Posts by Rod David
Trading Plan for 2/26
If the rally isn”t topping right now… then it”s preparing to get extend at an exponential pace. That wouldn”t change its ultimate resolution, but it would be a painful short.
Pattern points… (Setups and technicals)
You know that string of consecutive gaps down, all of which were absorbed intraday? They eventually got shallower and briefer, as their recoveries became more and more anticipated. Pavlov”s dogs used to do the same thing.
So, as the opening dips are bought up more eagerly, and that”s translated more regularly into a new high, eventually, their higher highs become unsustainable.
That happened Tuesday, to a small degree. Its afternoon new high failed to retrace above the morning”s new high. It happened again Wednesday, as its new high almost closed back under the morning”s low. In fact, Tuesday”s sequence required Wednesday to reject its 2117.75 new high. We were anticipating it. The only question was how, and by how much?
Okay, that”s two questions.
How: The bias environment was exited under the noon hour”s 2114.75 high, and the final hour was entered under the noon hour”s 2112.75 low.
How much: The morning”s 2108.75 low in negative territory was probed down to 2107.25.
New highs, and sellers gained traction. They also avoided closing under the morning”s high, which would have formed a very bearish “Pivot Reversal” setup. We also anticipated that wouldn”t happen, since this wasn”t the appropriate stage for “very” bearish. Sort of like the gaps down, also inappropriate to extend down.
But not for long. Trending down sharply Thursday morning after Tuesday and Wednesday”s sequence would be substantial, but not durable. That template is available, but more likely is another optimistic session that doesn”t gain traction for its effort..
What”s Next… (Outlook and opportunities)
Overbought RSIs at Wednesday”s 2117.75 high require its retest. Gapping up around 2115.00 and probing a fresh high would be optimal timing — both intraday and day of week — to begin trending back down into the weekend. Closing above Wednesday”s high would instead suggest the rally is instead extending to 2130-2140.
Is the market turning a
Is the market turning a corner? That was the main topic of discussion during Wednesday afternoon”s Market Tour, recorded here:
https://roddavid10.mitel-nhwc.com/join/cxwbvzs
The failed gap down’s distant cousin has arrived.
Afternoon slide hesitates before testing the morning”s low.
This afternoon”s probe under the morning”s low came after the bias environment exit and was recovered before the final hour”s entry. The next probe was recovered, too.
Or, at least, hasn”t extended down further.
Neither has it been reversed up. But back above 2111.00 would suggest as much. The noon hour”s 2114.75 would be targeted, if not also a retest of the 2117.75 high”s overbought RSIs.
Extending down is possible — more possible than in more than a week, as yesterday”s session began warning. But it is just a tad bit premature to start today.
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 Mar Contract (EC, ETF: (FXE))
Firming into Wednesday”s open didn”t extend higher intraday, but it did avoid resuming the decline for a second consecutive session. Early strength Thursday would be credible for extending higher intraday.
Gold Apr Contract (GC, ETF: (GLD))
Recovering repeatedly back above 1197.50 from tests of the decline”s 1191.50 target has been signaling the decline has ended. Trying to reverse up prematurely back above 1212.00 would only make a fresh low at 1185.00 likely. Tuesday night”s bounce did attack 1212.00 but dipped back down to within $1 of Tuesday”s close 1199.50 to temper the enthusiasm.
Silver Mar Contract (SI, ETF: (SLV))
Already gapping up Wednesday was premature for reversing even near-term momentum back up, and it left a gap outstanding back to Tuesday”s close that should be filled.
30-year Treasury Mar Contract (US, ETF: (TLT))
Fresh highs Tuesday night attacked the corrective bounce target”s 147-00 upper-end to within a quarter-point. It was eventually retested Wednesday afternoon, absorbing a couple of intraday dips to suggest the bounce isn”t just a temporary correction.
Crude Oil Apr Contract (CL, ETF: (USO, UWTI))
Wednesday”s EIA report triggered a blip-down under the 49.00-50.50 rock and hard place that quickly reacted back up into the narrow range. Its upper-end was probed. Surging back above 51.25-52.65 would be credible for resuming the rally, but that”s probably the only way to avoid a new downleg to new lows first.
Natural Gas Apr Contract (NG, ETF: (UNG, UNL))
Until closing above Tuesday afternoon”s high, pullbacks have room down to the 2.80 area before suggesting that a bigger rally leg might not be developing.
7 for 7.
Another gap down absorbed and reversed.
There have been seven consecutive gaps down, although the last two were only modest. But none has extended down.
Two of the first five gaps down were reversed intraday to new highs. The past two that gapped down only a little were also reversed intraday to new highs.
Absorbing morning weakness is a reflection of accumulation. Eventually, after rewarding accumulation by so much for so long, even the most bullish scenario must introduce a dip that is much more dramatic.
Considering that the rally didn”t actually gain traction from yesterday”s new high close, any near-term peak precludes today”s extension from gaining traction either. If the bias environment is exited at 2:30 above the noon hour”s 2114.75 highs, which is currently 3 points lower, then the final hour should be entered under 2114.75 to avoid confirming.
Exiting the bias environment back under 2114.75 could continue reversing down into the afternoon. Regardless, topping this week seems to depend upon rejecting this afternoon”s probe of new highs.