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Post-open Review… Noise in the range.
Overnight chop, meet post-open chop.
Last night’s range was contained within Friday afternoon’s range. But it flipped directions at least twice, steeply, to suggest this market wants to trend. That doesn’t then require trending, only trending attempts. Which the first hour has attempted, while either bias signal has remained comfortably untouched.
The pre-open dip back down to the earlier 2683.75 overnight low bounced through the open to attack Friday’s 2688.75 cash session close. Its reaction down to 2685.00 has been recovered entirely.
Probing higher has potential to test this morning’s 2691.00 bias-up signal. Perhaps not touched, possibly probed, but likely held during the bias environment. Any higher any later would be bullish, which would be suspicious for not yet having behaved bullishly.
Back under 2685.50 would have much more room to the bias-down signal. And much more potential to break lower into the afternoon as the first hour’s buying pressure is converted into selling pressure rushing for the exits.
The First Trade & Pre-open Tour Recording… Another window opens.
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…
If seasonal holiday bullishness was influential Friday, then it was by absorbing the open’s dip. Thursday night’s 3-4 point bounce had failed already before Friday’s 2688.00 open. The reaction down into the open persisted through the bias environment exit, attacking 2682.00. Bouncing through the afternoon probed the open’s high by several ticks up to 2689.50, before dropping 3 points into the close. Not a wide intraday range, and never straying very far or for very long off of unchanged, but not rallying.
Overnight action’s new info…
Friday afternoon’s range has contained a couple of wide swings since Monday night’s open. Friday’s last-minute dip was immediately retraced, entirely back to Friday’s late 2698.50 high. But no higher, and soon the night’s first dip was attacking Friday’s lows to probe negative territory at 2684.00. Its reaction up has been much shallower, barely attacking 2687.00 before dipping back down into negative territory at 2684.50.
If, then…
“Unfinished business below” at 2679.00 and 2675.50 would still be targeted by trending back down Tuesday. But the window is closing for seasonal bullishness to contain the drop — the sooner they’re tested, the easier to attract sponsorship for a recovery. Another seasonally bullish window of influence opens Wednesday afternoon ahead of Friday’s early close and another holiday weekend. In the interim is a brief window for sellers to influence price down, if they can. The 2688.00-2692.50 resistance range remains influential, and gapping up above it is probably the only path higher. Its minimum reward isn’t much higher, being new highs at 2699.75-2700.75 or 2703.00.
First Trade…
[Click here to view the Bias parameters] Exiting the open at 9:45 under 2688.00 would be unlikely to trigger the 2691.00 bias-up signal at 10:15. Exiting the open above 2684.25 would be unlikely to trigger the 2680.75 bias-down signal.
Phonetic dictation…
good morning and welcome welcome back it is December 26th a day after Christmas Tuesday it’s holiday shortened week not just because Monday was a holiday but also Friday will be closing early for another three day holiday weekend so seasonal bullishness that came in to last last week’s Market and prevented extending down would have been a couple of interesting mornings that nevertheless made Under Pressure through the day despite not extending down past the mornings low bounced on Thursday created some room to absorb a little more on Friday and now we come into a little bit of a window between that and the next weekendseasonal bullishness being a function of yo liquidityand there will be more of it next weekend so there’s a little window here today tomorrow maybe tomorrow into the afternoon where if there’s going to be declined at Now’s the Time to get it in here and if there’s going to be a decline contained this is also the time to get that done because of that seasonal boyfriend’s coming around so what might be an attraction or an objective there is an attraction and Wednesdays or low 2679 there is an objective at 2675 50 and bias Target outstanding an offsetting test actually that same sessions bias down TargetI tested it having been put into play by holding the offsetting test of the bicep Target which has otherwise contain door since contained price action anything lower starts to put in to Jeopardy deeper pull back 2667 area 2650 756 area show againwhich there is somewhat overnight there’s Friday’s recovery from the mornings low the entire buys apartment trying to down bounced and then pulled back into the clothes that was retraced but only retraced at last night’s