Tuesday's session started out on a bullish note, but by 12 p.m. everything changed. Our previously aggressive buyer disappeared, and the market's bid began to collapse. The selling kicked into higher gear around 1:20 p.m, but thanks to a last-minute bounce into the closing bell, most equity futures contracts closed the session with a slightly less bearish tone.
Regular session Es volume came in near 2.25 million contracts over an intraday range of near 51 handles. Suffice it to say, those are both extraordinarily high numbers. And while I haven't a clue whether the current volatility presages a more enduring top in the equity indices, I do know only the most agile and confident traders should be participating in the current environment. If the recent action has you frustrated or dizzy, take a step back and wait for a better pitch. It's always easier to end the week and month in the black if you aren't first digging out of big hole.
Moving on to Wednesday's regular session Es auction, I believe it's fair to assume buyers will be a bit more cautious in regards to chasing any early morning strength. Our primary area of interest is expected to be 2030.75. As long as price remains beneath that level (based on a 30-minute close) my baseline expectation is for day timeframe sellers to maintain their advantage and gradually auction price back down toward 2014.25 and 2003. A sustained break of 2003, and Tuesday's 2001 intraday low would have me targeting levels closer to 1997 and 1982.
In the event buyers return and auction the Es through 2030.75, our primary target would be to clear 2038 and close the session above 2047.25. Such a close, in my view, would give the bulls another shot and breaking the market back toward recent swing highs.
- Gold futures traded to within $0.50 of the $1245-$1255 resistance range discussed in the Jan. 12 Trader Daily, and while sellers were indeed waiting with supply in hand, I am by no means convinced the bullish run in gold (or gold miners) is over. The swing trader in me would rather not see the price of gold trade back beneath its 50-day moving averages. But realistically, I can't see being overly bearish on gold until it loses the late-December swing low of roughly $1168. In the interests of staying open-minded, one strategy for those wanting to fade this rally in gold would be to sell the commodity short against the 200-day moving average. A logical stop-loss would be either a single session, or weekly closing stop above that moving average.
- I received several inquires as to my technical opinion of Ocwen Financial Corp (OCN) and Altisource Portfolio Solutions (ASPS), and I can only assume that said inquiries were a result of the ongoing collapse in both stocks. Given the magnitude of collapse in both stocks, my inclination is to simply avoid them and move on to something a bit more manageable. However, if you're hell-bent on catching a falling knife (something I will never recommend), you might consider drawing a downtrend line on OCN from the monthly high in January 2007 to the July 2009 monthly high. OCN is currently trading beneath that line, but if it were to recapture it (above $9.20), we might see the early stages of a bottom take hold.
- I referenced the decline in copper futures in the Jan. 13 Trader Daily, but in case you missed it I believe it bears repeating. The price of copper has absolutely fallen out of bed over the past couple days, and despite traders' willingness to look beyond the decline in oil and gasoline futures, I can't help but wonder when traders will start to grow more concerned by this collapse in another once thought to be important barometer of the global economy.
Any trading or volume profile related questions can be posted in the comments section below, emailed to me at firstname.lastname@example.org or posted to my twitter feed @ByrneRWS.