For as bearish a day as Monday appeared to be, sellers were unable to auction the E-Mini S&P 500 futures (Es) beneath the initial balance low (the lowest print during the session's first hour of trading). This inability to extend the session's range beneath the low of the first hour tells us that Monday's seller was not quite as motivated as some may believe. That said, there is no denying that Monday's 2022 volume point of control (VPOC/Value) is significantly beneath Friday's 2041 level. So when it comes to value migration, the short-term trend is clearly bearish.
As far as our key moving averages are concerned, the Es and SPDR S&P 500 Trust (SPY) closed beneath all our short and intermediate-timeframe reference points. On top of that, both the 14-day and 21-day Relative Strength Index readings are back under the 50-center line. The bottom line is while the long term bull trend is still intact, the short and intermediate-timeframe trends lie somewhere between choppy and bearish.
Given the close proximity of the mid-December swing low and the 150-day and 200-day moving averages, I would urge bears to tread cautiously if trying to sell this market short. I know I've said this numerous times in the past, but until the long-term trend is broken, it will remain easier to sit on your hands and await long opportunities than try and guess when an enduring top is in place.
Turning our attention to the various equity sectors, the only areas of green on my screen during Monday's selling were found among the gold miners, select biotechs, REITS and home builders. Nearly everything else finished in the red. And given that light crude oil shed another 5% during Monday's session, it should come as no surprise that oil stocks were hit particularly hard.
Moving on to Tuesday's regular session Es auction, our two most important levels to trade against are expected to be 2029.50 and 2041. In a nutshell, all trading above 2029.50 begins to reverse Monday's bearish price action. However, only a close above 2041 (Friday's volume point of control) completely reverses the tape and shifts the short-term advantage back to the bulls.
As long as value remains beneath 2029.50 my baseline expectation is for numerous attempts to auction the Es down through 2014.50, and on toward 2009.75 and 1996.
Additional Notes:
- Another commodity hitting multi-year lows but not getting near the fanfare (as oil) is copper. There was a time when this, along with the severe drop in crude prices, would be a reason for concern. But that hasn't been the case this time around. Nonetheless, if you're trading copper futures or Freeport-McMoran (FCX), just recognize the longer-term trend and avoid trying to pick a bottom.
- I last discussed Cliffs Natural Resources (CLF) in the Dec. 31 Trader Daily, back when iron ore futures were making a move higher. Well, iron ore futures have since backed off and are trading back near lows, but CLF is still hanging on to recent gains. Monday's stock gains were the result of a report out of JP Morgan stating that if the Bloom Lake facility were allowed to move into bankruptcy, CLF would likely save a substantial amount of money. This may in fact be the case, but given that CLF is still trading beneath its 50-day moving average, and taking into account the horrendous trend in iron ore prices, I would proceed with extreme caution if you chased Monday's bullish momentum (in the stock).
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.
