Trader's Daily Notebook: Anemic Trading Would Be an Improvement

 | Aug 08, 2017 | 7:00 AM EDT
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The dog days of summer are known to be deathly quiet when it comes to trading the major-index ETFs and futures contracts. This isn't a groundbreaking revelation. But when we see trade volumes for the SPDR S&P 500 Trust (SPY) , iShares Russell Index ETF (IWM) and PowerShares QQQ Trust (QQQ) all come in between 50% and 53% of already low levels, it's nearly impossible not to shake your head in disbelief.

Monday's trade volume on the E-Mini S&P 500 futures (Es) was no different. The current 21-day rolling average for regular-session trade volume is a bump over 875,000 contracts. Monday's volume came in around 463,000 contracts. In my view, Tuesday's volume figure will need to top Monday's figure by 150,000 contracts just to reach anemic levels. The bottom line is this isn't the time to be aggressively pressing an active day timeframe trading strategy. Slow markets like this demand a less-is-more approach.

Before everyone tosses in the towel and heads to the beach, it's worth noting there are still plenty of strong stocks for short-term traders to congregate around. Previous go-to names like Facebook (FB) , Apple (AAPL) and Nvidia (NVDA) are all strong and pushing toward new highs. Other names, like Illumina (ILMN) , (JD) , Baidu (BIDU) and Alibaba Group (BABA) have performed beautifully of late and still look to be in fine position to trade higher.

We know the markets have narrowed and volumes are anything but impressive. And realistically, if your strategy revolves around the major indices, perhaps you should be enjoying a bit more time by the beach and less time in front of the screens. However, if you're a flexible trader and willing to move around the market to whatever has a bullish pattern, there are still short and intermediate timeframe opportunities to be had.

Moving on to Tuesday's Es auction, let's begin by noting the contract did finish Monday's session above its composite value-area high (noted on the chart below). A good indication as to how strong our current buyer is will be how deep responsive demand is as price tests that 2475 area.

Daily S&P 500 Futures Volume Profile, Chart 1

Over a higher timeframe (see chart below), there continues to be no price-based reason to abandon the bull. Price continues to find buyers against the 10-day moving average (MA), and trend higher above the 20-day and 50-day MAs.

Daily S&P 500 Futures Volume Profile, Chart 2

We'll enter Tuesday's session with a focus on 2476 to 2475 (I have 2475.50 marked on the chart below). As long as responsive buyers remain active within that general area, we'll look for bullish price extension toward 2480 and new contract highs.

15-Minute S&P 500 Futures Volume Profile

A failed trade from the mid-2470s doesn't guarantee a bearish price reversal. The most likely outcome would be an uptick in day timeframe selling, and downside tests of levels between 2468 and 2469.50. Barring value migration and a session close beneath the upper 2460s, I can't see a reason to adopt a bearish trading posture.

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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