Posts by Rod David
Post-open Review… Already underway?
Post-open dip suggesting it’s a correction.
Pulling back from the 2388.75 overnight high greeted the open at the 2384.00 bias-up signal. The first half-hour ranged there, and down to 2382.00. Then it broke lower.
The 2377.75 overnight high was touched. Its reaction up seems obligatory, and temporary. Anyway, failing to trigger the 2384.00 bias-up signal has put into play an offsetting test of the 2376.00 bias-down signal.
Having probed already under the pre-10:15 low, 2376.00 will become “unfinished business below” if not met this morning. Its test need not define the pullback, especially with a bullish WedEX likely to rescue even a deeper drop.
The open’s persistent overlap created congestion that is likely to be retested, regardless of that test’s resolution. Recovering 2385.25 would leave unfinished business below, but could still probe fresh highs first. But the near-term trend has otherwise reversed back down.
The First Trade & Pre-open Tour Recording…
Proper context can start the day with a solid win and make all the difference.
NEW 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…
The optimism inherent in Wednesday’s gap up was nevertheless restrained, peaking a couple of points under the 2370.25 overnight high. Gradually extending higher anyway had probed fresh highs up to 2374.50 during the noon hour. A pullback greeted the FOMC policy statement, which triggered a surge up to 2381.00. Yellen’s Q&A accompanied another pullback’s recovery to fresh highs attacking 2388.00. Overbought RSIs were left outstanding there ahead of a 10-point pullback into the close.
Overnight action’s new info…
The pullback into Wednesday’s close had targeted at least 2378.25. Just touching it at the Globex open was sufficient to reverse momentum back up. Europe’s opens were greeted back at 2385.50, on the way to fresh highs attacking 2389.00. The reaction down is so far holding a test of 2385.50 as support.
If, then…
Yesterday’s surge proves last week’s drop wasn’t going to break under “lower prior highs.” That was expected. But the past week’s bounce has yet to prove it can probe new highs up to 2401.00 or 2415.00. That’s also expected, but not required. Overbought RSIs at yesterday’s high is now neutralized, and substantial resistance at 2388.75-2390.25 has yet to break higher. Meanwhile, there is an immediate risk at the open for reversing a one-direction relentless overnight rally. I’ll be watching for any early reversal signals, and won’t necessarily be long in their absence.
First Trade…
[Click here to view the Bias parameters] Exiting the open at 9:45 above 2386.25 would be likely to trigger the 2384.00 bias-up signal at 10:15. Exiting the open under 2380.50 would be unlikely to trigger bias-up.
Morning Bias
| THU morning signal (triggered at 10:15 ET) | SPX | ES |
| Bias-up: above | 2387.25 | 2384.00 |
| …would target | 2393.25 | 2390.25 |
| Bias-down: under | 2379.00 | 2376.00 |
| …would target | 2374.50 | 2371.25 |
| Signal status: NO-BIAS, TESTED BIAS-UP SIGNAL | FAQ | |
| 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)
Wednesday’s rally probed the 2385.50-2386.25 target and attacked 2388.00. Overbought RSIs at the high will require its retest, regardless of the concurrent vulnerability to another corrective pullback. In fact, a late steep drop into Wednesday’s close fell 9 points to attack 2378.00.
It’s impressive that Tuesday’s drop apparently sufficed for expressing anxiousness ahead of the FOMC. But that lack of any other pre-news or post-news reaction down is what has created a vulnerability to another corrective pullback. Something longer and deeper than Wednesday’s late 9-point dip.
Meanwhile, we should take a snapshot of the bigger picture before the subject changes from rally to top. Especially at this moment as the FOMC session proves out several suspicions and expectations that were guiding us the past two weeks. All of which is centered around the 6-7 day pullback and its testing of the prior week’s “lower prior highs.”
Expectation for an imminent recovery was reinforced by several ongoing observations. Holding the “lower prior highs” was key to being only a temporary dip, but didn’t speak to timing a reversal. That was done by last week’s Thursday-Friday two consecutive positive closes. Even that remained vulnerable to a quick correction, which Tuesday’s drop provided.
Gapping up Wednesday helped to prove Tuesday’s drop was only temporary, and done. Actually, maintaining Wednesday’s gap up through the open was itself a bullish setup, because it did not immediately reject Tuesday night’s one-way relentless overnight rally.
All of which fulfills the bigger picture expectations that the FOMC move was not only anticipated by market participants but welcomed. And that the chorus of bearish market gurus did reach a crescendo last week — the 6-7 consecutive downtrending sessions had absorbed their selling so that the next upleg could begin.
Maybe that next upleg is already ended. Maybe it is on its way back up to and through the two-week old highs to 2401.00 or 2415.00. Regardless, it continues to be vulnerable to being short-lived and quickly rejected when its upside is done.
Details and other markets coverage are discussed in the post-market Wrap recording here.
Monitor overnight Globex trading in the chaRTroom here.
Pre-close View… Readily accepted.
REMINDER: MARKET WRAP BEGINS AT 3:33pm ET.
The FOMC policy statement announced a thoroughly-telegraphed rate hike. Already having pulled back 4 points from rallying into the noon hour’s 2374.50 high, the news triggered a surge to 2381.00.
Its correction targeted at least a touch of 2375.50, which was then soon tested. A new upleg was launched that attacked 2383.00.
Now 2383.00 has been retested, while at last 1-minute RSI tried diverging negatively. It was still on the cusp of being overbought, so its reaction down to 2380.00 isn’t assured of reversing momentum down.
So, the intraday uptrend remains intact and next targeting 2385.50-2386.25. The attraction back to two-week old highs would start to become tenuous above there. Meanwhile, back under 2379.00 could trigger a deeper drop into the close.