Posts by Rod David
The First Trade & Pre-open Tour Recording… Resolving the bearish template.
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…
Tuesday’s bearish template developed fully, with one exception — the bearish resolution. Having held a test Monday of the corrective bounce’s 2725.25-2727.75 objective, a failed intraday probe above it (i.e. distribution) was needed to kick-start the reversal. The probe happened up to 2734.50 before the open, and the reversal was underway down to 2710.25 during the bias environment exit. But a knee-jerk reaction to a tariffs headline triggered a recovery that ranged sideways around 2725.25-2727.75 through the close. Unfinished business below was left outstanding at the morning’s 2704.75 bias-down signal.
Overnight action’s new info…
Who knew. Apparently, the White House Chief Economic Advisor is critical to market stability. At least, that’s implied by Tuesday night’s 24-27 point gap down to 2700.00 in reaction to Gary Cohn’s resignation. And that eventually extended down to 2681.25. The test of “lower prior highs” at 2683.00 from last Friday afternoon reacted up until touching 2704.75, Tuesday morning’s unfinished business that is now neutralized. A shallower dip to 2685.00 was recovered almost entirely to 2704.75 through Europe’s opens. A 10-point range that formed since then just blipped-up to the 2707.00 bias-down target’s resistance, and reacted back down into the range.
If, then…
Knee-jerk reactions to news tend to be retraced to their origin, so filling the gap back to Tuesday’s close shouldn’t be surprising. But that’s not a timing mechanism, a requirement or even an influence, so it’s not an impediment to extending down. Meanwhile, there wasn’t any bullish reason last week to revisit 2701.00 or 2682.00, so the alternative to not holding their tests today could be to trend sharply lower. The immediate question isn’t about resolution, but the path there. The intraday crowd hasn’t yet had the opportunity to react to last night’s news. Another corrective bounce into or through the open up to 2713.25 or 2718.75 should still be shallow enough to attract sellers, but any higher could inhibit them to think the storm has passed. Otherwise, not holding the 2695.00 area through the open would mean strong hands aren’t waiting for more strength to sell into.
First Trade…
[Click here to view the Bias parameters] Exiting the open at 9:45 above 2718.75 would be unlikely to trigger the 2717.00 bias-down signal at 10:15. Exiting the open under 2713.25 would be likely to trigger bias-down. Exiting the open under 2704.75 would be likely also to exceed the 2707.00 bias-down signal at 10:15 to renew the bias-down signal.
Morning Bias
| WED morning signal (triggered at 10:15 ET) | SPX | ES |
| Bias-up: above | 2731.50 | 2731.00 |
| …would target | 2736.75 | 2736.50 |
| Bias-down: under | 2717.25 | 2717.00 |
| …would target | 2707.50 | 2707.00 |
| Signal status: BIAS-DOWN, BIAS-DOWN TARGET IS MET | 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)
Tuesday’s bearish template was to probe above Monday’s highs and reverse into negative territory. It was likelier to develop during the morning, instead of during the afternoon. It actually developed before the open. That is, Monday’s highs were probed overnight, and negative territory was probed through the bias environment lapsing.
Then came the knee-jerk reaction to news. A headline seeming to mute the dreaded tariff toll triggered a 15-point rally to 2730.00 by noon. That was already within 3 points of the afternoon bias-up target, so it didn’t become “unfinished business above” despite not being touched.
Bias-up wasn’t rejected, either. Knee-jerk reactions to new headlines usually are retraced entirely, eventually. And the noon hour’s surge seemed on its way to being retraced. But that was cut short by another headline touting Trump’s impending appearance. Instead of resuming the decline, the bias environment’s 2723.00-2730.00 range persisted through the close.
The same template governing Tuesday’s open is in-play again Wednesday. If not already trending down at the open, then failed probes of fresh highs should be viewed as distribution, and likely to resolve down. But it’s possible that having blind-sided Tuesday’s attempt to reverse the failed probe, not resolving down Wednesday could extend the rally to 2753.00 or 2765.00.
- 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 Mar Contract (EC, ETF: (FXE, UUP))
Bouncing to higher prior lows at 1.2345 didn’t resolve down under 1.2300 to resume the decline, and instead extended to the next higher objective at 1.2430 Tuesday. There is no bearish reason for probing any higher before resuming the decline.
Gold Apr Contract (jUN , ETF: (GLD))
Gapping up and trending higher Tuesday above 1331.00 and 1335.50 have started to signal a bigger bounce underway. Final confirmation above 1341.00 is only $1 higher. Regardless, the low’s Island pattern suggests the rally is only temporary.
Silver May Contract (SI, ETF: (SLV))
Tuesday’s gap up above 16.50-16.55 extended higher to close above 16.75. A second consecutive higher close on Wednesday would confirm 17.50 is in-play. Otherwise, back under 16.50 would signal the interim bounce had ended and that new lows under 16.25 are in-play.
30-year Treasury Jun Contract (US, ETF: (TLT))
Dipping to the 142-24 sell signal only reacted up to test 143-22, greeting Wednesday’s ADP report not from a position of weakness.
Crude Oil Apr Contract (CL, ETF: (USO, USL) (UWTI-long, DWTI-short))
Extending Monday’s bounce overnight to attack 63.30 was retraced back into negative territory Tuesday to test the 62.25 sell signal. Avoiding a second consecutive higher close above 61.35 has kept alive the potential for re-triggering 62.25 and resuming the original decline.
Natural Gas May Contract (NG, ETF: (UNG, UNL))
Relentless testing of 2.74 resistance finally broke higher, albeit short of 2.80 which is the limit for a blip-up to reverse down sharply on the way to at least temporarily probing fresh lows for a bottom to form.
Mid-day Update… Late trap.
Sellers have difficulty hanging on.
Gapping up to 2731.50 and initially probing 1 point higher had stopped short of touching the 2734.50 overnight high. The balance of the morning trended down. The gap back to yesterday’s 2718.50-2721.25 closes was tested into the bias timing window — which held, trapping sellers.
Trapped sellers were only so many. A corrective bounce up to 2728.50 was too late to invalidate the bias-up signal, and it resolved down to 2710.25 going into noon. But the requirement for an offsetting test of this morning’s 2704.75 bias-down signal has become “unfinished business below.”
Now more trapped sellers have helped to trigger the afternoon bias-up. The second probe into negative territory wasn’t maintained coming out of the noon hour. The likely reward is a probe above the overnight high to 2736.50.
Otherwise, back under 2723.00 would start to suggest momentum reversing down anyway. Actually launching a new downleg should be very obvious at the time.