Posts by Rod David
Mid-day Update… Optimism finds a hole.
Noon hour rally extending sharply higher.
The first hour’s multiple wide swings weren’t offering much information to its ultimate resolution, or it was offering plenty of contradictory information. 
But we knew its ultimate resolution would be substantial. In fact, dipping to test the 2674.00 bias-up signal down to 2672.00 during the bias-up environment created a slingshot effect that resumed the overnight rally.
But that’s not substantial. This is:
The noon hour’s entry was soon retesting Monday’s highs up to 2684.25. Not much later at all, attacking the morning’s 2681.00 bias-up target and then the afternoon’s 2688.75 bias-up target. The afternoon’s 2693.00 renewed bias-up target was part of a consolidation, but it has resolved up to the next higher objective above 2684.25, which is 2696.75.
1-minute RSI is diverging negatively, while overbought 3-minute RSI is at least no longer persistently overbought. Nothing requires extending higher. Reacting down a little could mean reacting down a lot, especially back under 2693.00. Not reacting down at all could mean extending a lot, with the next higher objective being 2721.50.
Look ahead: Economic Calendar – for Thu May 10, 2018
A midday look ahead in preparation for economic reports and events scheduled for the next trading day.
Highlights: Thursday’s BOE decision finds a currency well extended in its decline, but having recently defended prior sessions’ lows. Whether that’s a bottom, or “ineffectual optimism,” will soon be known. Meanwhile, CPI is both high-profile and reliable for influencing price action. And any noticeable price reaction will likely be duplicated by post-open reports. The 30-year auction can inhibit volatility during the noon hour, but there’s often a relief rally.
*Bank of England policy statement
7:00 AM ET
*Consumer Price Index
8:30 AM ET
Jobless Claims
8:30 AM ET
Bloomberg Consumer Comfort Index
9:45 AM ET
EIA Natural Gas Report
10:30 AM ET
*30-Yr Bond Auction
1:00 PM ET
Treasury Budget
2:00 PM ET
Fed Balance Sheet
4:30 PM ET
Money Supply
4:30 PM ET
Afternoon Bias
| WED afternoon signal (triggered at 1:20 ET) | SPX | ES |
| Bias-up: above | 2683.50 | 2681.75 |
| …would target | 2690.00 | 2688.25 |
| Bias-down: under | 2672.75 | 2671.00 |
| …would target | 2664.75 | 2663.00 |
| Signal status: BIAS-UP, BIAS-UP TARGET EXCEEDED | FAQ | |
| Flowcharts: Bias-UP // Bias-DN INTRO VIDEOS #1 and #2 |
||
1. At 1:20, 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 1:20 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 1:20 would invoke a grace period through 1:30 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 1:30 after invoking the grace period would trigger “noN-bias,” with no bias influence.
Post-open Review… Contained optimism.
Pre-open pullback holds resistance… and support.
Reacting down from the overnight test of 2684.25 isn’t surprising, since it’s the next higher objective, or the room for noise above 2674.00 and 2681.00. Reacting back down to 2677.00 isn’t surprising either, since it’s the open’s preliminary level.
Surprising, or unusual, is that the first hour has essentially produced six 5-6 point swings, each overlapping 2677.00 and the 2681.00 bias-up target — three of the swings during the opening 15 minutes of volatility. And still no resolution.
The 2674.00 bias-up signal did trigger. But its 2681.00 bias-up target is already met. Often. It’s still a bias-up environment that could break higher anyway. But meanwhile fresh lows should be limited to testing 2674.00 as support during this window.
I had assumed during the Market Tour that hesitating to test 2684.25 would at least reflect restrained optimism, potentially bullish from a contrarian perspective. New information arrived later, that the reaction down was back under Monday’s 2681.50 prior high. Monday’s prior high, not yesterday, but the Isolation setup still forms by remaining under the prior high.
So, the opening range has formed a position of weakness. It’s able to launch a probe of fresh highs, e.g. 2684.25. But from a position of weakness that would be doomed failure. And there’s no “unfinished business above,” so a break lower is possible at any time.
The First Trade & Pre-open Tour Recording… Overnight jump.
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…
Probing overnight under Monday’s 2662.50 low by 4 points was largely repeated through Tuesday’s open. But Monday afternoon’s slide didn’t resume, and bias down didn’t trigger. Wash, rinse, repeat. The morning’s bounce up to 2674.25 was retraced to fresh lows during the noon hour. But the afternoon’s bias-down signal didn’t trigger, either. Wash, rinse, repeat, again. A shallower bounce to 2669.50 was reversed to session lows at 2652.25, and — in-line with the session’s tradition — also bounced. Monday’s 2670.00 close was being tested at the close to essentially finish the session unchanged.
Overnight action’s new info…
Tuesday’s last bounce was extended into Globex to probe 3 points above Monday’s 2670.00 close. Its reaction down to 2666.50 was narrowly consolidated, and almost entirely recovered to test 2672.00. A 3-point dip ahead of Europe’s opens (defensive posturing) was recovered back up to and through the earlier high — first a little, and then a lot, extending to 2684.50. Its reaction is now testing 2681.00 as support.
If, then…
Recovering from several intraday dips can form accumulation. That’s the basis for a bottom, but the setup isn’t complete until triggered. Tuesday’s recoveries stopped short of producing a trigger, including the close which was not above a prior high or resistance. But gapping up Wednesday can serve as a proxy for that role. Meanwhile, even the most bearish scenario did not preclude retesting Monday’s highs up to 2684.25. Now Wednesday’s open is indicated to gap up Having tested 2684.25 overnight, holding its retest through the open could launch a reversal down. Tuesday’s accumulative behavior can be more bullish only by attracting reinforcements, which is difficult when gapping up to resistance. Extending higher through the open would suggest that reinforcements had arrived, introducing potential to 2696.75.
First Trade…
[Click here to view the Bias parameters] Exiting the open at 9:45 above 2684.25 would be likely also to exceed the 2681.00 bias-up target at 10:15 to renew the bias-up signal next targeting 2693.00. Exiting the open above 2677.00 would at least be likely to trigger the 2674.00 bias-up signal at 10:15.