Friday's regular session auction was another good one for bulls, though I doubt anyone would deny momentum fell a bit flat as the E-Mini S&P 500 futures (Es) began testing above 2098.
Whether or not Friday's decline in momentum is going to be a lasting problem likely hinges on two questions. The first revolves around the aggressiveness of buyers as price begins to gain acceptance above 2100 over a multi-session basis. The second, and in my mind the most important, will relate to the aggressiveness of responsive (dip) buyers the first time the contract declines toward its shorter time frame moving averages.
As you study the daily and weekly Es charts above, note where the Es is, on a weekly basis, within the yellow shaded box. Equally important to note is how the contract reacted as it tested the 30-week and 40-week simple moving averages (SMA). In a nutshell, while price is at the upper extreme of its 2.5-year range, buyers responded in a very aggressive manner as the higher timeframe SMAs were tested (following the Brexit vote). And for those that lack the ability to study a roll-adjusted Es continuous contract chart, please note last week's closing bar did register a new all-time high.
Day traders will likely struggle to chase price momentum in the near term, given how quickly we've bounced back from beneath 2000. But it's important to remember stalling price momentum doesn't necessarily have to result in reversal in the short-term trend. Those trying to sell short in and around 2100, and I am part of this crowd, will need to approach the auction with caution as price and value begin closing above the big figure (2100). A weekly close above 2110 displaying little to no excess would likely have initiative swing traders anxious to jump on board.
Moving on to a couple reader requested stock charts, several of you continue to have your sights set on an upside break in shares of IBM (IBM). And as poorly as this stock has performed, for what seems like an eternity, the tide is very close to turning.
My primary criticism when it comes to shares of IBM is the stock always seems to recapture its 200-day SMA for a few weeks, but never manages to make a higher high. The stock is currently rotating between roughly $143 and $153. A weekly close above $153 would likely equate to a clean upside break and while the rally would probably be filled with fits and starts, a move toward $173 would seem like a reasonable expectation.
Another reader request that recently broke to new swing highs is Exelon (EXC), and while I happen to like the daily chart, and am even long the stock, it's important to recognize where the stock is on a higher time frame.
Exelon's chart is pretty straight forward. On a daily or swing timeframe, the chart is breaking to new highs and is unquestionably in a bull trend. But on a higher time frame the stock is still trading within a large channel. Stiff resistance is to be expected toward $38. Identify your time frame and trade accordingly.
The direction of Tuesday's Es auction will likely hinge on whether value builds above or beneath 2095.75. All trading above that figure encourages probes above 2101.25, but the day trader in me is inclined to look for reasons to fade said attempts. But those attempting to sell the market in and around 2100 will need to be quick to recognize when prices are gaining acceptance above that figure. As value migrates above 2101.25 I see little reason to bet against a continued climb toward 2109.25.
Failure to hold above 2095.75 doesn't give bears a lasting advantage, but it does encourage a back-test of last Thursday's 2087.50 volume point of control (VPOC/Value), and potentially as low as 2081.25.
Any trading or volume profile related questions can be posted in the comments section below, e-mailed to me at email@example.com or posted to my Twitter feed @ByrneRWS