Results from Sunday's French election showed Emmanuel Macron and Marine Le Pen advancing to the presidential runoff election on May 7. If the Sunday evening Globex open is any indication, traders are relieved by this outcome. Most market observers were expecting Macron and Le Pen to advance anyway, but the Brexit and Donald Trump upsets had many sitting on the edge of their seat. For the first time in a while, the market, or rather the bulls, appear to have gotten what they expected and wanted.
Current expectations are that Macron will easily beat Le Pen in the May 7 presidential runoff. But you can bet the media will try their very best to keep folks in suspense and guessing over the next two weeks.
As far as the shorter-timeframe, regular session trader is concerned, overnight Globex strength (or weakness) only matters if it persists into the regular session. Put another way, don't sweat the overnight futures if you aren't participating during that timeframe.
How many times have we powered on our computers at the open of the Sunday evening E-Mini S&P 500 futures (Es) auction, spotted the Es contract trading 10-handles above or beneath Friday's regular session close, only to sit down for Monday's open and find the market trading relatively unchanged?
Remember, while we always want to be aware of potential catalysts, it's silly to stress of fret over a market's movements during a session in which we're not participating. Do your homework, be prepared and react accordingly. Don't allow yourself to be thrown off kilter by the emotional rantings of folks on Twitter or in the media.
While I trust everyone is well aware we're navigating another earnings season, I'd encourage you to stay on top of any positions you're carrying over a higher timeframe, which you're not committed to holding through their earnings release. The coming week is a heavy one for corporate earnings, especially Thursday, when we hear from Amazon (AMZN) , Baidu (BIDU) , Alphabet (GOOGL) , Intel (INTC) , KLA-Tencor (KLAC) , Microsoft (MSFT) , Skyworks Solutions (SWKS) and Western Digital Corp (WDC) .
Moving on to Monday's regular session Es auction, let's keep an open mind and remember the contract can open strong and fade, open strong and trade flat, open strong and continue to climb higher, or throw everyone for a loop and fade during the overnight session and open flat. Stay flexible and willing to embrace and adapt to any regular session open.
Given that the contract is trading between 2368 and 2372 as I write this note, we'll look to begin the day with a focus on the mid-2360s (2365.75 is marked on the chart below). As long as we're trading above the mid-2360s, we'll want to remain open the possibility of continued buying toward 2377.75 to 2379, with 2390 being a significantly more extended target.
As far as chasing a strong open is concerned, my inclination is to allow the contract to trade for between 15 minutes and 30 minutes. If a new high is made, I'd likely look to trade in the direction of the break, using the session's developing volume weighted average price (VWAP) as my trailing stop. As long as price is holding above VWAP (or attracting buyers on subsequent backtests), I'd want to be trading long or sitting on the sidelines.
A failed trade from 2365.75 would likely attract day timeframe scalpers looking to fade the bullish open, and we'd expect them to be targeting an immediate slide toward 2356.25 and 2348. While filling the entire gap isn't want buyers want to see, I'd hold off passing judgement until we see where the session ultimately closes. A close under 2348 would, in my view, be bearish and lead to another test of the year-to-date VWAP.
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.