Posts by Rod David
Market Wrap (recording & summary)
HAVE A MERRY CHRISTMAS!
Reminder: I’m away from the screens Wednesday morning, but chaRTroom will be open.
Monday’s early hours was the rare Christmas Eve session worth trading. 
Two signaled downlegs were very productive, and the next lower objective started being tested.
Sunday night’s rally up to 2434.50 reflected optimism, but not the same “hope springs eternal” optimism as last week. It was more a relief that Sunday night’s gap down had been relatively shallow, and relatively brief. Which is no more valid or credible for reversing momentum up. So momentum reversed back down, sharply, probing the Globex open’s 2401.00 low by 10 points.
The post-open drop to 2368.00 was recovered entirely to a fresh post-open high at 2412.50, but fresh lows were being attacked by noon. And then extended through the close, probing the objective’s 2345.00 lower-end down to 2340.50.
Fulfilling the decline’s next lower objective doesn’t equate to being a buy signal. It doesn’t even necessarily mean the decline is slowing its pace. Europe has yet to process this drop — the last we saw of them was retracing a relief rally. Wednesday’s chances are almost even for being either a capitulation session, or another hopeful bounce.
Details and other markets coverage are discussed in the post-market Wrap recording here.
chaRTroom will re-open Christmas night with Globex at 6:00 PM ET.
Look ahead: Economic Calendar – for Tue, Dec 25, 2018
A midday look ahead in preparation for economic reports and events scheduled for the next trading day.
Highlights: It’s Christmas! Globex closed on Christmas Eve (Ho-ho-ho!) and re-opens normally on Christmas Day (Bah, Humbug).
Globex re-opens
6:00 PM ET
Post-open Review… Creatures are stirring, all over the house.
Post-open drop extends the decline, before being recovered.
Overnight action had resumed the decline, rejecting the overnight bounce.
Friday’s 2409.25 low and the 2401.00 Globex open were probed down to 2390.75. Bouncing back above Friday’s late low to 2414.00 resolved down through the open.
Sharply. A blip-up to Friday’s 2409.25 low collapsed down to 2368.00. Which is already within 7 points of the decline’s next lower objective at 2345.00-2361.00.
Now a bounce has recovered it all — all of the post-open drop, up to a fresh post-open high at 2412.50. Back under 2400.00 would start to signal the bounce failing.
The bearish WedEX makes the bounce likely to fail, and the morning likely to trend back down. Holiday factors make today a wild card, and the WedEX less reliable. Just closing in negative territory would satisfy the bearish WedEX, but a more bearish production than that would still be appropriate.
But the wild card may have absorbed sellers already. Surging off of the lows is an example. Back above 2309.25 again could trigger a more substantial rally leg, but the morning remains vulnerable to another downdraft.
The First Trade & Pre-open Tour Recording… Sellers got their beauty sleep.
Proper context can start the day with a solid win and make all the difference.
DAILY SCHEDULE
First, watch the pre-open Tour recording HERE <<==
Then, meet in the chaRTroom here by 9:15 ET for updates and Q&A
Through the prior close…
Thursday night’s narrow overnight range had dipped only slightly and briefly before Friday’s expriration open, and before bouncing back to earlier overnight highs testing 2492.00. A post-open headline reaction surged to 2508.00. Having stretched the rubber band once again, the market snapped back down, extending eventually down to new lows at 2409.25. The afternoon was influenced by a bearish WedEX, as liquidity evaporated ahead of a 3-1/2 day weekend.
Overnight action’s new info…
Sunday night’s Globex open gapped down to meet the 2402.00-2405.00 target that had been established intraday Friday. Bouncing back to unchanged extended through a 2419.00 buy signal on the way to its 2434.00 target. A 7-1/2 dip was recovered to retest the high into Europe’s opens. But any influence of ES stability was quickly absorbed, and a 13-point dip just begat a 31-point collapse down to fresh lows at 2395.50 — testing this morning’s 2398.25 bias-down target, and having sufficient complexity to form a “new Globex trend extreme” that requires intraday retest.
If, then… (notes to accompany the Tour recording)
Last night I published a few thoughts about the potential for a “bottom,” (here, if you haven’t yet read it). Its two primary thrusts are that 1) we should be aware that a near-term low can appear at any time, and 2) a near-term low can be under Friday’s close by triple digits, perhaps 2,000 Dow points or more. Today’s restrained volume and early close make it a wild card — it’s difficult to get sponsorship that starts trending, and difficult to stop if it starts. Regardless of the holiday factors, delaying this overnight reaction helps today to avoid an UNusual meltdown. Another usual meltdown today would have room down to the next lower objective at 2345.00-2361.00. An intraday rally is unlikely due to the bearish WedEX influence, but 2454.00 would be its likely objective.
