Thanks in part to a relatively uneventful speech from Fed Chair Janet Yellen, Friday's E-Mini S&P 500 futures (Es) auction was pretty quiet. For the day, roughly 985,000 contracts changed hands over a 12.50-handle range. And despite the auction's bullish gap and initial surge toward Tuesday's intraday high, price failed to gain acceptance above 2448.50, and traders quickly auctioned the contract back down toward our 2441.50 day timeframe pivot. A silver lining for bulls is the fact that the day timeframe pivot supported price throughout the session.
Given how range-bound the regular session's Es trading was between Wednesday and Friday, my hunch is traders are growing increasingly impatient. Bears are focused on the fact that price only closed above the 50-day moving average (MA) once last week, and now appears incapable of recapturing a simple 10-day MA. Bulls, on the other hand, continue to suggest all is well as long as we're trading above 2400.
My own view is short-term traders should be bothered by the apparent inability of bulls to recapture the short and intermediate timeframe MAs. And if you're trading during the day timeframe, or even on a one to two-day basis, it makes sense to be selling upside rallies. On the flip side, if you're a higher timeframe participant, I would agree that until the contract begins to gain acceptance beneath 2400, it makes sense to remain bullish. As is so often the case, one's directional bias is very likely to be determined by their timeframe.
Several readers submitted notes regarding the iShares Russell 2000 Index ETF (IWM) briefly testing that 200-day MA on Friday, and I believe it's worth noting. If you're a day timeframe scalper, I'd expect sellers to turn more aggressive on a break beneath Friday's $136.42 intraday low. Our upside extreme (should bulls return on Monday) remains around the year-to-date volume weighted average price (VWAP) and 20-day MA, or approximately $137.90.
Moving on to Monday's Es auction, we'll begin the week by using 2444.75 to 2445.50 as our opening pivot, 2449.50 to 2451.25 as our upside breakout area, and 2436.25 to 2437.75 as our breakdown area.
Over the past three auctions, approximately 70% of regular session activity has occurred between 2440 and 2448. Within that eight-handle zone, the most actively traded price point, or value, was 2444.75. Our baseline expectation at Monday's open will be for all trading above 2444.75 to 2445.50 to target roughly 2451. If sellers want to keep alive their chances at breaking the Es down toward 2400, keeping price beneath the low-2450s on a closing basis job #1.
An open beneath our 2444.75 to 2445.50 pivot shifts our focus down toward 2436.25 to 2437.75. And just as sellers need to keep prices beneath the low-2450s, it's imperative that buyers not allow value to migrate beneath the mid-2430s.
The bottom line is: As long as value remains between the mid-2430s and low-2450s, we'll continue to see the Es rotate within this range, and neither side will gain a meaningful advantage. A close above 2451.25 or beneath 2436.25, however, turns this into a new, more directionally oriented ballgame.
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.