Last week's E-Mini S&P 500 futures (Es) auctions were incredibly difficult to navigate. And not only for our colleagues that tend to see the market as half-empty (overvalued). For bulls, too. Because unlike times where the market has rallied for a day or two and then consolidated, every single session last week produced higher closing values and overall range expansion. And when the week's trading came to an end, traders left knowing the Es had just closed above the upper Bollinger band for a third straight session. That is some seriously hot momentum.
Just to satisfy my own curiosity, I went back and looked at prior times the Es had closed above the upper Bollinger band either multiple times in a row, or within a relative narrow window of time. I also limited my search to times when the Relative Strength Index (RSI) traded above the mid-70s. For reference purposes, keep in mind the RSI on the Es contract closed Friday's session above 77, and the contract closed above its upper Bollinger band for the third session in a row.
For those interested in doing their own due diligence, take a look at the time periods between Jan. 12, 2011 through Jan. 18, 2011, Nov. 3, 2010 through Nov. 8, 2010, and April 4, 2010 through April 15, 2010. What you'll find, unfortunately, is a lack of a common pattern.
While the Es contract underwent a significant price correction shortly after the mid-April 2010 observation, only mild bouts of selling were observed after the occurrences in November 2010 and January 2011. My point behind sharing this data is to encourage you to be careful about turning bearish solely because price has risen at an extreme pace.
Some degree of consolidation toward a 20-day (short timeframe) or 50-day (intermediate timeframe) simple moving average (SMA) is probably a logical expectation over the coming couple of weeks. But I don't see sufficient data to support a claim the market is nearing some sort of apocalyptic collapse.
Meanwhile, a number of readers have begun to inquire about light crude oil, and whether that market is nearing a more meaningful upside break. So let's take a peek at the daily chart.
If we keep things really simple, I'd expect dip buyers to hug the rising 8-day, 10-day or 13-day (it doesn't matter which) exponential moving average (EMA). Then, as price closes cleanly above $52 to $52.50, momentum or breakout-oriented traders would be expected to flood the market and auction prices up toward the early June highs near $55.
While I'd place both charts in the neutral, but trying to improve category, I'd focus my efforts on AAPL if I could pick only one. As long as Apple continues to close above $111 to $112, I'd expect dip buyers to remain active in the stock. And in the immediate term, I'd expect day timeframe momentum traders to test the stock's strength (by buying) each time it trades above a prior session's high.
Alphabet's chart isn't bad by any means, but that resistance near $790 concerns me. A week's worth of consolidation above $790 accompanied by a secondary break higher would give me more confidence. But as long any dip toward the 50-day is immediately bought I wouldn't be too concerned about buying a dip in the name.
Moving on to Monday's Es auction, we'll begin the week by focusing on 2148.50. Although that level is quite a bit beneath Friday's 2255.75 closing print, I don't want to give short-sellers much rope until I see price back beneath what I'd consider to be a meaningful day timeframe pivot. As price drops beneath 2148.50, a bit more selling toward Friday's 2242.50 regular session intraday low and the Globex session 2239.75 low seem like reasonable expectations/targets.
An open above or quick recapturing of 2253.75 is not something I'd be in a hurry to fade. At least not until price traded above Friday's 2255.25 intraday high and then failed to sustain the break. Remember, no lingering supply issues exist above 2255.25, so at this point we're looking for that point where price cuts of demand.
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 twitterfeed @ByrneRWS