Thursday's E-Mini S&P 500 futures (Es) auction offered quick-fingered scalpers a couple of opportunities shortly after the regular-session open, but after 12:30 p.m. ET, the tape fell completely flat and we spent the remainder of the session rotating within a three-handle range. Oddly enough, Thursday's volume was the highest of the past seven sessions. The increased volume and general lack of upward progress lead me to believe momentum-oriented buyers are tiring.
Away from the Es, neither the PowerShares QQQ Trust (QQQ) nor iShares Russell 2000 Index ETF (IWM) made much upward progress during Thursday's auction. Both ETFs ran in place for virtually the entire session. Again, I suspect buyers have begun to tire (though not enough for a material decline to take hold).
Several readers emailed asking whether I was concerned by Thursday's poor showing in the energy sector, and while I wasn't happy by the lack of bullish follow-through, I believe it's too soon to assume the run is over.
It's important to remember that our thesis behind buying the VanEck Vectors Oil Services ETF (OIH) and Energy Select Sector SPDR (XLE) had nothing to do with company fundamentals or oil inventory data. Our catalyst was price (for both ETFs) beginning to hold above a 20-day moving average (MA). Nothing more. Since the stops we discussed in Thursday's Trader's Daily Notebook weren't breached on a closing basis, I remain long. In fact, I added a little OIH at $25.60 during the morning's initial selloff.
As far as Friday's earnings calendar is concerned, the three biggest names reporting (all before the regular-session open) are General Electric (GE) , Schlumberger (SLB) and Honeywell International (HON) . While I've no real interest in trading any of these stocks, I will be watching SLB since I'm long the OIH and XLE.
Moving on to Friday's Es auction, our baseline expectation will be for continued rotational trading between 2474.25 and 2466.25, with 2470.75 acting as our directional pivot within that eight-handle zone. Similar to our approach on Thursday, we'll again be stalking responsive selling opportunities above 2474.25 to 2475.25 (Thursday's intraday high). Any short-selling should be done as price breaks beneath the opening print and developing volume weighted average price (VWAP).
A break of 2470.75 likely triggers a re-test of 2466.25 to 2465.50, followed by additional churning between the mid-2460s and 2470.75. While bearish extension beneath 2466.25 isn't our most probable outcome, should it occur, our target would be 2456.
Any trading or volume profile related questions can be posted in the comments section below, emailed to me at parkcityyeti@gmail.com or posted to my Twitter feed @ByrneRWS
