Trader's Daily Notebook: We're Somewhere Between Neutral and Bearish

 | Jul 11, 2017 | 7:00 AM EDT
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Despite pockets of significant strength and weakness, Monday's regular-session action in the equity futures was pretty benign. The E-Mini S&P 500 futures (Es), for example, traded only a bump over 700,000 contracts. And that's well beneath the 1-million-contract mark I generally consider to be on the lighter side of things.

Daily S&P 500 Futures

My overall view of the Es and SPDR S&P 500 Trust (SPY) hasn't changed much over the past week. I continue to believe the short-term trend is somewhere between neutral and bearish, and I'll remain somewhat cautious when taking short-term trades until the Es begins to show strength above the 20-day (or 21-day) moving average (MA). As far as the intermediate timeframe is concerned, the repeated tests of the 50-day MA are concerning, but I don't believe we can be bearish until auctions begin closing beneath both the 50-day MA and the big figure (2400). Given that our last major breakout occurred around 2400, I have a sneaking suspicion that level is marked as the line in the sand for a number of different strategies.

Daily Nasdaq 100 Futures

The E-Mini Nasdaq 100 futures (Nq) contract remains in a slightly different position than the Es. The Nq began trading beneath its 50-day MA at the end of June, and despite bouncing from its mid-May swing low near 5560 a few days ago, I continue to believe the Nq is at risk of breaking lower. A close under 5560 would likely find sellers targeting the year-to-date (YTD) volume weighted average price (VWAP) and the late-April 5450 breakout zone. Until we see constructive price action above 5750 to 5770, and provided one isn't solely scalping the day timeframe rotations, my inclination is to remain skeptical and stalk reasons to fade either the Nq or PowerShares QQQ Trust (QQQ) .

Daily Russell 2000 Futures

The Mini Russell 2000 futures (Tf) and iShares Russell 2000 ETF (IWM) remain a complete mess. That said, because the Tf is consolidating toward the upper end of its multimonth range, I'd rather look for reasons to be bullish than bearish as long as it continues to close above 1390. Sooner or later, small-caps are going to make up their mind in regard to direction. And in my view, all trading above 1390 encourages buyers to step up to the plate. 

Moving on to Tuesday's regular-session Es auction, we'll begin the day with a focus on 2421.75 to 2423. A bearish gap that quickly trades through its opening print and recaptures 2423 has the potential to test both Monday's 2427.75 volume point of control (VPOC) and our 2429.75 resistance level. A sustained trade above 2429.75 (a 15- or 30-minute closing bar is ideal) opens the door to more meaningful day timeframe bullish price extension. Our primary target would be 2440.50.

15-Minute S&P 500 Futures Volume Profile

A failed trade from 2421.75 to 2423 brings sellers back to the auction, and immediately shifts our focus toward 2415.25. A bounce from near 2415.25 is to be expected, but barring a strong showing back above the low 2420s, we'd expect eventual bearish price extension toward 2408.25 and 2400.

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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