Pre-Market Outlook – 5/27/2021

Pre-Market Outlook – 5/27/2021

The major indices presented more trading range behavior yesterday – no surprise. We set the range Monday, finished at the bottom Tuesday, back towards the middle yesterday, and open towards the top today. 

So until options expire tomorrow, it continues to make sense to buy pullbacks one or two standard deviations below the 4200 level and sell when you are back at the level. If we break up above it, fade the upper bands back to the line. A great way to do this is to plot the volume-weighted average price (VWAP) with both sides of the standard deviation bands engaged. Anchor the VWAP to the Globex open. Perhaps you could anchor another VWAP band to the New York open after a few hours of data. I typically run it on a 5-minute chart.

S&P 500 Futures - 5-Minute Chart with VWAP and Standard Deviation Bands

Key levels above are the top of the single prints at 4214 and the all-time high at 4238. Key levels below are the overnight low and settlement at 4185. The 5-day EMA also sits at 4185 or so at the open. Acceptance below 4185 would be a potential tone change. For the Navigator Swing Strategy, a close below the 5-day EMA for more than a few hours would trigger our stop to lock in profits.

A.F. Thornton

AF Thornton

Website: https://tradingarchimedes.com

A.F. "Arthur" Thornton is an expert in logic, risk/reward quantification, market fractals, pattern recognition and asset class behavioral analysis with 34 years devoted to developing algorithmic and quantitative trading systems. In addition to trading his own capital, Mr. Thornton designs custom algorithmic and quantitative trading systems for a small and exclusive group of exceptionally qualified traders.

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