Tuesday's session was a rough one for anyone long Allstate (ALL), Skyworks Solutions (SWKS), Emerson Electric (EMR) or Apple (AAPL). But as far as the major indices are concerned, each declining in the neighborhood of 0.2%, the session was inconsequential. (Skyworks is part of TheStreet's Growth Seeker portfolio. Apple is part of the Action Alerts PLUS portfolio.)
The bottom line is index traders need a big event to encourage them to adopt a more directional mindset. And the only thing remotely close to a big event currently on our radar is Friday's employment report. Until that is released, I'm afraid short-term traders will be forced to focus their efforts on incredibly shortsighted day time-frame scalping.
Navigating a choppy, horizontal channel can be incredibly frustrating. Add in the fact that we've been stuck in such a position for roughly six months and the majority of traders are apt to power down their computers and head for the beach. The remedy for this, or at least something I've implemented throughout my trading career, is to accept there will be times when doing less is hugely important.
When you're faced with a market that presents limited trading opportunities, especially if you're a higher time-frame participant trapped in a horizontal market, nail down your areas of interest and step away from the keyboard. Trying to make something happen out of boredom, or self-imposed pressure to remain an active day-to-day participant, is simply a horrible way to lose money. Patience pays.
As we prepare for Wednesday's E-Mini S&P 500 futures (Es) auction, we'll want to remember the ADP employment report is released at 8:15 a.m. ET and the EIA petroleum status report hits the wires at 10:30 a.m. Traders haven't been paying all that much attention to the ADP data, but perhaps the increased focus on a potential September rate hike will rekindle their interest.
Our primary area of interest at Monday's open is expected to be 2076 to 2078. An opening slide toward that area needs to be met with aggressive responsive buying if bulls are going to avoid a more meaningful drop into the mid-2040s. Any bounce from the mid-2070s would have us targeting 2085 and 2089.50.
In the event we open strong right out of the gate and never probe the mid-2070s, we'll want to remain positioned for two-way trading, albeit with a bias toward testing 2095.50 and 2105.50. My gut take is we're unlikely to make much overall progress ahead of Friday's jobs data. So a day time-frame approach with relatively low expectations (as far as directional movement is concerned) is probably our best bet.
Any trading or volume profile related questions can be posted in the comments section below, emailed to me at email@example.com or posted to my Twitter feed @ByrneRWS