In what continues to be an incredibly powerful and unrelenting trend, energy and mining stocks led the market lower on Monday.
On a day where the major averages declined between 0.3% and 0.55%, we saw the First Trust ISE-Revere Natural Gas ETF (FCG), Market Vectors Gold Miners ETF (GDX), Market Vectors Oil Services ETF (OIH) and SPDR S&P Metals and Mining ETF (XME) all decline between 2.2% and 4.25%. And these declines aren't coming after any sort of relief rally. The best these sectors appear to be capable of is a few days of sideways consolidation, before sellers reload and continue their assault.
We knew coming into the session crude oil would be a major point of interest. And while I assume most traders saw September crude break to a new contract low, how many spotted the ugly breakdown in unleaded gasoline futures? I made a point of mentioning in Monday's Trader Notebook that I have no clue where energy prices are headed over the next 12, 24 or 36 months. But following a few simple moving averages tells us all we need to know in regard to the short, intermediate and higher time-frame trends. This area of the market remains off-limits to long-only traders.
As you can see on the daily E-Mini S&P 500 futures (Es) chart below, our multimonth pattern of two-way consolidation is very much intact. A bull will point to the repeated bounces from the 150- and 200-day exponential moving averages (EMA). While a bear will note the lack of follow-through on any break to new contract highs. In my view, the market is simply stuck in the same old range it's been in for ages. A responsive approach remains the most logical one.
Moving on to Tuesday's Es auction, my inclination is to side with bears as long as value remains beneath 2093.50 (just above Monday's 2093 value area high). As long as day time-frame value remains beneath that level, I believe sellers will maintain an advantage, and move forward with an assault on 2076, 2070.50 and the 150-day EMA.
A sustained trade above 2093.50 does nothing in regard to moving us up and out of our multimonth chopfest. But it does encourage day time-frame scalpers to shift their focus toward auctioning prices toward 2098.50 and 2105.50.
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