The last week of August is traditionally an extraordinarily slow time of year. Folks are enjoying a final week on the beach or in the mountains, before the entire family must embrace real life, and return to school or work. So while the week's economic calendar is astonishing busy (more on this below), most participants are unlikely to pay any attention at all to prices or economic reports until after the this weekend's three-day Labor Day holiday.
I rarely comment on the economic calendar, but this week's schedule is pretty busy given how quiet the trading's expected to be. Things pick up in a hurry Wednesday, with both GDP and the ADP employment report due out before the regular session open. The personal income and outlays report, along with Chicago PMI are released Thursday. And Friday brings us the both the ISM manufacturing index, and the overwatched (and frequently revised) employment situation report.
Monday's E-Mini S&P 500 futures (Es) auction was, as expected, pretty quiet. Regular session volume came in at a bump over 750,000 contracts, and intraday travel reached 11.25-handles. We were looking for rotational trading between the low-2450s and mid-2430s, and that's essentially what we got.
Shortly after Monday's regular session close, news broke that North Korea launched a missile over Hokkaido, Japan, likely landing in the waters off its eastern coast. Given that this all just happened, I've no doubt more accurate information will be available by Tuesday's regular session open. Nonetheless, this probably isn't the sort of development traders enjoying a final week at the beach wanted to see.
We've highlighted 2400 as a probable line in the sand for more intermediate to higher timeframe participants, and I still believe that's a logical area to focus on. That said, while the shorter timeframe participant is concerned with a few hourly bar closes, or perhaps a single session close, the higher timeframe participant is apt to use a weekly close. Put another way, while a single close beneath 2400 will be damaging (for bulls), most will likely be monitoring the chart for a weekly close beneath that area.
Moving on to Tuesday's Es auction, our overall expectation is that the North Korean missile launch will push volatility higher, and stock and index prices lower. At least at the open of regular session trading. Now, since we've all seen after hours volatility disappear during the overnight Globex session, I want to begin by reiterating our initial range of interest will be the same as Monday's. If the weak overnight auction stabilize and the contract begins the day session between the low-2450s and mid-2430s, we'll continue to look for rotational trading (with 2442.75 to 2443.75 acting as a day timeframe pivot)
15-min S&P 500f Futures VolumeProfile
I tend to think launching a missile over another country is a big deal, so my obvious assumption is that the Es will open well beneath Monday's 2443.75 closing print. A bearish open beneath 2436.25 that fails to immediately recapture the opening print and hold above the session developing volume weighted average price (VWAP) would be expected to attract increased supply, and quickly fall toward 2428.25 and 2420.
Our two primary downside target areas are still 2410.25 and 2400 to 2402. But remember, the ideal scenario for dip buyers to re-enter the auction would be for price to slice through 2400, shut off selling, and then sharply rebound and close back above that figure. The last thing prospective dip buyers want to see is price acceptance beneath 2400.
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.