Trader's Daily Notebook: All-Time High? Big Deal

 | May 16, 2017 | 7:00 AM EDT
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Stock quotes in this article:

spy

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QQQ

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IWM

As happy as higher timeframe bulls may have been to see the E-Mini S&P 500 futures (Es) close at an all-time high, it's bloody difficult for the rest of us to get excited about an all-time high that arrives on crummy volume and within the context of a three-handle value area. As far as Monday's regular-session Es auction figures are concerned, approximately 875,000 contracts changed hands over a 10-handle intraday range. However, it's worth noting nearly 70% of the session's business was conducted between 2398 and 2401 (the value area). Put another way, the actively traded range was abysmal. 

To the active trader, reading about low volume figures or narrow trading ranges isn't groundbreaking stuff. Most of us have long since become accustomed to, and accepted the reality of, a slower pace of business. But ignoring the figures beneath the surface continues to be a bit of a challenge. 

When it comes to understanding certain aspects of market structure, such as new highs and lows, or market breadth, there's no question the simplest approach is to read Helene Meisler's morning note. But for those who generally trade the major index ETFs, here are some statistics from Monday's session you might find surprising. A paltry 29 companies in the SPDR S&P 500 Trust (SPY) finished Monday's session at a new 12-month high. That's less than 6% of components. A whopping 12 companies in the PowerShares QQQ Trust (QQQ) finished the session at new 12-month highs. And while the iShares Russell 2000 Index ETF (IWM) is still beneath its most recent swing high, the ETF did close higher by near 0.8%, and more Russell 2000 stocks finished at new lows than new highs -- 30% more, to be exact. 

The bottom line is that while we can all find reasons to doubt or question the potential for further upside, we can't pick and choose what we want to believe, and begin selling short because we disagree with the market's primary trend. The number of stocks hitting highs along with the major indices is a concern. But if you're short-term trading in the indices, you can't disregard that new highs are still being hit. In the end, we can choose to be less aggressive and less active until a fatter pitch comes along. But we can't, or rather we shouldn't, adopt a genuinely bearish posture before the price action tells us that supply, within our timeframe, has begun to overpower demand. 

Moving on to Tuesday's auction, we begin the day with a focus on 2395.50 to 2396.50. As long as dip buyers continue to support prices above that area, our baseline expectation will be for a test of 2401, and bullish continuation beyond Monday's 2402.25 intraday high. 

15-Minute S&P 500 Futures Volume Profile

A dip beneath 2395.50 would be expected to find a few buyers lurking around Monday's 2392.25 regular-session low. However, I wouldn't expect any meaningful attempt to defend prices until 2387.50. For those looking for a turn in the market, I'd be hesitant to trust bears until we're closing back beneath 2379. 

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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