Posts by Rod David
The First Trade & Pre-open Tour Recording… Nerves of molten steel.
Proper context can start the day with a solid win and make all the difference.
DAILY SCHEDULE
First, watch the pre-open Tour recording HERE <<==
Then, meet in the chaRTroom here by 9:15 ET for updates and Q&A
Through the prior close…
Thursday’s open continued this week’s tradition of surging in some way — gapping up, recovering a post-open blip-down, simply surging — and then reversing down. The 13-point dive was measured as much as any previous reversal, but the half-hour timing was its fastest. So fast, that it left time for another bounce to also reverse down, this time 14 points and to fresh session lows. That was recovered to attack Wednesday’s highs, stopping short of a higher close that would have confirmed Wednesday’s breakout. No “unfinished business below” was left outstanding and sellers didn’t gain traction for their efforts. .
Overnight action’s new info…
Selling has resumed. Fluctuating around the 2774.00-2776.00 close began resolving down before midnight. Europe’s opens were greeted at 2766.50, which is a 61.8% retracement of the Double Bottom at yesterday’s lows. Its natural support held briefly before resolving down sharply to fresh lows at 2755.75. Price has been consolidating back up to the Double Bottom’s 2764.00 low.
If, then…
The trend had not reversed down through yesterday’s close, and yesterday’s sellers had not gained traction for their efforts, leaving potential for bouncing today back up toward yesterday morning’s highs. Probing lower overnight makes bouncing more difficult, but not if yesterday’s lows are holding as support through the open. Gapping down under Thursday afternoon’s lows would gain downside traction by proxy, forming a “session-long decline.” Isolating the fresh lows to the overnight would be bullish. Regardless, I would still beware of potential for an opening surge to fail anyway. Either way, Friday Factors are likely to exaggerate any resolution. Relative performance yesterday between NDX and the Dow will be very bearish if repeated today (I elaborate on this during today’s pre-open Tour, linked above).
First Trade…
[Click here to view the Bias parameters] Exiting the open at 9:45 under 2759.00 would be unlikely to recover the 2761.50 bias-down target at 10:15, renewing the bias-down signal. Exiting the open under 2765.50 would be likely at least to trigger bias-down at 10:15. Exiting the open above 2770.00 would be unlikely to trigger bias-down.
Morning Bias
| FRI morning signal (triggered at 10:15 ET) | SPX | ES |
| Bias-up: above | 2774.75 | 2778.50 |
| …would target | 2780.25 | 2784.00 |
| Bias-down: under | 2764.50 | 2768.25 |
| …would target | 2757.75 | 2761.50 |
| Signal status: NO-BIAS, TESTED BIAS-DOWN SIGNAL | FAQ | |
| Flowcharts: Bias-UP // Bias-DN 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.
Market Wrap (recording & summary)
Vidi, Veni, Vanished…
Sellers waited patiently for the the week’s fourth consecutive opening surge (of one type, or another). Then they pounced on it and drove price sharply lower by 14 points, quickly. But except for one bar of errant ticks, sellers only fulfilled their downside objective. Their sponsorship disappeared almost immediately, retracing 11 points back up to the open’s high.
Sellers saw the corrective bounce, and triggered a 14-16 point drop to fresh session lows. Their downside objective was neutralized again. And their sponsorship disappeared almost immediately again, too. Two intraday bounces, two intraday drops.
Sellers saw, sacked, then split.
The pattern of distribution into the open’s fresh highs need not repeat Friday. Expending so much selling pressure Thursday without gaining traction suggests the rally will try to extend. But it won’t require any higher close, since closing Thursday in negative territory fails to confirm Wednesday’s breakout. And gapping down under Thursday afternoon’s lows would gain downside traction by proxy.
Details and other markets coverage are discussed in the post-market Wrap recording here.
Monitor overnight Globex trading in the chaRTroom here.
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 Jun Contract (EC, ETF: (FXE, UUP))
Wednesday’s Island pattern at 1.1800 didn’t reverse down Thursday under its 1.1745 trigger, but gapped up to its 1.1835 room for noise. .
Gold Aug Contract (GC, ETF: (GLD))
Thursday’s open probed Tuesday and Wednesday’s 1305.00-1306.00 highs. The gap back to last Thursday’s 1305.00 close had been filled already, without extending higher. Thursday’s test also didn’t extend higher, and reacted back down to test 1300.00 as support. Closing beyond either end of Thursday’s range would likely trend in that direction.
Silver Jul Contract (SI, ETF: (SLV))
Gapping up through prior highs Thursday dipped post-open but held the 16.80 buy signal as support. The second consecutive higher close confirms Wednesday’s breakout and requires at least an eventual third higher close before another downleg would be reliable.
30-year Treasury Sep Contract (US, ETF: (TLT))
The gap back down to 142-00 was filled to within 1 tick overnight, which isn’t optimal for actually testing it. So, closing back above 142-22 wouldn’t reverse momentum up, but allows one more intraday dip that’s likely to recover. Dipping without first closing back above 142-22 would be likelier to extend down.
Crude Oil Jul Contract (CL, ETF: (USO, USL) (UWTI-long, DWTI-short))
With all current reports freshly past, and their negative reactions holding prior lows, there’s no bullish reason to much delay triggering a recovery underway back above 66.25. Firming Thursday started attacking the trigger to within 20 cents, which should be extended into the weekend if valid.
Natural Gas Jul Contract (NG, ETF: (UNG, UNL))
Thursday’s EIA report was greeted from a position of strength. A negative knee-jerk reaction down would have been compelling to buy, but the session already gapped up and and only drifted down on the news. At least an eventual third higher close at 3.00 or higher remains outstanding.
Mid-day Update… They’re not bashful.
Selling becomes much more obvious.
Pullbacks can be constructive and healthy to an ongoing rally. They help to keep pessimism alive, which is bullish from a contrarian perspective. 
They help to trap shorts, which can fuel a recovery as they’re “squeezed” into covering. And they can neutralize attractions below, letting new rally legs extend unencumbered.
Pullbacks can also become trend reversals.
All of the benefits I listed for pullbacks can be bullish when they don’t damage the chart. Holding support, developing during irrelevant timing windows, artificial catalysts (e.g. knee-jerk reactions), leaving “unfinished business above,” etc.
Those features aren’t part of today’s pullback.
More so, today’s sellers are hardly bashful. Reactions down from fresh highs on all other days this week were limited to some prior support, or else recovered back above a relevant level before gaining traction. Today’s selling has twice triggered bias-down, and quickly fallen to its objective (this afternoon’s 2763.25 bias-down target was just met to within 3 ticks).
Recovering back into positive territory today is not impossible. In fact, a 7-point bounce is underway from attacking the target. But extending back into positive territory is unlikely, and so is confirming yesterday’s breakout. That wouldn’t be irrecoverable unless this afternoon includes another steep downleg.