Posts by Rod David
Yesterday afternoon”s rally gained traction,
Yesterday afternoon”s rally gained traction, but also met and held its target. The premise of extending higher this morning depends upon not reversing down too deeply at the open. The relevant levels and a last-minute assessment were discussed in this morning”s Market Tour, recorded here:
https://roddavid10.mitel-nhwc.com/join/pcxymcr
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…
Thursday”s pre-open surge from the ECB QE had largely round-tripped during the morning. Sideways ranging through the afternoon bias environment was resisted by the untriggered 2043.50 bias-up signal. The timing window”s exit broke higher and rallied sharply into the final hour until touching its 2059.00 target. The balance of the hour ranged narrowly again.
Overnight action”s new info…
Even narrow ranging persisted overnight, albeit at a slightly lower level between 2053.00-2055.00. Firming into Europe”s opens became a surge to fresh highs at 2062.00. Its reaction down to 2055.00 has bounce back up to 2059.00.
If, then…
Yesterday afternoon”s rally gained traction for its efforts, so its buyers should be rewarded with control of this morning”s bias environment. Losing traction before the open would forfeit the reward. A pullback still has room down to 2047.50-2048.75 before even threatening the upward momentum. A lot of optimism is expended in avoiding a last hour pullback and again overnight. Probing fresh highs this morning would expend even more optimism, and be vulnerable to reversing down into the weekend. Until triggering bias-up above 2061.50 — which is the room for noise above 2059.00, and which held the overnight surge — I would be cautious about the morning”s upside.
First Trade…
Exiting the open at 9:45 above 2059.75 would be less likely to trigger the 2049.25 bias-down signal at 10:15. Exiting the open under 2047.50 would be likelier to trigger bias-down. The open must be exited above 2065.25 to be likelier to trigger the 2061.50 bias-up signal.
Morning bias
| FRI morning signal (triggered at 10:15 ET) | SPX | ES |
| Bias-up: above | 2067.50 | 2061.50 |
| …would target | 2074.50 | 2068.75 |
| Bias-down: under | 2055.00 | 2049.25 |
| …would target | 2049.00 | 2043.00 |
| Signal status: NO-BIAS, TESTED BIAS-DOWN 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.
Trading Plan for 1/23
If Thursday”s high were a little higher, or a little lower… then we”d have confidence in the rally extending. But rather than close above the next higher target, or leave it outstanding, the target was met and held.
Pattern points… (Setups and technicals)
Thursday afternoon”s steep and substantial rally from 2043.50 quickly fulfilled its 2059.00 target. That”s not patient optimism. The session”s last 45 minutes hovered just under 2059.00 instead of correcting down — i.e. refueling by trapping shorts. That”s ineffectual optimism.
None of which is inherently bearish. But all of which increases the vulnerability to stronger sellers retaking control.
A pullback had room down to 2047.50-2048.75. Still does. Opening any lower Friday could reverse momentum down. But holding support would still require rewarding Thursday afternoon”s buyers for having gained traction (they exited the bias environment above the noon hour”s high, and entered the final hour above both).
What”s Next… (Outlook and opportunities)
Sellers gaining traction through Friday”s open would reverse the trend down, but not necessarily for more than a correction. A lot of Thursday”s range can be retraced without reversing the trend. But reversing the trend would be very bearish for next week.
Another QE coming Friday? No
Another QE coming Friday? No one is suggesting it. But Thursday afternoon”s buyers behaved like it is. What happens if they”re disappointed? What if they”re not terribly disappointed? The post-close Market Wrap recording is here:
https://roddavid10.mitel-nhwc.com/join/mjvbwrp