open but not recovered we’re basically trending down overnight bounce low bounce on the way potentially do a little low one more lower low in here and we’ve got an overnight downtrend in playthat means under 26 83-75 would create a trend and would make the open likely to be under pressure in this area being under pressure makes the open likely to extender the morning likely to Extended 2679 2675 50 and if it gets done soon enough there will be enough time to inject a little more selling pressure little more distance down you can certainly get carried away with itself and be even more substantial than I’ve just described when there is a very brief window of time and it is going to be filled with one sponsorship things can get pretty steep and also deep so really will just bebut not be sitting there with a buy order add an objective not until being able to assess the price action leading into it same thing for Recovery there’s nothing that requires trending down here but recovering does pretty much required gapping up gapping up above Friday’s Highs at the least if not more so 2691 is the bias of a signal that will need to be recovered through 10:15 the reward for triggering bias up or for avoiding that window of selling pressure is the probe franchise 2699 75 20 703 that will be interesting if that’s the first move of the new week because as the last move of the last week gets underway that seasonal bullishness could get flipped on its head
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Morning Bias
| TUE morning signal (triggered at 10:15 ET) | SPX | ES |
| Bias-up: above | 2688.00 | 2691.00 |
| …would target | 2693.25 | 2696.25 |
| Bias-down: under | 2677.75 | 2680.75 |
| …would target | 2672.50 | 2675.50 |
| Signal status: NO-BIAS | 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.
Look ahead: Economic Calendar – for Mon Dec 25, 2017
A midday look ahead in preparation for economic reports and events scheduled for the next trading day.
Highlights: The holiday-shortened week has a busy econ calendar, but very few high-profile or influential items. Tuesday is the norm, with several items that have no track record for influencing price action.
Richmond Fed Manufacturing Index
10:00 AM ET
State Street Investor Confidence Index
10:00 AM ET
Dallas Fed Mfg Survey
10:30 AM ET
3-Month Bill Auction
11:30 AM ET
6-Month Bill Auction
11:30 AM ET
4-Week Bill Auction
1:00 PM ET
2-Yr Note Auction
1:00 PM ET
Bitcoin thoughts… And some weekend price parameters.
I don’t know when the Cryptocurrency top happens, but I know why it does.
Futures launches were discounted.
WHERE WE ARE…
CBOE launched futures on Bitcoin two weeks ago. CME launched its contract one week later. Bitcoin had already been in a rally, often turning exponential and occasionally crashing. The most impressive stretch came in anticipation of the futures launch. A 4-day 24% drop from 7,800 to 5,900 had recovered to attack 20,000 into the CBOE launch.
Futures. Professionals. Price discovery. Bitcoin promptly dropped 31% to 13,500. All of which was recovered into the CME launch. More professionals. More price discovery. Another drop. Bigger, much bigger… 47% to 10,400.
Dual spikes seldom hold.
That morning as the decline was breaking under 14,000, I noted during my morning Market Tour that the leg’s low would be a 10,000 handle. That was Friday. Its reaction reached 16,000 Saturday afternoon. And I would have loved to sell what I had bought Friday morning (above 11,000 by the time I could act). But Bitcoin purchase settlement runs much slower than Bitcoin trends, which is now in a reversal to 13,700.
The CBOE-CME launches formed a “double top.” The pattern all but requires eventually being retested, if not also broken by the previous trend resuming. That’s after probing under their interim low is done — everything before that having been noise. Meanwhile, the decline has been bouncing on spikes, which don’t form durable bottoms, projecting to potentially lower lows with an 8,000-handle. That next low would be more difficult to recover, let alone to resume the rally, since this pattern would have created a massive supply overhang. That said, bouncing above 15,700 would start to suggest a bigger bounce is developing, perhaps even a new rally leg.
WHERE WE ARE…
It’s not fair to call Bitcoin a bubble. Not unless also calling it a series of bubbles. In the singular, “bubble” implies a finality that Bitcoin has eluded. Each individual bubble is the natural process of over-saturating the currently available supply of buyers. Usually, buyers would be considered demand, and Bitcoin the supply. However, the inverse better explains Bitcoin’s behavior. The normal supply:demand equation isn’t invalid,
TRTC got a little ahead of itself.
it doesn’t fully characterize Bitcoin’s relationship to the investment marketplace.
