The Trader Daily

 | Aug 15, 2014 | 7:30 AM EDT
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Aside from the horrid action in the oil patch, it's pretty difficult to complain about Thursday's price action. Sure, the iShares Russell 2000 ETF (IWM) continues to lag behind the SPDR S&P 500 Trust (SPY) and Powershares QQQ Trust (QQQ). But, so what? That's been going on for literally months. The bottom line is that for the most part, the majority of the market's primary sectors are trading well.

Thursday's Trader Daily was all about understanding one's own timeframe. And with another strong trading session in the E-Mini S&P 500 futures (Es) under our belt, I think we can go ahead and say that in addition to the short and longer term trends favoring the bulls, so too does the intermediate (3-10 day) timeframe now. We all know the market's tone could change in a matter of hours. But based on the Es contract closing Thursday's session back above its 50-day simple moving average, I think it's fair to say that nearly every timeframe is back to favoring the bulls. 


E-Mini S&P 500 Futures -- 4-Hour Volume
Source: eSignal


As far as what could derail the bulls and put the bears back in the game, I'd point to two specific things. The first, and without a doubt most rewarding for active traders, would be a vicious rejection of prices between the mid-1950s and low-1960s. Such a rejection would give the appearance that price had failed to recapture the upper balance area (defined as roughly 1962 to 1985). Assuming sellers then sold the contract back down through 1940, the odds would once again favor a collapse toward the bottom end of our lower balance area (defined as roughly 1905 to 1940).

Rather than placing odds on the above scenario playing out, I'll simply remind everyone that consistently betting on a trend's end, or reversal, is generally a difficult way to make a living. Catching the turn when the majority of participants are ill-prepared is fantastic, unless you're betting on such a turn day-in and day-out, and missing the meat of the primary trend.

The second scenario that would breathe new life into bears would be an exhaustion of the current advance, and a gradual trend back down through 1940. While not as exciting and volatile as scenario number one, any close beneath 1939 - 1940 would likely be viewed in a negative light.

Moving along to Friday's Es trading session, my baseline expectation remains for higher prices. Barring an unforeseen collapse back beneath 1939.25/1940.75, I'd expect any intraday weakness to be viewed as a buying opportunity. The two most likely areas to find dip buyers camped out are Thursday's 1949 volume point of control (value), and 1947.50. Upside continuation from Thursday's 1953.50 close targets 1956.50 and 1960.75/1962.

In the unlikely event the market's bid vanishes, and sellers manage to sustain a break beneath 1939.25/1940.75, day timeframe traders would be expected to press the short side down toward 1932 and 1923.50.


E-Mini S&P 500 Futures -- 5-Min Volume
Source: eSignal


Additional Notes:

  1. Achillion Pharmaceuticals (ACHN) has moved nicely over the past couple sessions, and assuming it doesn't reverse course and close back under $7.50, I think this is a speculative stock worth hanging on to. As posted in yesterday's comments section, I did sell half my position around $8.30. But this move was done out of risk control, and nothing else. For now, I expect to remain long against $7.50.
  2. December corn futures began to show some life on Thursday, indicating that beaten-down instrument might finally be ready to lift. If you're involved in the futures market, or the Teucrium Corn Fund (CORN), I'd consider trading against the 10-day simple moving average. Failure to remain above that moving average might result in recent dip buyers scrambling to exit their position, for fear that the commodity might be embarking on another leg lower. As a reminder, corn is still in a horrific bear market. It's OK to play for a bounce, but if you operating from a higher timeframe, don't lose sight of the larger trend.

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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