Thursday's E-Mini S&P 500 futures (Es) auction was predictably quiet and well contained as traders were unwilling to make any large bets ahead of Fed Chair Janet Yellen's speech at the Kansas City Fed's monetary policy symposium Friday morning. That said, I'm not convinced traders have any idea what they want to hear from Yellen when she speaks at 10 a.m. ET.
So, rather than guess at how traders will react to talk of future rate hikes, let's end the week by focusing on the low 2170s. If value migrates beneath 2170.75 to 2171.75 and the auction closes with little to no bearish excess, the odds will favor continued downside as we enter the final few trading sessions of August.
Away from the quiet churn of the Es, let's look at the iShares Nasdaq Biotechnology ETF (IBB) and natural gas futures.
We all know Mylan (MYL) came under fire from presidential candidate Hillary Clinton due to its skyrocketing fees for the EpiPen. And as you'd expect, the attack on Mylan's decision to hike prices has weighed heavily on the sector as a whole. As far as the IBB is concerned, several of you asked whether it was worth trying to catch a bottom in the ETF given its bounce from beneath the 200-day simple moving average (SMA) during Thursday's auction. My inclination would be to wait for the stock to close back above the eight-day and 21-day exponential moving averages (EMA), using whatever the swing low turns out to be as my stop. However, for those hell-bent on catching a low, consider using a stop under the 50-day and 100-day SMA (roughly 274.50) as a protective stop.
When it comes to biotech, I'm uneasy trying to catch a bottom based on the sector's tendency to become a political football. As such, I'd rather wait to get long until after buyers have shown up and price momentum has made an obvious turn higher.
Natural gas futures have rallied smartly since turning higher shortly after we reviewed that market in the Aug. 10 Trader's Daily Notebook. At that time, the $2.54 and $2.45 levels were identified as likely areas of support. And as luck would have it, buyers arrived Aug. 11 and 12 as the contract rotated above and beneath $2.54.
Now, with natural gas threatening to push past the mid-$2.90s and on to new swing highs, a number of you are unsure whether to trust the strength. My immediate thought is price could stand to trade sideways for a couple of days. But after that, a push to new swing highs seems very likely. This remains a favorable market for both responsive and initiative buyers to operate in.
Moving on to Friday's Es auction, we'll continue to look for responsive selling on rallies toward 2177.25 to 2179.25. As long as value remains beneath 2179.25, chasing price momentum higher will remain off limits for the day timeframe trader.
Assuming value remains beneath 2179.25, the odds will favor repeated attempts to trade back down toward 2171.75 to 2170.25. As long as value holds above the 2170.25, a narrow-ranged session is to be expected. If, however, value migrates down toward 2165, we'll end the week with a bearish tone and expectations for a probe of 2153 (the lower edge of composite balance dating back to July 14) and the 50-day SMA in the very near future.
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