The Trader Daily

 | Aug 04, 2014 | 7:30 AM EDT
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Last week's selling ripped through virtually every facet of the market. Every major stock market sector I follow lost more than 1% on the week. The weakest group on the week, the iShares US Home Construction ETF (ITB), fell more than 4%. Even the Energy Select Sector SPDR ETF (XLE), one of the top performers on a year-to-date basis, declined 4%.

On the commodity side of things, gold, silver, oil, bonds, corn and wheat all lost ground on the week. The bottom line is that aside from U.S. dollars, natural gas and coffee, everything I track on weekly basis declined in value last week.

Given our tendency to overlook the bigger picture, let's begin the week with a review of the weekly E-Mini S&P 500 (Es) volume profile chart.


E-Mini S&P 500 -- Weekly Volume Profile
Source: eSignal


Utilizing a higher-timeframe chart makes it a bit easier to see that despite last week's carnage, the Es is still a long way away from making lower lows and breaking down in any sort of meaningful way. In fact, with support coming in near 1895/1900 and the rising 30-week simple moving average only 20 or so points beneath that, I still believe the (higher timeframe) odds favor the bulls. Only a weekly close beneath 1857-1869 (shaded in red on the chart above) begins to shift the odds in favor of a more meaningful price decline.

As far as last week's trading is concerned, we saw the volume point of control (or value) shift lower from Tuesday through Friday. This downtrend in value is a clear indication that short-term momentum favors sellers. So if your timeframe revolves around a single session, recognize that the path of least resistance is still skewed toward the downside.


E-Mini S&P 500 -- 30 Minute Volume Profile
Source: eSignal


Narrowing our focus to the day timeframe, Monday's session is likely to revolve around the 1916-1918 area. Should buyers defend that area and prevent a 30-minute bar from closing beneath 1916, I'd expect traders to auction the Es up toward 1926. Continued buying above 1926 provides bulls a window of opportunity to bid prices up toward 1940.50-1942.

The flip side to the above scenario would be a collapse back beneath 1916 and a violation of Friday's 1910.25 intraday low. All trading beneath 1916 favors a continued slide toward 1904.50-1906.50, 1900.50 and 1895-1897.50.

A word of caution for aggressive short sellers. Proceed with extreme caution as price approaches 1895-1897.50. If a bullish price reversal is in the cards, it would not surprise me to see it occur from that general area. 


E-Mini S&P 500 -- 5 Minute Volume Profile
Source: eSignal


Additional Notes

1. Despite Friday's bullish reversal in 30-Year bonds, I'm maintaining my bearish view on price (bullish on yields). Barring a close above 139.03 on the 30-Year futures contract, I expect to remain long the Proshares Short 20+ Year Treasury (TBF).

2. Having rallied hard for the past two weeks, U.S. dollars appear a bit overbought and in need of a rest. That said, I remain a dip buyer of the Powershares DB US Dollar Index (UUP) and expect the bull trend to persist in the weeks ahead. My stop on the UUP remains a weekly close beneath $21.34.

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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