Morning Es Trading

Tuesday's Market Review We entered Tuesday's session with one eye on the E-Mini's developing 1866.25 to 1882 balance area and the other on the volatile, red-hot fuel cell sector. Both day timeframe scalpers and position traders found trading opportunities in the Es. Nearly 20 handles of intraday travel provided scalpers with ample opportunity. The test and prompt rejection of 1882 (the top of our developing balance area) provided day timeframe swing traders with a fantastic short selling opportunity. What failed to occur, however, was a decent bounce from near 1866.25. You'll recall in Tuesday's report I opined on the possibility that a retest of 1866.25 might fail to inspire buyers to re engage. I also said that something closer to 1859.75 would potentially be needed to pull said buyers out of their hidey holes. Unfortunately, such a test failed to transpire. Preparing for Wednesday's session, we will again be on the lookout for our responsive buyer to begin stepping forward near 1859. 5-Minute Volume Profile Es eSignal View Chart » View in New Window » As we review the surge and collapse in fuel cell stocks, there's no denying that the sector had become a speculators paradise. Unfortunately, traders with loose risk controls found out the hard way that stocks like Plug Power (PLUG), FuelCell (FCEL) and Ballard Power (BLDP) can also be labeled widow-makers. The bottom line is that if you're going to deal in frothy sectors, be it in small-caps, or stocks like Tesla (TSLA) and NetFlix (NFLX), you should be prepared to jettison all emotion and move in the direction of the day timeframe momentum participant. Remember, disciplined speculators and scalpers are less concerned with direction, and more focused on activity and volume. Given Tuesday's fuel cell implosion, my guess is the sector will fall further out of favor for a while. As for the sector's next move, my preference would be to step aside and wait for a test of the individual stock's 50-day simple moving averages. That would be the most logical area to sniff around for a fresh batch of buyers. Wednesday's Es Trade No new macro economic data is scheduled during Wednesday's session. We will, however, get the weekly EIA petroleum status report and the results from the latest 10-year note auction. The EIA petroleum report is released at 10:30 a.m. EDT, while the results of the 10-year auction should hit the wires shortly after 1 p.m. EDT. 15-Minute Volume Profile Es eSignal View Chart » View in New Window » Despite Tuesday's weak close, we are still operating under the assumption that the market is moving toward a more balanced condition. Wednesday's primary areas of interest are expected to be 1869/1870 and 1859.25. Should buyers recapture 1870 early on in the session, day timeframe traders would be expected to adopt a moderately more bullish posture. A sustained trade above 1870 begins to reverse Tuesday's bearish momentum and immediately shines a light on 1874 and 1878. A more meaningful recovery would have us focusing on 1882. But as we said in Tuesday's report, we will once again be looking for demand to fall off a cliff as the low-1880s are probed. If Tuesday's seller has additional business to conduct and buyers fail to recapture 1859 to 1870, the odds favor an immediate test, and likely failure, from 1863.75. The higher probability area for buyers to step forward is still near 1859.25. So, assuming downside momentum begins to stall near 1859.25, my plan will still be to stalk our responsive buyer. Any bounce from the upper 1850s would be expected to target Tuesday's 1867.25 VPOC, and our 1869 to 1870 resistance zone. A collapse in demand within the upper-1850s would immediately have me adjusting my focus down toward 1853.25 and 1846. Current conversion formula: Es (March 2014 contract) value X .100277 SPDR ETF S&P 500= (SPY) Value 1882 = 188.72* 1878 = 188.32* 1874 = 187.92* 1869/1870 = 187.42/187.52** 1863.75 = 186.89* 1859.25 = 186.44*** 1853.25 = 185.84* 1846 = 185.11*

Morning Es Trading

A sustained trade above 1870 will begin to reverse Tuesday's bearish momentum.

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