S&P 500 Emini Day Trading Gap Wednesday November 18, 2009

S&P Emini 500 Futures opened with a 2.50 gap down on what turned out to be a day with a very narrow trading range.  Only 7.50 points separated the high and the low of the day.  That is a narrow trading range, but the average true range has dipped to 12.5 points.  The average trading range has dropped from 25 points earlier this month to the current level, and reflects the corresponding drop in volatility as prices have increased over the last several days.  Today’s close is the highest in over a year, but comes on less than average volume.  1.5 million contracts traded today, average is 2.0 million.  Note how today’s low formed right at the psychologically important 1100 level.  That’s a good example of how prior resistance can become new support.  Prices look to be weakening.  The narrow range, the new high on less than average volume, and a close into an overbought indicator could all signal the possibility of a short term correction.  The market appears to be news driven for the time being, and that generally results in weakness at the top