Contract Rollover for futures can distort trading data, and for the Russell 2000 today was the day. Not the last day the December contract can be purchased or sold, but the day all the short-term traders switch to the March contract.

For those of you not trading index futures, the contracts expire four times a year, and as you can see from the bottom of today’s chart, there is a sudden change in the volume pattern as everyone starts trading the new contract.

I track this by having the volume from both the old and new contracts showing in my brokerage program, and as soon as the new contract starts trading more than the old, I make the switch.

Testing Yesterday's Range

Today was spent testing the extremes of yesterday, starting with a run to the high, and then a drop to the low. Highs and lows from several previous days should be watched closely and often become new pivot points. But except for the first reversal, we either went slightly too far or didn’t quite reach these levels. Yet I still have them labeled as tests.

As I said in the November 21st post

my definition of a Test is when the present bar goes anywhere into the range of the bar being “tested.”

Using this rule, the yellow arrows show what I consider a test, and I trade them exactly as I would an equal top or bottom. In other words, that is a point where I am looking for a potential entry signal in the opposite direction. In each case, the Stochastic oscillator made a nice divergence for a tradable entry.

Of course as soon as we moved away from the Test of Bottom, I drew the blue trendline. And the blue parallel. And at 10:30 (Pacific) we got a Test of Top, an 89% Fibonacci retracement, a rejection from the parallel, and a Stochastic divergence. You know I love multiple signals.

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