Posts by Rod David
I know what you”re thinking…
I know what you”re thinking… Has the overnight pullback held its limit, so that yesterday afternoon”s buyers can be rewarded with control of this morning”s bias environment? And what if it hasn”t? How can we know? Well, coincidentally, those are the exact questions (and more) addressed during this morning”s Market Tour… recording available here:
https://roddavid10.mitel-nhwc.com/join/zvsrxts
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…
Flat-to-higher ranging through the holiday had only fattened up the market for Tuesday morning”s slaughter. But sellers were done by noon. First, the open rejected both bias-up parameters and put into play both bias-down parameters. They were fulfilled by the morning”s 26-point post-open plunge, on the way back to Friday afternoon”s low. The balance of the session rallied, stopping pessimistically short of touching resistance. The afternoon rally gained traction for its effort, exiting the bias environment above the noon hour”s high and entering the final hour even higher.
Overnight action”s new info…
Dipping from yesterday”s 2016.75 close to attack 2013.00 reacted up to 2021.50, perhaps inspired by China”s market surge. Perhaps. China”s plunge three days ago had only a temporary impact. Similar to that delay, another dip has probed lower to 2008.00. This is the origin of yesterday”s last 30-minute 12-point surge,
If, then…
Having gained traction, yesterday”s rally is owed the reward of probing higher highs this morning. This reward would be invalidated by gapping down under a relevant low. That would become likely if this overnight drop isn”t contained pretty much here and now. Not containing it would be likely to retest yesterday”s lows, which this stage of the pattern would be unlikely to prevent extending down to last week”s lows.
First Trade…
Exiting the open at 9:45 under 2007.50 would be likely also to trigger the 2009.50 bias-down signal at 10:15. Exiting the open above 2014.00 would be unlikely to trigger bias-down.
Morning bias
| WED morning signal (triggered at 10:15 ET) | SPX | ES |
| Bias-up: above | 2025.00 | 2018.75 |
| …would target | 2031.50 | 2025.25 |
| Bias-down: under | 2015.75 | 2009.50 |
| …would target | 2009.25 | 2003.00 |
| Signal status: LATE BIAS-UP, 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 1/21
If Wednesday”s open doesn”t gap down under relevant support… then the morning should be very productive to the upside. The afternoon might hesitate, or run into trouble, ahead of the ECB policy statement.
Pattern points… (Setups and technicals)
Tuesday afternoon”s rally gained traction for its effort. The bias environment was exited above the noon hour”s high, and the final hour was entered higher. Typically, the reward to Tuesday”s buyers is control of the next morning”s bias environment.
Trending higher Wednesday morning can be invalidated by gapping down sufficiently. A pullback has room down to 2009.50 before suggesting the recovery”s momentum is losing traction.
An overnight dip can”t be discounted, but it isn”t required. The current environment”s optimism remains in-check — the afternoon”s recovery peaked pessimistically1 tick short of touching natural resistance at the 2020.00 open”s gap, and that reacted down in two pre-close dips.
None of which interferes with this rally still being only a temporary correction. “Temporary” doesn”t speak to duration, only to durability — last week”s lows will need to be retested, not for the sake of retesting them, but because they lacked integrity for forming a durable bottom.
What”s Next… (Outlook and opportunities)
The annual State of the Union address has no bearing on the market. But it has distracted attention from the BOJ policy statement due overnight.
Tuesday afternoon”s rally gained traction.
Tuesday afternoon”s rally gained traction. What that means, and doesn”t mean, discussed in today”s Market Wrap recording:
https://roddavid10.mitel-nhwc.com/join/fbfjtvm