Posts by Rod David
Post-open review
Trades are like trolleys. If you miss one, another will arrive momentarily.
As suspected, yesterday”s “50b Euro” leak was still a work-in-progress. Criticism was taken to heart, and the actual commitment was increased 20%.
As suspected, the news was productive. Its likely objective was 2041.00-2044.00, but it actually triggered a 10-point surge to 2047.00. And that was after already firming 3 points from a pullback to 2034.00.
As suspected, the reaction would be vulnerable to peaking. Whether immediate, this afternoon, or next week, the reaction should be reversed by a downleg back to last week”s lows.
About that last suspicion…
NOT suspected was an almost immediate reaction down. NOT opening back under a prior low like 2034.00 kept price within 2047.00”s orbit — bouncing 6 points into and out of the open did NOT disagree.
Anyway, that was wrong. A 22-point drop through the opening 15 minutes of volatility got to 2019.25.
I was late to catch that drop. At least it was still sizable. Catching the recovery has probed to be the bigger trade:
Usually, rejecting tests of both bias-up parameters (2033.00 signal and its 2038.25 target) through 10:15 would put into play offsetting tests of their bias-down counterparts. Not necessarily. Rewarding those sellers too quickly could limit the reward. Already holding a test of the 2021.75 bias-down signal did just that.
But wait, there”s more…
The 2033.00 bias-up signal was touched again, within 3 minutes of 10:15. That invoked the grace period through 10:30, which triggered “late bias-up.” And now the post-open peak is being retested by a fresh session high at 2045.25.
About that vulnerability to reversing the ECB rally back down to last week”s lows… Maybe not. This morning”s reaction down came before the bias environment even began. Its round-trip recovery may have refueled the rally. The next higher objective is 2059.00 .
The favorable knee-jerk reaction to
The favorable knee-jerk reaction to the EB QE had melted away before this morning”s Market Tour began. It had been largely recovered by the time our recording* ended. Your welcome, Mario.
* https://roddavid10.mitel-nhwc.com/join/mjvbkmy
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…
Wednesday morning had recovered from gapping down to test 2005.25, and then trended back above Tuesday”s 2026.50 high to 2032.75 — rewarding Tuesday afternoon”s rally for having gained traction. With that obligation fulfilled, and with ECB news ahead of it, the morning”s optimism needed to be kept in-check. So, the balance of the session marked time, dipping to 2016.25 and then bouncing back up to 2028.25.
Overnight action”s new info…
Wednesday”s last bounce eventually extended higher to another fresh high at 2035.75. ECB news still lies ahead, so the optimism was kept in-check by dipping back down to test Wednesday”s 2028.25 late bounce high. That has bounced to retest yesterday”s 2032.75 high into the ECB interest rate news (but not yet the QE details).
If, then…
Yesterday”s price action behaved appropriately for a favorable reaction to this morning”s news, greeting it with retrained upward momentum. A favorable reaction could extend through multiple timing windows, but could. Regardless of whether it fails today, a favorable reaction should be very productive. A negative reaction should be both durable and productive.
First Trade…
I”ll update this following the QE details.
Morning bias
| THU morning signal (triggered at 10:15 ET) | SPX | ES |
| Bias-up: above | 2039.00 | 2033.00 |
| …would target | 2044.25 | 2038.25 |
| Bias-down: under | 2027.75 | 2021.75 |
| …would target | 2021.50 | 2015.50 |
| Signal status: LATE BIAS-UP SIGNAL, TESTED BIAS-DOWN SIGNAL AFTER TESTING BOTH BIAS-UP PARAMETERS, | 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 1/22
If the reaction to ECB”s QE isn”t bullish… then Thursday”s open is probably indicated to gap down sharply.
Pattern points… (Setups and technicals)
Wednesday”s session did everything it could to facilitate a favorable reaction to Thursday”s pre-open ECB statement. At least, to facilitate an initially favorable reaction targeting 2041.00-2044.00:
— Tuesday afternoon”s buyers got the reward they were due by controlling Wednesday morning”s bias environment, but no more.
— Reacting down into the afternoon bias environment”s low kept optimism in-check.
— And upward momentum from the last 60-90 minutes” rally will greet Thursday morning”s news.
A favorable reaction could still be reversed in the afternoon. But if the initial reaction isn”t favorable, then a reaction down to last week”s lows is probably underway. Wednesday”s closing action rallied, and the bias environment contained the afternoon”s 2016.25 low, so gapping down under it would form a “session-long decline” setup.
What”s Next… (Outlook and opportunities)
Although the ECB QE size was floated Wednesday morning, that was only a leak, perhaps a trial balloon. And it was criticized. Markets held up just for knowing with much greater certainty that some sort of program would be announced within hours. Presumably, the actual total won”t be lower. But even if it is higher than what was leaked, the pattern”s timing doesn”t change.