Holiday trading remains the name of the game as Tuesday's regular session E-Mini S&P 500 futures (Es) volume barely managed to clear the 600,000 contract mark. Better than Monday's 520,000 contract volume, but still well below anything I would consider to be close to normal. With Wednesday being the final trading day of 2014, a slight bump in volume may be seen as traders square positions for the year. Overall, though, I wouldn't expect volume to begin creeping higher until after Monday, Jan. 5.
As far as Wednesday's regular session Es auction is concerned, we'll begin the day by recognizing the general lack of interest among dip buyers during Tuesday's session. While neither the Es contract nor SPDR S&P 500 Trust (SPY) closed beneath the eight-day exponential moving average on Tuesday, the general lack of interest among dip buyers was a noteworthy change.
My baseline view of the Es contract (and the SPY) is that while all time frames are in bullish uptrends, the risk-reward currently favors doing as little as possible. The trend remains too strong to sell short, but too extended to do much buying. The only ones participating in the current tape to any great degree are tick-scalpers and day time frame swing traders.
Day time frame traders are expected to enter Wednesday's auction with a neutral posture and an eye toward 2071.50/2072.50 and 2086.75. Two-way rotational trading is to be expected within that approximately 15-handle range, with any chance of range extension coming from a sustained break (30-minute bar close) above 2086.75 or beneath 2071.50.
As discussed in Tuesday's Trader Daily, I continue to believe higher time frame traders should be focused on 2060.50 as their short-term directional line in the sand.
- I've avoided Cliffs Natural Resources (CLF) for months, but the recent jump in iron ore futures has attracted bottom-fishers back to the stock. While I wouldn't be in too great a hurry to buy shares in this beaten-down name, some stabilization above the 50-day simple moving average (currently sitting around $8.80) and a 21-day Relative Strength Index reading above the 50-center line would certainly get me interested. For the time being, I would encourage anxious and aggressive buyers to proceed with caution in the event the stock closes back beneath $6.40 (the most recent swing low).
- Alibaba Group (BABA), a popular stock among short-term traders, is dangerously close to tumbling lower. With the stock closing just beneath its 50-day simple moving average and the 14-day RSI having spent the better part of the past three weeks beneath the 50-center line, I would keep a tight leash on this name. Put another way: A close beneath $100 could quickly result in a slide back down toward mid-October lows.
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.