Posts by Rod David
The First Trade… Gapping up through headwinds.
Proper context can start the day with a solid win and make all the difference.
Enter the chaRTroom here
(pre-open Market Tour begins at 8:55 ET)
Through the prior close…
Monday”s sell-off from 2101.25 bled into Tuesday”s session, thoroughly testing the maximum 2076.00 pullback limit. Two timing windows failed to break lower, and the second window was exited in rally mode. The noon hour”s 2092.00 high was consolidated through the afternoon, perhaps inhibited ahead of post-open earnings. Buyers didn”t gain traction for their efforts.
Overnight action”s new info…
Tuesday afternoon”s consolidation bled into the overnight, trading flat-to-lower within Tuesday afternoon”s range. One hour after Europe”s opens a surge probed above Tuesday”s range to 2095.00. That has since extended to 2097.00..
If, then…
The rally was likely to resume today, and the rally”s resumption was likely to begin by gapping up. But gapping up does not ensure the rally is resuming. Already trading 5 points above yesterday”s high is testing 2097.00, important resistance that was Monday morning”s support and eventual sell signal. Post-open testing of relevant resistance requires exceeding it through that timing window”s exit, or else a reversal down would become likely — even if only as a temporary correction. It is possible to expend too much buying pressure to be sustainable, which would be “ineffectual optimism.” There is a benefit of the doubt for extending higher, but we”ll still be prepared for signs that new sponsorship isn”t being attracted. Bank of America (BAC) just announced earnings and the ECB just announced policy, neither having an effect on S&Ps. Mario Draghi”s press conference will begin soon, a centrist Fed speaker is scheduled pre-open, and a hawk is scheduled post-open. Until the bias timing window triggers at 10:15, we”ll still give dips a benefit of the doubt to be recovered.
First Trade…
Exiting the open at 9:45 above 2097.00 would be likely also to trigger the 2094.50 bias-up signal at 10:15. Exiting the open above 2103.25 would be likely also to exceed the 2100.50 bias-up target at 10:15 to renew the bias-up signal. Exiting the open under 2088.00 would be unlikely to trigger bias-up.
Was anxiousness ahead of INTC”s
Was anxiousness ahead of INTC”s post-close earning responsible for inhibiting an afternoon recovery? That can happen during earnings season, and we”re definitely in it. But if the market intended to extend the recovery from its morning drop, and the impending earnings caused that recovery”s delay, then resuming the rally should compensate for the delay. This means surging immediately if not gapping up Wednesday.
Meanwhile, buyers gained no traction for Tuesday afternoon”s efforts. Resuming the rally immediately should begin by surging immediately or by gapping up.
Also, the correction from Monday”s high to Tuesday”s low fulfilled the lowest pullback limit. Literally, as much selling pressure as could be expended without gaining traction has been expended. So, there is no excuse for delaying the rally”s resumption.
The first condition makes a rally likely to begin aggressively. The second condition makes a rally likely to begin aggressively if it begins at all. And the third condition makes not rallying aggressively bearish.
Barring surprising dramatic news that must be absorbed, this resolution should be obvious almost immediately Wednesday, one way or the other..
Here”s the recording of Tuesday”s post-market Wrap (take-two, since take-one encountered some sort of technical difficulty):
https://roddavid10.mitel-nhwc.com/join/bwzzjxp
Morning bias
| WED morning signal (triggered at 10:15 ET) | SPX | ES |
| Bias-up: above | 2101.25 | 2094.50 |
| …would target | 2107.25 | 2100.50 |
| Bias-down: under | 2090.50 | 2083.75 |
| …would target | 2084.50 | 2077.75 |
| Signal status: BIAS-UP | 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.
Daily Spot… Euro bouncing from support, Crude Oil teasing.
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 Mar Contract (EC, ETF: (FXE, UUP))
Gapping up Tuesday to probe above Friday”s ~1.0650 highs has room up to 1.0845-1.0855 so long as 1.0615 now holds as support.
Gold Jun Contract (GC, ETF: (GLD))
Gapping down sharply Tuesday was recovered enough to fill the gap back to Monday”s close, but that was retraced to close back under 1194.50 support. Or, at least, still testing its support. Early strength Wednesday would be credible for extending higher. There is otherwise potential down to 1181.50.
Silver May Contract (SI, ETF: (SLV))
Tuesday”s probe under 16.02-16.10 support was recovered through the close. Back above 16.45=16.60 would signal momentum reversing up.
30-year Treasury Jun Contract (US, ETF: (TLT))
Gapping up sharply to 163-29 Tuesday proved that Monday”s opening sellers were impatient and weak-handed. Extending higher proved that Friday”s 61.8% resistance required a retest. Extending intraday to 165-26 probed the last three surge peaks without closing above any of them.. But reacting back down to 1640-08 support stopped just short of proving that buyers were absorbed so the decline could resume. Back under 164-04 would now be the nearest sell signal.
Crude Oil May Contract (CL, ETF: (USO, USL) (UWTI-long, DWTI-short))
Fresh recovery highs attacked 53.75. Stopping pessimistically short of touching last week”s ~54.00 high is potentially bullish from a contrarian perspective.
Natural Gas May Contract (NG, ETF: (UNG, UNL))
Gapping up Tuesday didn”t extend more than a penny above Monday”s 2.54 high, ranging narrowly sideways around it through the afternoon without creating any new signals.
Pre-close view… Did the last seller drop?
Closing higher would confirm.
The afternoon”s no-bias environment was triggered only ticks away from its 2089.25 bias-up signal. Often, that leaves an entire bias environment carte blanche to drop as low as its bias-down signal.
That wasn”t expected in this instance. The bullish template would not stray far from resistance while waiting for the bias environment restraint to lapse. In fact, the bias environment”s 2-point 2087.00-2089.00 range barely pulsated.
The bias environment”s exit did dip momentarily to 2085.75. The bullish template considers that to be the rubber band stretching, so it can snap back up.
Now the final hour has been entered probing higher to 2090.75. That”s a start, but it”s not enough. The bullish template all but requires trending up through the close — at least above yesterday”s 2092.75 final hour high, if not also above yesterday”s 2096.50 noon hour high.
Ending any lower would remain vulnerable to resuming yesterday”s decline.