The typically quiet, late-summer E-Mini S&P 500 futures (Es) auction schedule has been canceled so that we might bring you a more volatile, opportunistic trading environment. Please take your seat and fasten your seat belt. Enjoy the ride.
According to various financial media outlets, Thursday's equity market volatility was primarily driven by rumors that economic advisor Gary Cohn was abandoning his post in the Trump administration. But that's not all. Once the Cohn rumors began to fly, folks immediately began speculating about who would follow him out the door. The obvious fear being if folks like Cohn abandoned their posts, who would be left to instill some semblance of direction to a seemingly directionless administration?
Adding to concerns over Cohn leaving the White House were the terrorist attack in Barcelona, and bearish gaps (earnings related) in shares of Cisco (CSCO) and Walmart (WMT) . The bottom line is it was a rough day to own stocks.
As you review the daily Es chart above, several things are worth noting. First, price is making a lower low and secondary break beneath the 50-day moving average (MA). Taken at face value, that's bearish. Second, bulls were given several chances to recapture the 20-day MA over the past few days, and failed each time. Again, that's bearish. And third, we have nearly 80 handles to go before we test the 200-day MA. While not bearish, that's certainly a bit scary for dip buyers hoping to lean against a higher timeframe MA for support.
As far as buying the current dip is concerned, I believe traders should be particularly concerned with the area shaded in green, and blue dotted trendline on the chart above. To make it even simpler, I highlighted a small circle in red where I believe our attention should be. That small area represents the line in the sand near 2400 we discussed on Monday, as well as a prior trendline and low-volume area (as seen on the volume profile). In a perfect world, we'd see the contract trade beneath the big figure (2400), trigger bearish excess and recapture that level all during the same day. Such a reversal might not propel prices back toward 2480, but they could easily trigger a 25- to 50-handle snap-back rally.
Before we get to Friday's Es auction, several readers asked about the VanEck Vectors Gold Miners ETF GDX, so let's take a quick peek at that chart.
My short-term trading strategy on GDX is fairly straightforward. I like it long above $23.20 to $23.25, and would expect to remain bullish as long it continued to close above a 20-day MA. If the bullish break occurred on Friday, I also would not want to see the ETF reverse and close back under $23.05 to $23.10.
Moving on to Friday's Es auction, we'll end the week by looking for bearish price continuation as long as the contract is holding beneath 2439.50 to 2440.50. Put another way, a bullish gap that fails to open and hold above 2440.50 would be expected to attract a swarm of anxious and willing sellers. As traders push the contract beneath Thursday's regular-session 2427.75 intraday low, we'll gear up for a 2424.75 gap fill from the July 12 bullish gap, followed by continuation toward 2420.75.
More extended targets would be 2411.25 to 2412.50 and 2400 to 2402, but that's probably putting the cart way ahead of the horse at this point.
A sustained trade above 2440.50 removes a bit of pressure from dip buyers and opens the door for a bounce toward 2449.50 to 2450.50. We'd look for any test of 2450.50 to quickly stall and reverse back down.
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