P 500 Futures -- 15-Min Volume Profile

A failed trade from 2385.25 opens the door to an immediate decline toward 2378.50. But testing the upper-2370s won't be enough to give sellers an edge. We'll need the auction to close beneath 2378.50 before we begin considering the potential for a more bearish outcome.

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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