We've discussed the idea that active traders continuously are trying to sell the E-Mini S&P 500 futures (Es) in and around 2100. This is not a new revelation. The simple fact that momentum consistently has faded between the mid-2080s and 2100 dating back to late-May 2015 is sufficient evidence for traders to adopt a responsively bearish posture. That said, I want to make sure those actively selling the top of end of the range recognize the potential for an upside squeeze or breakout.
In Wednesday's morning note we referenced the bounce that materialized from between the eight- and 21-day exponential moving averages (EMA) during Tuesday's auction. The same thing happened on Wednesday, only this time price made it all the way to the 50-day simple moving average (SMA). As long as the Es is finding support beneath the eight- and 21-day EMAs, those trying to sell short should anticipate strong and swift support from responsive dip buyers during moments of intraday weakness.
Also worth noting in regard to the chart above is the fact that price is finding support above the upper end of the most actively traded range (the bell curve). The longer price holds above 2080, and as long as dips beneath the shorter-timeframe EMAs continue to stimulate demand, the more likely I believe we are to break higher. In a nutshell, have a plan in place just in case the Es gains acceptance above 2100.
Moving on to bonds, which are currently the instruments I am most frequently emailed about, the relatively minor selling we saw in 10-year Treasury notes and 30-Year Treasury bonds ahead of Wednesday's regular session open was a nice reprieve for trapped bears, but it's incredibly premature to say any sort of meaningful top is in place. Those stalking a turn in bonds and using the iShares 20+ Year Treasury Bond ETF (TLT) as their trading vehicle should measure their risk against $143.
A number of readers have inquired about the never-ending sideways action in shares of Freeport-McMoRan (FCX), but unfortunately, I don't see much in the way of an imminent breakout. On the plus side, the chart still looks OK.
Freeport is clearly struggling to break out of its multi-week channel between $10 and $12. But as long as the stock continues to close above the 30- and 40-week SMAs, I wouldn't want to give up on an eventual upside break. Those operating on a shorter timeframe can continue to trade the channel in a responsive manner. But those taking a longer-term approach should continue to give bulls the benefit of the doubt.
And since Freeport is generally assumed to move at least to some small degree based on copper futures, I thought I'd post an updated chart.
At this point I want to take an optimistic approach and hope the multi-month channel can resolve itself above $2.25. A bullish break of the current flag would be a huge victory, while bullish extension above the mid-March highs would likely indicate a new primary bull trend is in the works.
As far as Thursday's Es auction is concerned, we'll begin the session with a focus on 2086.75, and 2099.75 to 2101.25. Wednesday's bullish close would be expected to give buyers the upper hand. So as long as value remains above 2086.75 we'll look to buy dips and keep our sights set on the big figure (2100).
A failed trade from the mid-2080s turns the auction a bit more dicey and has the potential to trigger a slide in the Es back down toward 2079.75 and 2073.75. Scalpers would be expected to take a bearish posture beneath the mid-2080s. However, my inclination is to focus less on chasing bearish day- timeframe price momentum and bit more on stalking dip-buying opportunities until the contract begins to close beneath the eight- and 21-day EMAs.
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