It is invaluable to know these boundaries in advance. Traders can focus on the important support and resistance clusters inside the sandboxes rather than a kitchen sink of levels and indicators. The predictability makes it easier to plan “what if” scenarios in advance.

Still, working the boundaries can be tricky. We calculate them as of expiration – the applicable daily or weekly (Friday) NYSE close. That leaves temporary tolerance for the expected moves to post outside the range before expiration. Don’t panic – the price typically returns inside the range expeditiously as dealers and market-makers defend the edges.

But suppose the price moves substantially beyond the upper or lower boundary – perhaps more than 50 S&P 500 points? In that case, dealer counterparties must buy or sell futures in the same direction as the boundary violation to hedge their inventory.

This protective reaction is counterintuitive, as it worsens the range violation and can accelerate the outside move as much as one and one-half times to double the range). Fortunately, this happens only 34% of the time. This is why we respect the sandbox ranges but don’t marry them.

As mentioned, knowing the boundaries allows traders to focus on the key issues they will likely encounter inside the limits for the trading day and week. The trader maintains awareness of important levels near the outside borders but does not expect to encounter them often.

The expected move lows and highs can serve as important support, resistance, and reversal points during the day and week. As rather esoteric concepts. Few amateur traders know about the DEM and WEM, much less how to calculate the edges.

When the price exceeds the boundaries, traders can fade the price back into range with the dealers as expiration approaches. Dealers and market makers are considered smart money. Trading with them is akin to trading with the “house” and far better than trading against them.