Posts by Rod David
Post-open Review… Post-open paradigm shift.
Overnight slide reverses straight up.
A relatively narrow sideways range had developed from Friday’s close through Monday and well past midnight. 
Its eventual break just after Europe’s opens was far enough removed from this morning’s open that we couldn’t rely on it being a false break. Butt that didn’t prevent its complete retracement anyway.
Fluctuating around unchanged at 2776.00-2777.00 had broken lower to 2767.00 where RSIs diverged positively. A 4-point bounce reacted down to touch 2766.00 at the open. Another bounce developed immediately, holding the 2767.75 bias-down signal.
Holding the bias-down signal’s test through 10:15 would put into play an offsetting test of the 2777.25 bias-up signal. But the post-open bounce was much stronger than its pre-open predecessor, and tested the bias-up signal in time to invoke the grace period.
Now having held a test of the bias-up signal, a test of the 2767.75 bias-down signal is back in-play. It’s not required to be tested since it was tested already post-open. But it’s usually tested anyway.
Perhaps more relevant is the non-arbitrary amount of buying pressure expended post-open. It touched a relevant resistance during a relevant window. Expending so much energy so soon leaves none in reserve, which I would have expected to eventually test the overnight highs. Instead, now the question is whether a test of the overnight lows is underway.
The First Trade & Pre-open Tour Recording… Will the market hit snooze?
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 2765.00 open was 10 points above Thursday’s high. But that was modest compared to being 35 points above the overnight low, having rallied relentlessly since Europe’s opens. The balance of the session was a choppy 10-point range between 2763.00-2773.00, until the position-squaring window surged to 2777.50 through expiration. WedEX had no bearish influence, so it’s not required to have a bearish influence Tuesday morning unless the open were to gap down deeply enough. Meanwhile, closing above 2757.00 and 2751.00 suggests the rally since Christmas is more than a temporary bear market correction.
Overnight action’s new info…
Sunday night’s open spiked up 5 points to 2782.50. It reacted down almost immediately to begin a directionless range between 2773.00-2780.00 that persisted through all of Monday’s abbreviated session, and well past midnight. Then, as if an alarm clock sounded, the market seems to have awoken from its slumber. Trending was finally attempted soon after Europe’s opens, so far dipping down to 2766.75 (testing this morning’s bias-down signal) where RSIs have diverged positively. The break from an otherwise sideways range comes too early to ensure it’s false and any likelier to recover.
If, then… (notes to accompany the Tour recording)
Topping here need not immediately reverse the trend down noticeably, but it probably needs to stop rallying immediately. Friday’s underperformance by NDX and outperformance by the Dow makes a bigger rally leg from here suspect. Otherwise, historically a fresh trend extreme close on expiration like Friday is usually exceeded, and a fresh trend extreme close on Fridays usually requires an eventual higher close. Both could be considered anomalies by gapping down deeply enough to reinstate WedEX’s bearish influence. Not only triggering bias-down but also gapping under Wednesday’s 2762.00 prior highs to form an Island out of Friday’s range, if not also under 2757.00 and/or 2751.00 to reject Friday’s close above them and help to prevent a second consecutive confirming close. Meanwhile, trying to reject Friday’s bullish elements, but not, could be as bullish intraday as the rejection would have been bearish. Similarly, testing bias-down without triggering it would put into play a probe above Sunday night’s highs.
First Trade…
[Click here to view the Bias parameters] Exiting the open at 9:45 under 2766.25 would be likely to trigger the 2767.75 bias-down signal at 10:15. Exiting the open above 2772.75 would be unlikely to trigger bias-down.
Look ahead: Economic Calendar – for Tue Feb 19, 2019
A midday look ahead in preparation for economic reports and events scheduled for the next trading day.
Highlights: The holiday-shortened week begins Tuesday with only one post-open econ report, but also with one Fed speaker — not only pre-open, but one day before Wednesday afternoon’s FOMC Minutes release.
*Loretta Mester Speaks
8:50 AM ET
Housing Market Index
10:00 AM ET
Morning Bias
| TUE morning signal (triggered at 10:15 ET) | SPX | ES |
| Bias-up: above | 2777.25 | 2777.25 |
| …would target | 2784.00 | 2784.00 |
| Bias-down: under | 2767.75 | 2767.75 |
| …would target | 2759.00 | 2759.00 |
| Signal status: NO-BIAS, TESTED BIAS-UP SIGNAL, BIAS-DOWN SIGNAL TESTED | . | |
| 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)
Friday’s bullish Globex-flip setup was influential, but only to preventing a reversal down. Post-open action ranged relatively narrowly sideways. A very last-minute surge did probe fresh highs, but that was too late to ensure the Globex-flip setup would extend through the following morning. Meanwhile, the very last-minute surge invalidated the bearish WedEX. I would still give sellers a benefit of the doubt if Monday’s open were to gap down deeply enough.
How deep is deep enough? Back under Wednesday’s 2762.00 prior highs would form an Island out of Friday’s range. Gapping down under at least 2757.00— if not also under 2751.00 — could reject Friday’s close above them and prevent a second consecutive confirming close, keeping alive the current bear market rally. Friday’s underperformance by NDX and outperformance by the Dow makes me very suspicious that a bigger rally leg is only now getting underway.
Otherwise, a fresh trend extreme close on expirations doesn’t often reverse the trend. And a fresh trend extreme close on Fridays requires an eventual higher close, regardless of any interim dip. Regardless, the three-day holiday weekend is not global, so there’s no assurance of greeting Tuesday’s open with only little change.
Details and other markets coverage are discussed in the post-market Wrap recording here.
There is NO Saturday Review this weekend. Chartroom re-opens at 6 ET Sunday.