The First Trade

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

CHARTROOM LINK(s)
o Win XP-Friendly entry
o non-xp friendly (ilinc)
(pre-open Market Tour begins at 8:55 ET)

Through the prior close…
The biggest one-day negative print Monday also produced one of the biggest intraday rallies. And one of the biggest intraday drops from there. Price trended down into the close — twice, as the afternoon”s 76-point slide from 1950.00 down to 1873.50 hiccuped to 1922.00, and then plunged again to 1867.50.

Overnight action”s new info…
1920.00 is Tuesday morning”s bias-up target, so it”s not coincidental the overnight rally initially peaked there and then double-topped there ahead of China”s open. Dropping down to 1885.50 was recovered as the overnight rally resumed, eventually probing above 1936.00. Consolidating there blipped-up on news of a China rate cut and devaluation. A “blip-up” in this environment means double-digits, attacking yesterday”s highs up to 1948.50. A 12-point reaction down has now largely recovered.

If, then…
Is a rally setting up for today, or is the overnight rally being set-up? Yesterday afternoon”s 1947.00 high printed as the bias environment got underway. So, after trending down into the close, gapping up above 1947.00 could form a “session-long rally” setup. The missing element would be to maintain the gap up through the open. Otherwise, the setup can become as bearish as it would have been bullish. The bearish consequence would be attracted down to fill the gaps at yesterday”s 1886.00 and 1878.00 cash and futures closes. There isn”t much attraction above except for the gaps back to Friday”s 1968.00 and 1970.00 closes.

First Trade…
Exiting the open at 9:45 under 1910.00 would be unlikely to exceed the 1920.00 bias-up target through 10:15, not renewing the bias-up signal. Exiting the open above 1938.00 would likely exceed 1920.00 at 10:15 to renew the bias-up signal. Exiting the open under 1890.50 would be unlikely to trigger the 1910.00 bias-up signal.

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

CHARTROOM LINK(s)
o Win XP-Friendly entry
o non-xp friendly (ilinc)
(pre-open Market Tour begins at 8:55 ET)

Through the prior close…
Friday”s gap down extended Thursday”s break under 2035.00, which had pretty much been the massive topping pattern”s last line of defense. Trending down throughout the morning didn”t discount the bearish WedEX. The afternoon”s bias environment corrective bounce resolved down to resume the decline with a vengeance. Momentum and support break combined to suggest hold-short, especially with the bearish WedEX in-play.

Overnight action”s new info…
Sunday night”s open gapped down just 3-1.2 points from Friday”s 1968.00 cash session close to the 1964.50 bias-down signal. Extending down formed an otherwise large sideways range down to 1950.00. That broke lower to 1911.00 into and out of midnight. Bouncing since then attacked 1943.00 before reacting down 6 points.

If, then…
Whatever created the bearish WedEX at Wednesday”s close can still be influential after this much time, that much is common. A 166-point decline is a little less common, so the bearish WedEX”s contributing factors may have become moot. Bouncing 32 points from overnight lows does correct that decline to better enable the bearish WedEX playing out this morning as it commonly would. The Dow”s low was 525 points under Friday”s close, and doubling it would produce a 1000-point down day.

First Trade…
Exiting the open at 9:45 above 1945.00 would suggest extending the bounce to 1955.00 (1952-1957). Exiting the open under 1930.00 probably will trend down through the morning”s bias environment.

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

CHARTROOM LINK(s)
o Win XP-Friendly entry
o non-xp friendly (ilinc)
(pre-open Market Tour begins at 8:55 ET)

Through the prior close…
Gapping down and trending down Thursday somewhat duplicated Wednesday morning”s pattern. But where Wednesday bounced into the afternoon, Thursday morning”s decline extended. And extended. And extended. A last-minute plunge essentially doubled the entire post-open drop that had preceded it. The cash session close fulfilled the 2035.00 objective that was targeted by a break under 2077.00, on the way down to 2025.50. And the gap down served by proxy to clearly define a bearish WedEX signal.

Overnight action”s new info…
Firming up to 2029.00 suddenly gave way to another plunge testing 2015.00, which soon extended down to test 2009.00 before midnight. Bouncing recovered to within 1 tick of 2029.00, but that reacted back down to 2018.00.

