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…
Rewarding the prior afternoon’s upside traction required absorbing Thursday’s pre-open dip to 1890.00, and a post-open dip to 1894.00. Recovering back above the prior session’s highs still peaked 3 ticks short of touching the 1922.50 overnight highs. The balance of the session narrowed its range into the 1908.00-1910.00 close, paralyzed by anxiousness ahead of the payrolls report. Even probing deeply into negative territory during Thursday afternoon’s bias-up environment was recovered back to its bias-up signal.

Overnight action’s new info…
As is often the case ahead of an Employment report, the narrow range persisted, albeit in slightly negative territory. The range did expand at Europe’s opens, back up to the prior afternoon’s 1914.00 bias-up target. Price has settled back into 1908.00-1910.00.

If, then…
That was a lot of pessimism Thursday. A lot of ineffectual pessimism. Not so much the morning’s attack on overnight highs, which aren’t as influential intraday. But the pre-open and post-open dips that were recovered in order to launch that attack. And the afternoon’s bias-up downtrend whose timing prevented sellers from gaining traction for the effort. It’s potentially bullish from a contrarian perspective, which suggests a positive resolution to this morning’s pre-open report. All that having been said, the pessimism that was absorbed yesterday wasn’t recovered back above any relevant levels. So, I’ll be a little reluctant to buy an initially negative knee-jerk reaction that breaks under yesterday’s lows, and a little suspicious of opening strength that isn’t recovering above prior highs.

First Trade…
No preliminary levels are considered prior to an Employment Situation report.

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…
Wednesday’s intraday pattern matched the overnight action by recovering from a plunge. The overnight reversal had come from testing 1886.00 to attack 1911.00. Intraday action bettered that after plunging to 1865.00 and recovering up to 1912.00. And the afternoon buyers gained traction for their effort, despite leaving oversold RSIs outstanding at the low.

Overnight action’s new info…
After recovering Wednesday’s last-minute closing dip, China’s strength triggered a surge to fresh highs testing 1922.00. Hovering there ahead of Europe’s opens was reversed down to 1908.75 — natural support shared by yesterday’s open and close. Now a bounce to 1919.50 has been retraced entirely.

If, then…
I had mentioned at the start of yesterday’s late rally that upside potential begins at 1924.00. Higher highs overnight attacked that to within 2 points. That’s a little too short of the next objective to qualify as reward for the traction gained by yesterday afternoon’s buyers. Probing higher highs this morning remains likely so long as its reaction down holds the support of “lower prior highs.” And that’s being challenged now. But there’s still room to the bias-down signal before suggesting the decline was resuming.

First Trade…
Exiting the open at 9:45 under 1902.50 would be unlikely to trigger the 1908.00 bias-up signal at 10:15. Exiting the open above 1914.50 would be likely to hold above the 1913.00 bias-up target through 10:15 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…
Gapping down Tuesday under Monday’s lows inverted the traction gained by Monday’s late buyers. The lowest objective was met under 1890.00, triggering a sharp reversal up to attack the 1900.00 resistance. Potential was left outstanding to 1886.00.

Overnight action’s new info…
The slide resumed and soon tested the outstanding 1886.00 objective by 2 ticks. And held. Tuesday’s 1895.00 cash session close was recovered by midnight.  Rallying through Europe’s opens attacked 1909.00. Now a pullback to 1894.00 is trying to recover.

If, then…
Another example of the market satisfying all influences, no matter their divergence. I described the two currently relevant influences in yesterday’s post-market Wrap. First, yesterday’s last bounce had stopped pessimistically short of testing its last relative high, which is potentially bullish from a contrarian perspective. Second, that bounce had originated from only piercing the decline’s target range — the slide had stopped optimistically short of probing the entire objective, which is potentially bearish. Overnight action satisfied both. So, is momentum reversing up, or has the overnight recovery only traded one prior high’s resistance for another (1911.00 from yesterday morning’s bias environment). I would tend to be bullish here since testing the decline’s objective was responsive both yesterday and overnight. So long as the open doesn’t hold a relevant prior’s test, the window is open for a rally. Otherwise, retesting overnight lows could find no support remains.

First Trade…
Exiting the open at 9:45 under 1901.50 would be unlikely to trigger the 1904.50 bias-up signal at 10:15. Exiting the open above 1906.25 would be likely 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…
Gapping down Monday held Friday afternoon’s lows to avoid trending down lower than 1912.50. The gap back up to Friday’s 1931.00 close was eventually filled on the way to fresh highs at 1940.00. Reacting down retraced deeply enough not to close above Friday’s 1933.00 high, so its breakout wasn’t confirmed.

Overnight action’s new info…
Monday’s late reaction down extended deeper to test 1924.00. A shallow bounce there resolved down, too, eventually touching 1909.25. Its reaction up is testing 1920.00.

If, then…
Whether a rally is accumulative or distributive depends on its origin, what it probes, and where it closes. Yesterday’s recovery failed to close above resistance that it tested intraday. So, trending up from the morning’s lows was actually distributive. Timing can be revealing, too. This is why not filling the gap back up to Friday’s 1931.00 close until late-Monday would have been vulnerable to reversing down sharply. And it has reversed down sharply, as the 1910.00 high of last week’s range was tested overnight as support. But distribution doesn’t become a downtrend until support is broken through a relevant timing window. That opportunity is presented by the overnight decline. Not recovering above relevant support through the open would be vulnerable to probing into last week’s range down to 1904.50. .

First Trade…
Exiting the open above 1924.00 at 10:15 would be unlikely to trigger the 1921.00 bias-down signal at 10:15. Exiting the open at 9:45 under 1918.50 would be likely to trigger bias-down. Exiting the open under 1911.50 would be unlikely to recover the 1915.50 bias-down target at 10:15, renewing the bias-down 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…
Friday’s 7-point gap up to 1894.50 extended back to and through Wednesday’s 1910.00 high to fulfill the corrective rally’s 1913.00 attraction by noon. That was extended through the afternoon’s bias environment exit to fulfill potential up to 1924.00. The position-squaring window ended with a surge up to 1933.00.

Overnight action’s new info…
Sunday night’s firm open only attacked Friday’s high before drifting back down to 1922.50. Ranging back up to 1830.00 resolved down through Europe’s opens down to 1917.50. Another bounce’s failure is now probing fresh lows down to 1916.50.

If, then…
Despite producing a breakout close above resistance, the rally has gotten suspicious. Friday afternoon’s buyers didn’t gain traction through relevant timing windows. The first close above a multi-session range was a breakout, but Friday breakouts often aren’t confirmed by a second consecutive higher close on Mondays. And Friday’s close above 1924.00 was produced by a leg that originated too late to be reliable. Not holding 1913.00 would undermine the interim extension to 1924.00, if not also reverse the recovery.

First Trade…
Exiting the open at 9:45 above 1924.00 would be unlikely to trigger the 1922.00 bias-down signal at 10:15. Exiting the open under 1919.00 would be likely to trigger bias-down. Exiting the open under 1913.00 would be unlikely to recover the 1916.50 bias-down target in time to avoid renewing the bias-down signal.