Expected Price Action in US Index Futures – Week Ahead

The past few weeks price action has been quite challenging to those that trade the US indices. It really highlights the need to stay on your toes and adapt as a trader. Thursday was a case in point.

Price action

On Wednesday we took a big drop with a lot of volume. One way Price Action for much of the day. We pushed past the lows that’d held in the past 3 weeks and closed above them. The move down was high volume, showing a lot of commitment. So a big down day. We ended the day an inflection point both from a 3 week perspective but also a longer term level (the blue horizontal line). That would all point to decent volume and range the following day. Traders would start Thursday expecting a little excitement regardless of whether we recovered the losses or added to them.

But no – we had a very slow, range bound day session. Participation was down, nobody was really interested.

So if like me, you were waiting for the move to happen. You were disappointed but that doesn’t mean you couldn’t trade. It just means the likely scenarios mapped before going into the market didn’t pan out and you had to be a bit more reactive.

Price Action in the past few weeks

If we look back at the past few weeks, we’ve been in a range. A directionless market but still one that on the whole has had some decent trading ranges. There have been a few days amongst those days where the volume and volatility simply dried up. This action is quite unusual. What it does help is with is a couple of things:

  • It shows us we really need to react to the medium term market state – the market changes day by day but it also changes week by week. We can (to an extent) expect the medium term (weeks) behavior to continue.
  • We can’t really expect a totally fixed approach to the market to work. So we have to be flexible, be reactive. We can map out scenarios and trade them but we have to let recent history be our guide.
  • On any day – the market may just decide to buck the trend of recent behavior and do whatever it wants to.

So over the coming week. We can start off with the expectation each day of a decent intraday range. We have more reliable action towards the extremes. We can also expect that the occasional day simply won’t play ball. Then the low volume should guide us. At some point in the future, the market will switch gears and this will no longer be the case. So our approach to this market at this time is very much unique to this market at this time.

As well as trading your plan, keep an eye out for look for signs that we are now out of this phase and into the next phase of Price Action.

price action

We can better see the anomaly low range day on Thursday. In addition, the low of the past 3 weeks was 2132.75. So there is a chance that this will hold and if it does, we can expect that we’ll hit 2100 and potentially enter a new phase of price action. Traders may see this as the range of the past 3 weeks has broken and that we now have opportunity to the downside. That is scenario 1. Scenario 2 is that the bottom of the range is really 2100 and that we are just going to carry on moving sideways from 2100 to 2171.

In terms of actual entry/exit points. Those at the extreme of the ranges are a better prospect but we have tended to open days in the middle of the range, so going with moves to the extremes has been a good initial play.

These are testing times but keep in mind that the most reliable play has been to wait for the order flow and price action to confirm a move with strength is under way and to jump on board when it does.

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After suffering a 30% drawdown at the hands of “independent financial advisors”, Peter started trading in the early 2000’s, figuring there was no point in paying people to lose money for him. By 2005, Peter was day trading NASDAQ stocks and later discovered the value order flow. He struggled with the way order flow data was presented so designed tools that organized Order Flow information more rationally and Trading was born. Those tools are now the #1 ranked software on Investimonials.com.
Today Peter spends his time trading and helping other traders through the Jigsaw community, articles and free one on one sessions.

Jigsaw Trading

After suffering a 30% drawdown at the hands of “independent financial advisors”, Peter started trading in the early 2000’s, figuring there was no point in paying people to lose money for him. By 2005, Peter was day trading NASDAQ stocks and later discovered the value order flow. He struggled with the way order flow data was presented so designed tools that organized Order Flow information more rationally and Trading was born. Those tools are now the #1 ranked software on Investimonials.com. Today Peter spends his time trading and helping other traders through the Jigsaw community, articles and free one on one sessions.

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