"Never think that lack of variability is stability. Don't confuse lack of volatility with stability, ever." -- Nassim Nicholas Taleb
Monday's E-Mini S&P 500 futures (Es) auction turned out to be a non-event, with fewer than 825,000 contracts changing hands over a 10-handle intraday regular-session range. But don't let the lack of activity in the Es contract fool you; market participants still managed to keep themselves busy.
Above-average volume and strong gains were found across much of the tech universe. Apple (AAPL) , Facebook (FB) and Tesla (TSLA) , all slated to report earnings this week, logged strong gains on higher-than-average volume (measured over the past 21 days). Other strong performers in the tech space include Alphabet (GOOG) , Microsoft (MSFT) , Amazon (AMZN) , Priceline (PCLN) , Netflix (NFLX) and Nvidia (NVDA) . Suffice it to say it was a good day to be part of the big-cap momentum tech cohort. (Apple, Facebook and Alphabet are part of TheStreet's Action Alerts PLUS portfolio.)
For those wondering, I don't expect Monday's after-hours decline in shares of Advance Micro Devices (AMD) to bleed over into the rest of the tech space.
Away from the tech space, bank stocks endured a temporary scare when news broke that President Trump was considering a plan to break up the nation's largest financial institutions. This plan apparently dates back to a promise he made while campaigning for the presidency, but based on the very limited selling following his remarks, traders have finally begun to realize they're generally better off ignoring, or at least downplaying, the majority of what this president says the first time around.
For those interested in the actual numbers, the Es dropped from approximately 2386.50 to 2381.25 immediately following remarks concerning the potential breakup of financial institutions. From a volume standpoint, the five-minute bar when Trump's banking comments hit the tape was the second-most-active bar of the day. Again, though, the second-most-active bar of the day when fewer than 825,000 contracts change hands doesn't tell us a whole heck of a lot. The fact that intraday Es volatility immediately following the remark was contained to roughly five handles tells us traders aren't currently concerned by this development.
On top of the limited volatility following Trump's comments on banks, we also saw the CBOE Volatility Index fall to its lowest level since early 2007. Now, do I follow or even utilize the Volatility Index in my daily trading? Absolutely not. But I do believe Nassim Taleb had a point when he said, "Don't confuse lack of volatility with stability, ever." Seemingly low volatility has a way of reversing when few are ready. So don't get lazy.
Moving on to Tuesday's Es auction, we'll continue to anticipate generally range-bound conditions, focusing our efforts on a 10-handle range between 2390.25 and 2382.25. Until value begins to build and price gains acceptance outside that 10-handle range, day timeframe participants are likely to remain responsive in their trading.
A sustained trade above 2390.25, despite the questionable price momentum, encourages scalpers to bid the contract toward 2397.50 and the big figure (2400). On the flip side, a failed trade from 2382.25 shines a light on 2371.50. Given that earnings from Apple are scheduled for Tuesday evening, and both Facebook and Tesla report Wednesday, we might see intraday activity slow in the E-Mini Nasdaq 100 contract and flow back toward the Es as traders avoid taking on additional tech-related risk.
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