It goes without saying that bulls were disappointed with Friday's E-Mini S&P 500 futures (Es) price action. The contract opened above the 100-day simple moving average (SMA), traded above the eigth-day exponential moving average (EMA), and was promptly slammed back down beneath both reference points. In a nutshell, the bears ended the week with the wind at their back. And we'll begin the new trading week with a baseline expectation for lower prices.
An impressive number of readers were focused on the same instruments last week. Questions regarding Action Alerts PLUS charity portfolio name Facebook (FB) , Twitter (TWTR) , biotech and gold dominated my inbox. Since we've discussed Facebook and Twitter numerous times over the past week, let's keep the analysis there short and sweet.
Facebook has closed beneath its 21-day EMA for two days in a row now, and the Relative Strength Index (RSI) is back under the 50-center line for the first time since early July. If you like top ticking crowd favorites, you might consider selling FB, with either a close above the eight-day and 21-day EMA, or a close above the Oct. 10 $130.72 intraday high as your protective stop.
Analyzing Twitter is even easier. While charts can heal in a relatively short amount of time, I hate Twitter's chart and see no reason to waste much time on it. If you're stuck in the stock and looking for a reference point to trade against, consider using the $15.70 intraday low from the bearish gap on July 27.
Moving on to biotech, this is a sector that can't seem to catch a break. Names like Illumina (ILMN) , Bluebird Bio (BLUE) , Ariad Pharmaceuticals (ARIA) and Kite Pharma (KITE) were slaughtered last week. And the biotechs that weren't slaughtered were still badly beaten. Simply put, there weren't many place for bullish biotech investors to hide last week.
Traders loved to love biotech in early and late-August when the Ishares Nasdaq Biotechnology ETF (IBB) looked ready to break above $300. But after several failed attempts to break above resistance and an inability to hold above the 50-day simple moving average (SMA), traders now hate the IBB. With the ETF back under the 200-day SMA and the RSI nearing 30, there's no arguing the chart of IBB looks pretty bad. However, perhaps a last flush toward $250 can help the ETF establish a bottom.
The bottom line is biotech looks horrendous. But if you fancy yourself a nimble bottom picker and thrive on the gut-wrenching volatility that tends to go along with investing in biotechs, keep an eye out for signs of supply being cut off as price begins approaching $250.
When I think of gold, I think of emotion. Because while some traders are capable of viewing the Vaneck Vectors Gold Miners ETF GDX or gold futures contracts as just another tradable instrument, an overwhelming number of investors either love or hate the precious metal.
With both the GDX and gold futures struggling to attract buyers in and around the 200-day simple moving average (SMA), my hunch is traders are becoming increasingly bearish. And since actively buying things trading beneath their 200-day SMA generally isn't the best strategy, I wouldn't blame aggressive day timeframe momentum traders for looking for reasons to sell both the miners and gold futures down through recent swing lows.
However, if you're hell-bent on catching an upswing in the metals, keep $22 and $19 on your radar for the GDX. And the $1200 to $1220 area highlighted on gold futures. As for me, given gold's close proximity to the $1200 to $1220 area (it closed Friday around $1251), I'd rather sit patiently on the sidelines (looking long) until supply shows signs of being cut off toward the big figure.
Moving on to Monday's Es auction, we'll keep in mind how thin demand was above the eight-day EMA on Friday, use 2135.50 to 2137 as our directional pivot, and look for an early session probe of 2120.75 to 2122.50. As long as buyers return toward 2120.75 I don't want to rule out another session or two of horizontal consolidation between approximately 2120 and 2135. However, since I continue to be short-minded near current levels, my inclination is to sell rallies with an expectation of testing 2100 in the very near future.
A sustained trade above 2137 has a rather obvious target of 2142.50 to 2143.75. And only a close above that zone will get me to rethink my current bias toward lower prices.
On the flip side, failure to attract buyers near 2120.75 immediately shifts our attention toward 2108 and 2100.50.
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.