Posts by Rod David
The First Trade.
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 fifth consecutive gap down triggered the bias-down signal for the second time, but without already having fulfilled its target like Friday had. That still didn”t suffice for sellers to take control, as the signal was invalidated by exiting the bias environment above the open”s high. Despite having absorbed sellers, buyers never left negative territory — not until the last half-hour”s surge back to Friday”s 2108.50 high. The surge reversed yet another probe under 2101.50 support which I was expecting to drop by as much. Oversold RSIs were left outstanding.
Overnight action”s new info…
Monday”s choppy 7-8 point session was relatively narrow compared to Friday”s 26-point range. Last night”s 3-point range was narrower. Both share the same high, 1 tick short of Friday”s highs.
If, then…
“Ineffectual pessimism”? Hovering at the highs without either probing above them or reacting down eventually makes higher highs obligatory. That is, buyers must be rewarded for their effort. But that reward isn”t necessary substantial or durable, not unless another dip were to develop first. The anti-Grexit headlines have taken the lead from yesterday”s worrisome delay in Greece”s announced reforms.” The new source of anxiousness is FOMC Chair Yellen”s Senate testimony, whose remarks are normally embargoed until 10:00am.
First Trade…
Exiting the open at 9:45 above 2111.00 would make the 2108.50 bias-up signal likely to trigger at 10:15. Exiting the open under 2104.25 would be unlikely to trigger bias-up, and under 2101.50 would be likely to trigger the 2102.50 bias-down signal.
Morning bias
| TUE morning signal (triggered at 10:15 ET) | SPX | ES |
| Bias-up: above | 2111.00 | 2108.50 |
| …would target | 2116.25 | 2114.00 |
| Bias-down: under | 2104.75 | 2102.50 |
| …would target | 1998.00 | 1995.50 |
| Signal status: INVALIDATED NO-BIAS, TESTED BIAS-UP SIGNAL | 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.
Monday”s post-close Market Wrap was
Monday”s post-close Market Wrap was recorded. In fact, here”s the recording”s link, now:
https://roddavid10.mitel-nhwc.com/join/wzcptth
Trading Plan for 2/24
If not for the new Grexit drama… then Monday”s session could have ended flat like Monday did. But the range would have been much wider and less subdued. Not that Monday was terribly subdued — it was volatile enough to expect a substantial reaction to news..
Pattern points… (Setups and technicals)
Monday”s session, in retrospect, was defined by its fifth consecutive opening gap down, which didn”t extend. It wasn”t just the drop, and its lack of follow-through. It was the multiple intraday drops that didn”t extend.
Not extending down wasn”t for lack of trying. The open”s drop ultimately triggered the bias-down. The afternoon”s drop took RSIs oversold. There were interim drops, but they were book-ended by strong-handed sellers. And then they were overwhelmed.
Last week”s upside target at 2101.50 continues to be influential. It was tested during each of Monday”s timing windows. I had expected its last test to break 6-points lower, targeting 2095.50. Instead, it was recovered to momentarily probe a fresh high, closing 6 points above 2101.50.
Friday”s breakout wasn”t confirmed Monday. That”s not necessarily bearish, and Friday”s trend high close still requires at least one more.
What”s Next… (Outlook and opportunities)
Yellen”s testimony Tuesday morning may have inhibited trending Monday. The proximity to fresh highs without reversing down suggests at least a probe is likely. No durable trend in either direction is likely to be a reaction to anything Yellen is going to say.
In the absence of up…
…down.
The afternoon bias environment stopped 1 tick short of touching the morning bias environment”s late 2106.25 high. Rather than exploit that pessimism by surging, the final hour”s entry attacked the noon hour”s 2101.50 low.
All of today”s timing windows have touched 2101.50. Its support has been thoroughly chipped away. Entering the final hour at fresh lows would all but ensure extending down today to 2095.50.
2101.50 is being overlapped now, but from below, after having probed under it down to 2100.25. Oversold RSIs at the low doom any bounce to failure, dooming a premature buy signal to failure even if the bounce limit were violated.