Posts by Rod David
Pre-market Tour (recording & summary)
Expectations for repeating the post-Brexit rally have resurrected the excessive optimism that killed yesterday’s rally. The overnight recovery has extended to fresh highs testing 2116.00. Extending higher this morning would target “higher prior lows” at 2134.50, and then potentially retest the 2152.50 overnight high. Otherwise, exiting the open above 2104.50-2106.50 would still be bullish, but now that bullish scenario has become more difficult. Under 2097.50 would target 2091.00, and potentially 2077.50.
Details and other markets coverage are discussed in the pre-market Tour recording here.
The First Trade… Bounce, or boom?
Proper context can start the day with a solid win and make all the difference.
CHARTROOM LINK
(pre-open Market Tour begins at 8:55 ET)
Through the prior close…
Things got off to a normal start Tuesday. Not gapping up had trended down instead, probing under the overnight lows. That was appropriate behavior since Monday’s rally had not gained traction. But then exit polling began claiming the market’s preferred candidate was leading the day’s vote. Despite having triggered the 2123.50 bias-down at 10:15, and despite only threatening to invalidate it at 10:30, the bias environment only rallied. The morning’s 2132.50 bias-down signal was recovered sufficiently to invalidate the bias-down at noon. The noon hour extended up to 2143.50, testing “lower prior highs” of the two-week old highs. The balance of the session ranged choppily back down to 2131.25.
Overnight action’s new info…
Early returns produced retests of Tuesday’s high, first up to 2144.25, and then up to 2152.50, probing the two-week old prior high. Then, quite similar to Brexit, results tightened in unexpected critical areas. I had described Tuesday’s session as being a very unstable base to the next rally attempt, and the evidence could not have come faster or clearer. Soon Tuesday’s “Hillary” rally was retraced to its 2119.00 low, and the same leg — almost the same bar — retraced Monday’s “Comey” rally to its 2102.75 intraday low.. Then last Friday’s lows of the decline were retraced entirely, too, plunging 22 points under it to 2057.25. Reacting up to 2082.00 was reversed down to 2028.50, finally effecting a collar that stopped the decline. That was at midnight, and an eventual bounce has extended to attack 2109.00. Its reaction down tested last Friday’s ~2080.00 lows. A bounce has been chipping away at resistance just under 2100.00.
If, then…
In yesterday’s post-market Wrap I described the multiple instances of excessive optimism: rejecting Tuesday morning’s bias-down, the morning’s inappropriate rally, its retracement holding above Monday’s prior high. At best, Tuesday’s rally had discounted a large portion of Hillary’s victory. Likely, it incorrectly anticipated a decisive decision. Surprisingly, it was blind-sided by Trump’s win. The pattern only favored a correction, but last night’s plunge is not out of bounds. The question is whether its near-term low — which is likely — will be durable. Probably not, because last night’s “new Globex trend extreme” requires an intraday retest, but the pattern suggests that a healthy retest will be prevented by optimism for repeating a Brexit-like recovery. So long as Friday’s ~2080.00 lows hold as support (preferably 2084.50) this morning can produce a bounce to 2121.25 or 2125.25 and possibly higher.
First Trade…
[Click here to view the Bias parameters] Exiting the open at 9:45 under 2077.50 would be unlikely to rally this morning. Exiting the open above 2104.50-2106.50 would be likely to rally this morning.
Morning Bias
| WED morning signal (triggered at 10:15 ET) | SPX | ES |
| Bias-up: above | 2144.75 | 2140.75 |
| …would target | 2149.75 | 2145.75 |
| Bias-down: under | 2134.50 | 2130.50 |
| …would target | 2129.25 | 2125.25 |
| Signal status: noN-BIAS, TESTED BOTH BIAS SIGNALS, BIAS-DOWN TARGET MET | FAQ | |
| INTRO VIDEOS #1 and #2 | ||
1. At 10:15, trading above the bias-up signal or under the bias-down signal would put into play a test of its bias-up or bias-down target.
2. Not triggering either bias signal at 10:15 would be “no-bias,” and the bias signals should define the bias environment’s range.
— A test of the opposite bias signal would be targeted if one bias signal was tested before triggering no-bias.
3. Touching the bias signal within 3 minutes either way of 10:15 would invoke a grace period through 10:30 to trigger a late signal.
— “Late” signals don’t require testing the opposite bias signal, but it’s still likely.
4. Still testing the bias signal at 10:30 after invoking the grace period would trigger “noN-bias,” with no bias influence.
Post-market Wrap (recording & summary)
Rallying to fresh highs Tuesday morning should not be durable, since the prior day’s buyers gained no traction, which wasn’t offset by a gap up. That’s excessive optimism. The intraday probe was retraced to only attack Monday’s prior high, which is also excessive optimism. All of which followed the morning’s bias-down being rejected, fairly, but still a product of optimism.
The market’s optimism is a belief that its candidate will win. A decisive victory tonight would probably be cause for at least some more optimistic behavior, no matter how much optimism that Tuesday’s rally already discounted. But an indecisive result can only encourage selling. And in today’s Market Wrap, I describe why Tuesday’s session makes a poor base to try launching any probe higher.
I’ll be checking the chaRTroom regularly during election results, and annotating the chart where possible.
Details and other markets coverage are discussed in the post-market Wrap recording here.
Monitor overnight Globex trading in the chaRTroom here.
Daily Spot…
A daily summary of high-profile members of several complexes… View a more detailed discussion of each chart at the end of today’s Market Wrap.
Eurodollar Dec Contract (EC, ETF: (FXE, UUP))
Extending down Tuesday can confirm Monday’s break from the failed Ascending Triangle, targeting 1.1010 and potentially 1.0965, so long as the rally’s 1.1100 is not recovered. Having originated from a failed Ascending Triangle, a complete recovery would be likely.
Gold Dec Contract (GC, ETF: (GLD))
Initially bouncing Tuesday to 1291.50 didn’t prevent retesting the 1284.00 pullback limit that was already broken through Monday’s close, and even deeper to attack 1273.00. Closing back above 1286.00 would undermine the selling pressure, but momentum reversing up requires a close back above 1291.50
Silver Dec Contract (SI, ETF: (SLV))
Gapping up slightly extended sharply higher Tuesday morning, filling the gap back to last Wednesday’s high close.Closing above prior lows keeps alive the upside momentum.
30-year Treasury Dec Contract (US, ETF: (TLT))
Finally breaking under the 162-16 sell signal Tuesday morning extended down to attack the 161-22 prior lows that had formed only a temporary bottom, still targeting fresh lows at 160-10.
Crude Oil Dec Contract (CL, ETF: (USO, USL) (UWTI-long, DWTI-short))
Only firming slightly Tuesday suggests that the decline is not rejected and a new low will be in-play. But calculating the next lower target’s objective requires a corrective bounce to develop, targeting 45.70 or 48.25, perhaps in reaction to Tuesday’s post-close APA report and/or Wednesday’s EIA report.
Natural Gas Dec Contract (NG, ETF: (UNG, UNL))
Not even threatening to recover 2.88-2.91 Monday has resolved by gapping down again Tuesday to fresh lows testing 2.74. No scenario Wednesday would greet Thursday’s EIA report from a position of strength.