The First Trade

Proper context can start the day with a solid win and make all the difference.

CHARTROOM LINK
(pre-open Market Tour begins at 8:55 ET)

Through the prior close…
Friday’s gap up to 1997.00 was maintained through the open, but not extended until the first hour was ending. The late start didn’t prevent extending to new recovery highs attacking 2010.00 during the noon hour, and then 2013.00 into the close. No traction was gained for the effort.

Overnight action’s new info…
Sunday night’s open gapped down under Friday’s noon hour high. Price action since then has essentially ranged flat-to-lower, still supported well above Friday afternoon’s bias environment lows at what is this morning’s 2006.00 bias-down signal.

If, then…
Gapping down Sunday night back to Friday’s noon hour high helps to isolate Friday afternoon’s fresh high. Friday breakouts already are not often confirmed by a higher close Monday. More so, it helps to confirm a new focus on Wednesday’s inflation-sensitive FOMC meeting, and less on last week’s bazooka-toting ECB. Meanwhile, ranging narrowly Sunday night is due more to anxiousness than to calm, and doesn’t often persist intraday.

First Trade…
Exiting the open at 9:45 under 2004.00 would be likely also to trigger the 2006.00 bias-down signal at 10:15. Exiting the open above 2010.00 would be unlikely to trigger bias-down.

Proper context can start the day with a solid win and make all the difference.

CHARTROOM LINK
(pre-open Market Tour begins at 8:55 ET)

Through the prior close…
Despite surging in reaction to the ECB policy statement, Thursday morning was spent in decline.Its drop had originated during a bias-up environment, so its 1981.75 bias-up signal required an eventual recovery. An interim drop tested the 1960.00 bias-down target to 1958.00. But the afternoon bias environment rallied into the position-squaring window until piercing 1981.75 by 2 ticks. No traction was gained for the effort.

Overnight action’s new info…
Thursday afternoon’s recovery has extended. The open’s 1995.50 high was attacked by midnight, and the 2001.00 pre-open high was probed up to 2002.25 soon after Europe’s opens. A pullback to 1995.00 has recovered.

If, then…
One thing favors extending the rally: Gapping up is the appropriate way to immediately resume it when no traction had been gained for the effort. This being a Friday when trend reversals have a brief window of opportunity, extending the rally can become likelier if the gap up is extended through yesterday’s pre-open high. That’s difficult since a prior extreme can be more resistant to a gap than to trending. And trending relentlessly overnight is easier to reverse intraday. Holding the prior high’s test through the open would become attracted to filling the gap at yesterday’s close under 1980.00, which could extend easily into negative territory with so much room having been carved out by the prior three sessions. So, today’s direction should be determined by whether the session’s first several minutes can attract new buying sponsorship in this area where it has repeatedly found sellers.

First Trade…
Exiting the open at 9:45 above 1993.50 would be likely to exceed the 1991.50 bias-up target at 10:15 to renew the bias-up signal. Exiting the open under 1989.25 would be unlikely to renew the bias-up signal.

Proper context can start the day with a solid win and make all the difference.

CHARTROOM LINK
(pre-open Market Tour begins at 8:55 ET)

Through the prior close…
Is optimism bullish, when it doesn’t get anywhere? Wednesday’s session was spent almost exclusively in positive territory. The session made higher lows throughout. But positive bias gained no traction, while all price action was contained within Tuesday’s late-afternoon range up to 1982.00. And “unfinished business below” was left outstanding at 1968.00 (basis Jun).

Overnight action’s new info…
China’s econ reporting triggered a surge to fresh highs testing 1986.00. Reversing down attacked 1977.00 ahead of Europe’s opens, but a complete recovery tested fresh highs above 1987.00. Now a break higherhas touched 1989.50 as the ECB policy statement and subsequent Mario Draghi press conference are looming closer.

If, then…
Answering my own question (whether optimism is bullish when it doesn’t get anywhere), no. That doesn’t prevent trying to extend, but bases built by weak-handed buyers don’t often launch durable rallies. And not necessarily by reacting down immediately to this morning’s ECB events — a surge testing 1991.50 or new recovery highs up to 1999.50 would remain vulnerable to failure. Like last Friday’s reaction to payrolls, which reversed a large pre-open surge, but this time without recovering it. All of which assumes already rejecting a recovery through a relevant timing window, because otherwise a much higher high could develop… [The front-month rolls forward from Mar to Jun at this morning’s open.]

First Trade…
Exiting the open at 9:45 above 1990.00 would be likely also to recover the 1987.00 bias-up target through 10:15 which would renew the bias-up signal. Exiting the open at 9:45 under 1986.00 would be unlikely to renew the bias-up signal. Exiting the open under 1877.00 would be unlikely to trigger bias-up.

Proper context can start the day with a solid win and make all the difference.

CHARTROOM LINK
(pre-open Market Tour begins at 8:55 ET)

Through the prior close…
Monday night’s drop to 1981.00 was partially recovered up to 1994.00 before Tuesday’s open. Tuesday’s opening drop to 1977.50 was recovered to 1993.00 into the afternoon. Tuesday afternoon’s drop retested the morning’s low down to 1976.00, too late to recover. No downleg was so aggressive that it could be considered as reversing the trend down.

Overnight action’s new info…
Tuesday’s last drop had firmed to 1983.00 into the close. Consolidating there through midnight eventually broke higher to 1986.00. After retracing the breakout to retest the consolidation range, its recovery has tested 1991.50, and retested it while RSIs diverge negatively.

If, then…
The topping template all but requires the trend reversal to be obvious no later than Wednesday morning. Retracing yesterday afternoon’s drop from 1993.00 doesn’t necessarily contradict the topping template — until the entire drop is recovered pre-open. Gapping up above the downleg’s 1993.00 origin could form a “session-long rally,” and its timing would prevent trending down this morning. Rejecting the gap up through the open would maintain the topping template, and its likely morning decline.

First Trade…
Exiting the open at 9:45 above 1988.00 would be likely to trigger the 1986.00 bias-up signal at 10:15. Exiting the open above 1994.50 would be likely also to renew the bias-up signal by exceeding its 1993.25 bias-up target through 10:15. Exiting the open back under 1984.25 would be unlikely to trigger bias-up.

Proper context can start the day with a solid win and make all the difference.

CHARTROOM LINK
(pre-open Market Tour begins at 8:55 ET)

Through the prior close…
Monday’s price tracked perfectly with the topping pattern described during the Saturday Review. Gapping down shallowly and recovering into positive territory, then closing only slightly positive. No higher objective was left outstanding.

Overnight action’s new info…
Only downtrending has defined price action since yesterday’s close. Soon sliding 12 points back down to attack Monday’s 1988.25 afternoon low, then resolving a shallow bounce to fresh lows to 1980.75. Perhaps it was only a “warning shot across the bow,” as a bounce back up to yesterday’s 1986.00 low  has surged further up to 1994.00.

If, then…
The topping patterns isn’t just optimal — it’s perfect. That always makes me suspicious, but I’ll give it a benefit of the doubt until proved otherwise. The actual capitulation — the sudden exponentially growing mass realization that the music has stopped — should not become obvious until Tuesday afternoon or Wednesday morning. Last night’s fresh low under Friday and Monday’s lows is acceptable as a warning shot, and should be followed by one last gasp up into the range. Already trending down this morning would still get that benefit of the doubt, and also a dose of suspicion. Regardless, only a strong rally would start to disqualify the topping pattern.

First Trade…
Exiting the open at 9:45 under 1984.00 would be likely also to trigger the 1985.00 bias-down signal. Exiting the open above 1988.00 would be unlikely to trigger bias-down.