Posts by Rod David
The First Trade & Pre-open Tour Recording… Carving out a “cushion.”
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…
Monday morning’s gap down and follow-through from Friday’s 2822.00 close only pierced the pre-open low. Both of those lows had otherwise stopped optimistically short of touching the earlier 2733.00 overnight low. But simply trading in negative territory post-open had put into play a test of at least 2722.00. A substantial bounce was possible first, and in fact, the morning bounced 30 points. But not a durable bounce, as fresh lows were probed during the noon hour. The afternoon plunged almost another hundred points down to 2635.50. There was still time for a 60-point bounce to retrace almost entirely down to 2645.50 at the cash session close. Futures settled more than 43 points lower at 2602.00.
Overnight action’s new info…
Extending down 43 points after the cash session close into the futures settlement might seem like a lot. “Hold my beer,” said Globex. Another plunge down to 2529.00 subtracted another 116 points by midnight. Already rallying sharply into Europe’s opens then extended to within 2 points of yesterday’s 2645.50 cash session close equivalent. Its 30-point reaction down to 2573.00 is now bouncing.
If, then…
The plateau at December’s 2688.00 “lower prior highs” was probed from above and broken through that same session’s close. This requires so much selling pressure that it is highly unusual. The next lower prior highs is from early November at 2583.00. It was probed overnight by at least 50 points, but recovering to close above it today would still indicate a low is forming. Which conforms to the timing pattern created by Monday’s expanded follow-through, for a lower low Tuesday to launch a multi-session rally. The overnight lows don’t require being retested first, but the earlier drop could soften the damage a post-open drop might do, having room down to 2509.00 while still being able to recover (if tested early enough). Typically during a multi-session decline’s Tuesday, not already trying to rally into the noon hour isn’t helpful to bottoming… P. S. Bitcoin hit my $6100 target last night, probing it briefly by about $200 around midnight, so I have begun re-buying several cryptocurrencies.
First Trade…
[Click here to view the Bias parameters] Exiting the open at 9:45 under 2599.00 would be unlikely to recover the 2621.00 bias-down target by 10:15 to avoid renewing the bias-down signal. Exiting the open under 2627.00 would be likely at least to trigger the 2638.00 bias-down signal.
Phonetic dictation…
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Morning Bias
| TUE morning signal (triggered at 10:15 ET) | SPX | ES |
| Bias-up: above | 2659.50 | 2661.00 |
| …would target | 2675.00 | 2676.25 |
| Bias-down: under | 2636.75 | 2638.00 |
| …would target | 2620.50 | 2621.00 |
| Signal status: LATE NO-BIAS, TESTING BOTH BIAS SIGNALS, TESTED BOTH BIAS TARGETS | FAQ | |
| NEW! Flowcharts: Bias-UP // Bias-DN INTRO VIDEOS #1 and #2 |
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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)
Well, that was certainly historic. The Dow down 1177 points, S&Ps down 113 points. Not a first for a 24-hour period, but a first for a single session. The 24-hour period is still ticking, and overnight action will encounter global exchanges opening. All of which were closed during the majority and meat of Monday’s drop.
Monday’s sellers gained traction by exiting the bias environment under the noon hour’s low and entering the final hour lower. The 3:10-3:20 proxy window corrected, but wasn’t likely to recover a relevant level. Its bounce only refueled sellers for a final collapse to fresh lows.
While the size of Monday’s plunge is fascinating, it’s not unusual for a Friday-Monday sequence. And it behaved appropriately after the pre-open and post-open optimism of avoiding the overnight low’s retest. Even the velocity of suffering the consequences is normal.
What is unusual — highly unusual — is to have closed under the plateau at December’s highs on their first probe. That’s a lot of conforming selling pressure so late in the decline. It’s like a figure skater saving her quad jumps for the end of her program.
Extending down to a low mid-morning Tuesday would also be normal for this otherwise abnormal environment. Closing back above the plateau would have greeted that extra selling from a position of strength. Greeting the open from an overnight bounce would be unlikely to avoid resuming the decline.
- 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))
Relatively shallow weakness down to 1.2420 is no small victory. Not while many other currencies were trending down intraday. And now when Mario Draghi is speaking in the background. Back above 1.2500 would target a retest of prior highs above 1.2570.
Gold Apr Contract (GC, ETF: (GLD))
Bouncing back up to “higher prior lows” at 1341.00 reacted down from its resistance to range sideways intraday. Probing above Monday’s high Tuesday would be likely to extend higher.
Silver Mar Contract (SI, ETF: (SLV))
Monday’s shallow bounce was easily retraced but only back into the range and not to fresh lows. There is on buy signal indicated.
30-year Treasury Mar Contract (US, ETF: (TLT))
Firming overnight didn’t make the pattern any likelier to reverse up, let alone to recover. An intraday reversal fell to fresh lows, potentially fulfilling the recent confirmed breakout’s requirement for at least another lower close.
Crude Oil Mar Contract (CL, ETF: (USO, USL) (UWTI-long, DWTI-short))
Friday’s recovery to 65.35 was retraced again back down to 64.65, and lower to 63.50, which undermines any reliable timing for another upleg.
Natural Gas Mar Contract (NG, ETF: (UNG, UNL))
Gapping down slightly Monday soon filled the outstanding gap below to neutralize its attraction, but didn’t recover to close positive which would have reverse the trend back up.
Mid-day Update… A stronger target?
Post-open bounce resolves down sharply.
The pre-open and post-open attacks on the earlier overnight low had stopped optimistically short. 
Which didn’t preclude there being a bounce, and clearly didn’t prevent on. But only a bounce. And no matter how substantial, not a durable bounce. Retesting 2747.00 and 2738.00 overnight had made 2722.00 likely to be tested, too.
2722.00 was just tested down to 2715.00. And 2722.00 was still being overlapped at 1:20, then again at 1:30. That’s not to say the bias was affected, but the relevant price was holding at a relevant time to suggest that selling is waning.
Now a bounce is testing 2730.00, on its way to 2738.00 so long as 2721.25 holds as support. Recovering 2738.00 through the bias environment exit could lead to a short-squeeze into the close. Otherwise, the next lower objectiv would be December’s “lower prior highs” at 2690.00.