The major index ETFs finished Thursday's session in the black, but the gains were small, the price action crummy, and of the better performers, more than a handful were what I'd consider to be lower-tier names. On the index side of things, the SPDR S&P 500 (SPY), iShares Russell 2000 (IWM) and PowerShares QQQ (QQQ) all gained between 0.25% and 0.45%. The SPDR Dow Jones Industrial Average ETF (DIA) was the session's top performer, climbing just over 0.5%. (IShares Russell 2000 is part of TheStreet's Growth Seeker and Stocks Under $10 portfolios.)
As for stocks making outsized moves, names like GoPro (GPRO), Twitter (TWTR), CONSOL Energy (CNX) and Chipotle Mexican Grill (CMG) were some of the session's stronger performers. But as you no doubt already know, all these stocks, except perhaps CMG, have been trapped in horrific bear markets for months. Trade them if you like, but think long and hard before getting too attached to them. (Twitter is part of TheStreet's Action Alerts PLUS portfolio.)
I doubt I need to lay out specific reasons for disliking Thursday's price action, but I'll do it anyway. To begin, breadth was about flat. What we need is a strong rally accompanied by powerful breadth. And if we can't have that, at least give us breadth that diverges (bullishly) from the session's price action.
Away from breadth, it's never good to see value on the E-Mini S&P 500 futures (Es -- December 2015 contract) remain near 2052.50 for the entire session, but price spikes as high as 2067 (lack of value migration). In a nutshell, every attempt to auction prices higher was met with strong and responsive selling.
With the above lack of value migration in mind, we saw sellers step in aggressively the moment price tested above Wednesday's value area high. Put another way, when traders auctioned price above the upper end of where 70% of Wednesday's business occurred, buying was immediately cut off and sellers assumed control. This sort of price action, where responsive sellers stomp and overwhelm initiative (breakout) buyers must change for bulls to have a chance.
Turning our attention to Friday's Es auction, please note I am still referencing the December 2015 contract. I'll make the switch to the March 2016 contract beginning Monday.
Our most immediate zone of interest is expected to be 2046 to 2060.50. Continued two-way rotation with minimal directional conviction is expected as long as value remains within that roughly 14-handle zone. A sustained trade above 2060.50 has the potential to extend as high as 2069 and 2075.75, but I would remind prospective buyers not to forget the price action of the past two sessions too quickly. Given the bulls' lack of follow-through, guard your capital closely and avoid trusting bullish intraday price action prematurely.
Failure to hold above 2046 opens the door to bearish price extension, but I wouldn't expect the floodgates to burst open without a break of 2037. All trading beneath 2037 sets the stage for a continued slide toward 2026.75.
Any trading or volume profile related questions can be posted in the comments section below, emailed to me at parkcityyeti@gmail.com or posted to my Twitter feed @ByrneRWS
