Posts by Rod David
The First Trade & Pre-open Tour Recording… Making the effort.
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…
Friday’s complete retracement of Thursday’s rally was the resumption of distribution that I began identifying on Monday. Its chart is copied below. Thursday afternoon did not confirm its breakout, because the session’s rise to 2866.00 from a pre-open dip to 2813.75 was only a function of having dumped ballast Monday, Tuesday, and Wednesday. Gapping down Friday could have been limited to backing-and-filling ahead of another rally effort into the close or Monday. But its 2830.75 pullback objective resolved down as the morning’s bias environment lapsed. The noon hour’s fresh lows at 2806.50 reacted up 22 points, only for the final hour to retrace it all (yet another failed intraday rally). No “unfinished business” remains above. And Friday’s close was under the prior multi-session consolidation (circled red below), starting to signal the trend reversing down.
Overnight action’s new info…
The weekend’s so-called Russiagate report is favorable to Trump, so an overnight rally was likely. It amounted to gapping up back to 2813.00, and immediately extending 5-1/2 points. That was retraced as quickly almost entirely, and then the decline resumed by collapsing to 2792.00. Ranging sideways up to 2801.00 probed lower through Europe’s opens to attack 2790.00. But only momentarily, as a snap up has extended back above Friday’s lows to test 2810.00.
If, then… (notes to accompany the Tour recording)
Thursday’s rally could have proved itself by a second consecutive higher close above the week’s range, which it did not. Similarly, now breaking under the week’s range must prove itself by closing lower again on Monday. Of course, it always seems darkest before the dawn. And, more on point, bull markets have a way of stepping right up to the brink, and then reversing. The alternative to falling into this precipice — the most glaring and pronounced precipice since long before the ongoing Christmas rally — avoiding this precipice would suggest resuming the rally to much higher highs. The “dawn” could be an Isolation setup that leaves behind the overnight probe, holding above Friday’s 2805.00-2806.50 lows. The setup is forming now. Meanwhile, Friday’s lows are also resistance, and rejecting an Isolation setup can be as bearish as it would have been bullish.
First Trade…
[Click here to view the Bias parameters] Exiting the open at 9:45 under 2812.00 would be unlikely to trigger the 2815.75 bias-up signal at 10:15. Exiting the open above 2806.50 would be unlikely to trigger the 2803.50 bias-down signal. Exiting the open under 2800.50 would be likely to trigger bias-down.
March Top Madness
Anyway, enjoy the following analysis of last week’s pattern. Trade its natural resolution in my live chaRTroom with real-time intraday market timing setups HERE.
MARCH TOP MADNESS
Markets reached a precipice Friday, we can at least say that. Referencing the below chart, you can see that last week’s new recovery highs were restrained by persistent, concentrated, strong-handed distribution:
- Friday’s complete retracement of Thursday’s rally was the resumption of distribution that I began identifying on Monday. That was a failed probe above prior highs, isolated to the morning’s timing window (1).
- Tuesday isolated another probe (2), and also retraced Monday’s failure (2b).
- Wednesday’s intraday rally probed no prior highs, but it was substantial, and its retracement was completed within the same timing window (3).
- Thursday tried to invalidate the distributive pattern, but the afternoon did not confirm its breakout, because its rise was only a function of having dumped all of that ballast Monday, Tuesday, and Wednesday. It was not strong-handed buying. So, its failure on Thursday was not unexpected, completely retracing the week’s most substantial rally (4).
- More so, the close ended under a prior consolidation (circled red). This triggers the equilibrium shift from distribution into strength, to distributing into weakness. Which tends to become very, very aggressive selling pressure.
Such persistent, concentrated, strong-handed distribution is positioning for more than one week of problems that might be forming on the horizon. Coinciding with Friday’s 2-point surge / capitulation in the 30-year Treasury, which triggered a Cup & Handle pattern, a paradigm shift is permeating among market participants. That reasoned selling is being joined by the next most aware tranche of market participants — those who monitor actions by those who monitor the horizon.
Thursday’s rally could have proved itself by a second consecutive higher close above last week’s range, which it did not. Similarly, now breaking under last week’s range must prove itself by closing lower again on Monday.
Of course, it always seems darkest before the dawn. And, more on point, bull markets have a way of stepping right up to the brink, and then reversing straight up. Is this such a bull market? The alternative to falling into this precipice — the most glaring and pronounced precipice since long before the ongoing Christmas rally — avoiding this precipice would suggest resuming the rally to much higher highs.
Meanwhile, another failed bounce or a lower close on Monday would maintain the distributive pattern. And Sunday night’s Globex open is already probing further below last week’s range…
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Quick note about today’s news, and last week’s pattern…
Last week we tracked a growing pattern of intraday distribution. It culminated in the two-day rally and failure that took price sharply lower into the weekend. It is the most glaring re-positioning among strong hands that I’ve seen in some time.
Meanwhile, Mueller has delivered his “Russia-gate” report, and it’s apparently not the damning conclusion so widely anticipated for so long. Some sort of relief rally tonight is likely.
Could fear of the worst have been responsible for last week’s distribution? An entire week of big money, strong-handed selling into strength? I’m doubtful. That’s not the pattern that I see, but it has a stop — two consecutive closes above last week’s highs, at the latest. Otherwise, retesting last week’s highs or only attacking them would have no effect on the distributive pattern. The distributive pattern should have an effect on any rally.
Monitor Globex price action in the chaRTroom, opening at 6:00pm ET. Note that the link is changed, and also that Adobe has planned maintenance that will make it unavailable for a period overnight… ENTER THE CHARTROOM HERE.
Morning Bias
| MON morning signal (triggered at 10:15 ET) | SPX | ES |
| Bias-up: above | 2810.75 | 2815.75 |
| …would target | 2819.50 | 2824.50 |
| Bias-down: under | 2798.50 | 2803.50 |
| …would target | 2790.50 | 2795.50 |
| Signal status: BIAS-DOWN, BIAS-DOWN TARGET EXCEEDED | . | |
| BIAS VIDEOS… INTRO // EXAMPLE | ||
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)
Don’t discount Friday’s complete retracement of Thursday’s rally. It was the resumption of distribution that we began identifying Monday. Then Tuesday. And Wednesday. Friday’s drop proves what we had assumed at Thursday’s close, that the intraday rally was only a function of having dumped all of that ballast Monday, Tuesday, and Wednesday. It was not strong-handed buying.
And distribution by that crowd, for that duration, is positioning for more than one week of problems that they see off on the horizon. Like Friday’s 2-point surge in the 30-year triggering a Cup & Handle pattern, if more than just the strong hands are distributing, then capitulation isn’t far behind.
Had Thursday’s rally stuck, and the overnight dip held Friday as only backing-and-filling, then perhaps this week’s reversal could be explained away as volatility ahead of the next upleg. I would still be wary in this range of potential for one more probe higher. But there’s no “unfinished business” above, and ending the week in decline reflects a continued vulnerability to a much steeper, deeper decline.
Of course, it always seems darkest before the dawn. And, more on point, bull markets have a way of stepping right up to the brink, and then reversing. I’ll be monitoring for any signs that sellers are done, because the reaction up would far exceed the week’s highs.
Meanwhile, the week-ending decline did satisfy unfinished business below at 2806.25 by 1 point. The next lower support is 2801.00, and then 2751.00. Probably as only a correction, possibly as a deeper correction, and potentially as a retest of the Christmas low.
Details and other markets coverage are discussed in the post-market Wrap recording here.
REMINDER: NO SATURDAY REVIEW THIS WEEKEND DUE TO TRAVEL.