We’ve seen this before, most recently with the Cannabis sector. I was the first professional technical analyst following the sector in late 2013 when its several dozen pink sheet and OTC stocks had already doubled and tripled from near nothingness. Many would go on to double and triple again, and those were the under-performers. The gains were produced not by corporate results, but by exponentially rising demand for their stock. Exponentially rising prices attract attention, and more demand feeds the vicious circle for more price rises.
Investors weren’t motivated by a desire to own shares in companies having no revenue growth, of which most had none at all. Generally, buyers weren’t typical investors. A not insignificant portion were seasoned traders,
VAPE fooled ’em twice.
but many more buyers could call Cannabis stocks their first stock purchase. Many of the first-timers were so fortunate to be so early to such a substantial rally because they shared another trait in common. They were the product’s customer base.
Sound familiar? With very few exceptions, Cannabis stocks were penny stocks, if not sub-penny stocks. The general investor marketplace didn’t seek out these issues. Rather, Cannabis stocks were seeking out new buyers. I wouldn’t dare say they were wrong, but I also wouldn’t call them prepared. I went on record during the first week of April 2014 to call a top for the sector, and the words seemed like gibberish to many. Few seemed to accept that trends could end, and far fewer seemed to have any experience with that natural occurrence.
Along the way up many new companies began trading shares in the Cannabis sector. 
This continued during a good portion of the way down, too, as deals were already in the works. Which brings us back to Bitcoin. Which is still better known than other “Cryptocurrencies” Ethereum and Litecoin, but not much. All of which are better known than Iota, Monero, and Dash. And I’ll wager that more than two-thirds of their buyers can’t define “Blockchain,”most of whom don’t care.
Big name investors announcing new funds for Crypto investment add dimensions to the process that the Cannabis sector’s penny stocks never could. The new funds ARE the liquidity that penny stocks couldn’t provide. But that won’t change the sector’s general direction, and may slow the process of letting the currencies make their bottoms. Bitcoin’s current pullback / plunge is a not-unique reminder that the ultimate scalability is irrelevant, when compared to the pace of each interim adoptive leg. Those interim legs are interrupted by organic checks-and-balances that contain growth’s pace, while rewarding earlier adopters, and punishing late believers.
GWPH outperformed, for a reason.
WHERE WE’RE GOING…
Most of the questions I had posed before futures launched have been answered. I suspected that the derivative would both siphon serious and institutional Bitcoin buyers, while also diverting speculative activity to other Cryptocurrencies. They’re all down now, but “altcoins” such as Ethereum and Litecoin continued their rallies. We got to see a trading halt when Bitcoin had plunged Friday morning. Whether or not the cause, the plunge did stop. And now we’ve seen how Bitcoin behaves while futures don’t trade during the weekend. Very volatile.
About that halt, though. This is not a new device. We have decades of experience to infer that halts create artificial extremes, eventually retested if not also broken. Bitcoin et al have bounced considerably since Friday morning, also known as a correction. Even if the bounce were to get bigger, I suspect it will only be temporary. Drawing from experience with the Cannabis sector, I think we can also equate Bitcoin to GW Pharmaceuticals (GWPH), one of a handful of blue-chip players in the sector. It participated to some degree and duration with the sector’s decline, but held up well. Many of the other players are still getting shaken out.
We’re also going to see how tax enforcement affects the sector. Enforcement, and deferral. My suspicion is that futures have been sold in many cases to hedge exposure while deferring a taxable sale until next year. Next year, as in midnight January 1. Tax reform forecloses on the option of converting Bitcoin tax-free into other alt-coins. All of which applies to the U.S. and all of which foreign participants are aware — and have stepped back themselves from buying ahead of the selling pressure.
Perhaps the Christmas break will end with Bitcoin futures re-opening limit down or limit up. Then we’ll get to see whether that contributes to frenzy in that direction. Meanwhile, I’ve added daily coverage of Cryptocurrencies to my daily Market Tour and Market Wrap recordings, as well as reviewing interesting action intraday in the chaRTroom. That coverage will be expanded in 2018… Enjoy!