If, then…
If the open isn”t already recovering above the 2035.00 area, then the overnight recovery attempt will have likely failed. The consequence could fall far below the overnight low — not necessarily easy, but easier. This may seem counter-intuitive since the overnight low is much deeper. But the overnight drop has cleared a path that enables lower lows. And don”t underestimate how much stronger a trending effort can be when it bites down with expiration”s teeth. Meanwhile, this being expiration, trending through the opening 15 minutes tends to define the balance of the session. And this being a Friday, the morning”s bias tends to persist through the noon hour anyway.

First Trade…
Exiting the open at 9:45 under 2020.75 would be likely to trigger the 2023.75 bias-down signal at 10:15. Exiting the open above 2027.75 would be unlikely to trigger bias-down. Exiting the open under 2016.50 would be likely also to exceed the 2019.75 bias-down target at 10:15 to renew the bias-down signal.

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

CHARTROOM LINK(s)
o Win XP-Friendly entry
o non-xp friendly (ilinc)
(pre-open Market Tour begins at 8:55 ET)

Through the prior close…
Gapping down Wednesday to 2084.25 extended down 18 points to 2066.50 through the morning”s bias environment. Greeting the prematurely leaked FOMC Minutes from 2077.00 was soon extended 16 points to test 2093.00. But no matter how sizable, that leg had originated during a no-bias environment, requiring its complete retracement. A shallower bounce was retraced back down to 2077.00 into the cash session close, and then down to 2071.50 through the futures close

Overnight action”s new info…
Initially bouncing through midnight to retest 2077.00 was suddenly reversed back down through Wednesday”s late lows to attack Wednesday morning”s lows around 2067.00. Consolidating there through Europe”s opens eventually gave way to a 14-point drop touching 2053.50 — 40 points under yesterday”s high.

If, then…
Yesterday”s gap down attracted new sponsorship after the open to extend the overnight decline. Last night”s drop may be overly-discounting that possibility. Lower lows were likely, and this action is in-line with the recent trend, But tomorrow”s option expiration may be exacerbating the decline as exposure is readjusted en masse. The result need not be a morning rally, but extending down more deeply would be difficult. Meanwhile, gapping down under yesterday”s low can turn yesterday”s WedEX more bearish by proxy.

First Trade…
Exiting the open at 9:45 under 2060.00 would likely not recover the 2062.00 bias-down target through 10:15, thereby renewing the bias-down signal. Exiting the open above 2065.00 would likely hold above the 2062.00 bias-down target through 10:15 to avoid renewing the bias-down signal

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

CHARTROOM LINK(s)
o Win XP-Friendly entry
o non-xp friendly (ilinc)
(pre-open Market Tour begins at 8:55 ET)

Through the prior close…
Tuesday”s open had to put up, or shut-up. Recall that Monday afternoon”s buyers hadn”t gained traction for their efforts and the afternoon”s 2099.75 bias-up target had been met. So Tuesday morning wasn”t going to extend Monday”s rally without gapping up. And Tuesday”s open didn”t gap up. The open”s dip to 2093.75 was recovered to 2100.00, filling the gap back up to Monday”s close. The balance of the session trended down to probe just under the morning”s low attacking 2090.00.

Overnight action”s new info…
Last night”s flat narrow open eventually surged up to 2098.00, perhaps because China wasn”t crashing another 10% at its open. The balance of the night has trended down, fulfilling Tuesday afternoon”s potential to 2088.00. Eventually plunging through it to 2085.00 triggered a 7-1/2 point reaction up. A fresh low at 2084.00 has reacted up 7 points. That”s a lot of choppiness for just several hours, all centered around 2088.00.

If, then…
Despite trending down throughout, Tuesday afternoon”s sellers didn”t gain traction for their efforts in the same way that Monday”s buyers had failed to entrench their rally. The afternoon bias environment”s exit at 2:30 was within the noon hour”s range, and the final hour”s entry at 3:00 was within the bias environment”s range. Similarly, gapping down is the only way to extend Tuesday afternoon”s decline. Here is where the examples may diverge, because a gap down IS currently indicated. But the gap must be maintained to indicate that new sponsorship has actually arrived. And “lower prior highs” around 2088.00 can still cause a gap down to reverse sharply.

First Trade…
Exiting the open at 9:45 above 2088.00 would be unlikely to trigger the 2086.00 bias-down signal at 10:15. Exiting the open under 2083.50 would be likely to trigger bias-down. Exiting the open above 2099.25 would be likely to trigger the 2096.25 bias-up signal.