First Trade…
[Click here to view the Bias parameters] Exiting the open under 2416.00 would be unlikely to trigger bias-up at 10:15. Exiting the open under 2403.00 would be likely to trigger the 2405.00 bias-down signal. Exiting the open at 9:45 above 2424.00 would be likely also to trigger the 2421.00 bias-up target.
Overnight update, and big picture prep.
As I write this, Sunday night’s ES Globex session has opened by gapping down to meet the 2402-2405 target established intraday Friday, and then bounced back to unchanged. Is it a head-fake that will result in a relief rally, or a warning shot that will resume after filling the gap? Either way, Monday’s early close with its volume limitations may be among year’s the busiest and widest ranging.
There’s always a bullish case. There’s also always a bearish case. One tends to be more dominant, but their relationship is always in flux as price changes, because price levels and price action are a big part of either case. Recently, the bearish case has dominated. But is that relationship nearing an inversion point to create a buying opportunity? I’m not referring to valuation, which would be based on such inputs as fundamentals, intermarket comparisons, etc. Rather, from a technical perspective that is guided by observations of momentum, sentiment, and specific behaviors that can be associated historically with previous turning points.
When I asked whether a bullish setup may be *nearing*, I mean in terms of a couple of hours, or a couple of days. Meanwhile, that could be thousands of points below. We’ve been monitoring the development of my Complex Ascending Triangle topping pattern in April, and now all of its likely downside targets are met, with no signs of slowing.
I’m still concerned that the decline lacks capitulation. Such extreme sentiment is a necessary component to forming price extremes. But how much longer can the decline avoid becoming capitulative? 
My contemporaneous observations of excessive optimism have been a significant rationale for remaining bearish. Meanwhile, sessions have been losing a lot of ground: At its lowest point, in the past 6 days the Dow Jones has fallen 463, 679, 513, 77, 643 and 563 points. This decline may be only hours away from a capitulation low, but that could be a 1500-2000 point intraday capitulation session. So, *nearing* a buying opportunity can be very different in terms of price than in time.
By the way, I’m referring to a trading bottom, and not to a longer-term investment opportunity. Markets peaked at September’s end, and three months in decline is within the 3-4 month average of stock market corrections. That’s not a time limit for the decline, but the time frame does add credibility to an actual reversal attempt. Having said that, bear markets average a duration of 1-1/2 years, during which many reversals are attempted and fail. The current decline may be the beginning of a deeper, longer bear market.
Scroll back up to see the chart we’ve been monitoring since April, with my “Complex Ascending Triangle.” 
It is a topping pattern I discovered that occurs frequently among markets and stocks, among all time frames from intraday to weekly. It projects to a final or “terminal” extreme in the ongoing trend, at a 61.8% or 161.8% projection from two specific price points within the pattern (this instance reached the initial target).
More so, the pattern predicts — before its highs are even met — that the subsequent reversal will be aggressive, which it has been. Again, this pattern began forming more than 6 months before October’s highs, before any talk of tariffs or shut-downs. Additionally, retracement objectives and supportive influences complied with the typical 61.8% minimum objective (that “x” on the chart was placed almost 2 months before price arrived there). Extending lower can become a much longer and drawn out decline.
So, the current decline was not a recent creation. The market pattern had been working toward it for months before it appeared. Recall my posts nearly one year ago (Dec 26, 2017, Jan 3 2018) discussing the high-profile gift of stocks from Kim Kardashian to her husband Kanye West. This “contrarian alert” wasn’t expected to prevent optimism from rising to new extremes, and it didn’t, as January screamed higher. But then the market crashed into February, because of the pattern that had created the vulnerability, and not because of any catalyst.
As I write this conclusion, Globex is approaching midnight and ES is approaching the 2434 target created by its opening swing. Monday’s shortened, illiquid session could cut either way, triggering a squeeze or resuming the decline. Major trend reversals don’t generally form during expiration, but that doesn’t preclude bounces. Whichever direction your trading, be sure to have a stop at work — and don’t rely on Santa, his rallies, or his reindeer to affect direction.