The First Trade

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

Enter the Chartroom here
(pre-open Market Tour begins at 8:55 ET)

Through the prior close…
Ugh. Completely recovering from Tuesday night”s probe of fresh lows was predicted after the close. The 26-point drop to 2033.50 was several magnitude greater than the drop to 2054.50 I had anticipated, but still recovered. Perhaps it was the recovery”s size that inhibited it from turning positive at Wednesday”s open, let alone from trending back above Tuesday”s high. Wednesday”s open delivered another shock to the system by dropping 19 points. It ended quickly and was largely retraced, but the balance of the session ranged choppily sideways between 2045.00-2054.50, even by a last-minute surge to its upper-end.

Overnight action”s new info…
Wednesday”s last-minute surge to 2054.50 initially firmed a couple of points more. But that was reversed to begin trending back down to test the 2045.00 lower-end to Wednesday”s mid-day range. Current action is firming after having been ranging narrowly around 2045.00.

If, then…
Trending through the open beyond yesterday”s 2045.00-2054.50 range may be the only path out of its consolidation this morning. Those happen also to be this morning”s bias signals. The overnight dip can reflect caution, i.e. pessimism, which is potentially bullish from a contrarian perspective. That pessimism is ineffectual only so long as it holds the range”s lower-end, or recovers from probing under it to avoid triggering bias-down at 10:15. But the rally potential this morning probably requires triggering bias-up. Yellen speaks in a few minutes, after 24 hours of several other Fed speakers signaling their favoring a rate hike. More so than her actual comments, it is the eventual reaction to her comments — whether only trending up or down, or reversing from a blip-up or blip-down — can dictate whether the market has yet discounted or dismissed a rate hike.

First Trade…
Exiting the open at 9:45 above 2050.50 would be unlikely to trigger the 2045.00 bias-down signal at 10:15. Exiting the open under 2042.00 would be likely to trigger bias-down. Exiting the open above 2057.50 would be likely also to trigger bias-up.

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

Enter the Chartroom here
(pre-open Market Tour begins at 8:55 ET)

Through the prior close…

Tuesday morning”s 2070.50 bias-down signal was invalidated, but its recovery peaked upon filling the gap back to Monday”s 2076.25 futures close. Exiting the bias environment back under 2070.50 negated the invalidation, eventually sliding to test 2060.25 support. The next lower objective at 2057.50 was tested into the futures close.

Overnight action”s new info…
Narrow ranging held 2060.25 as resistance into Asian markets” opens. Suddenly, “positive” news sent them diving, taking S&Ps down to 2033.50 in just over an hour. It was a tough slug, but the entire drop was recovered to retest 2060.25. Its reaction down to 2051.25 is trying to recover 2054.50.

If, then…
Tuesday”s late break came moments too late to justify hold-short, unless planning to cover overnight, because “extending down overnight remains possible to recover before Wednesday”s open.” My 2054.50 objective was probed by 22 points, but that doesn”t alter my pattern for reversing positive into Wednesday”s open.

Not opening positive would keep alive potential for repeating the overnight drop, albeit not as steeply, and not necessarily all the way back down. Opening positive must still extend, and would be likely to extend, optimally to close above yesterday”s 2076.25 high. In-line with the bigger picture we discussed during this weekend”s Saturday Review (see lower image, basis SPX), closing positive would all but ensure extending to new highs before the next credible downleg.

First Trade…
Exiting the open at 9:45 under 2057.50 would be likely also to trigger the 2054.50 bias-down signal at 10:15. Exiting the open above 2068.00-2068.75 would be likely to trigger the 2064.00 bias-up signal.

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

Enter the Chartroom here
(pre-open Market Tour begins at 8:55 ET)

Through the prior close…
Monday”s extreme sentiment of gapping up to 2065.00 was not a sentiment extreme. The post-open surge quickly exceeded 2069.00 resistance on the way to eventually attacking 2082.00. That fulfilled the afternoon”s bias-up target, while neutralizing overbought RSIs, without buyers gaining traction for the effort. A last-minute reaction down touched 2078.00 at the cash session close, and 2074.50 into the futures close.

Overnight action”s new info…
Initially firming to attack 2077.00 was short-lived. Monday”s last-minute reaction down became an all night imperative. Bouncing 5 points off of 2069.00 has resolved down to test 2062.50.

If, then…
So much for having reduced the vulnerability to extending down? Although Monday”s buyers had left absolutely no “unfinished business above,” the last-minute dip had begun neutralizing selling pressure. Its overnight extension has attracted new selling pressure — but, so far, only overnight. Rallying this morning will require either already recovering considerably before the open, or else extending further down to probe into Friday”s range. Regardless of the opening level, keep in mind that it is difficult for one-way overnight trending to attract intraday sponsorship to extend the trend.

First Trade…
Exiting the open at 9:45 under 2060.25 would be likely also to exceed the 2064.00 bias-down target through 10:15, which would renew the bias-down signal next targeting 2057.50. Exiting the open above 2068.00 would be unlikely to renew the bias-down signal.

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

Enter the Chartroom here
(pre-open Market Tour begins at 8:55 ET)

Through the prior close…
Friday morning”s no-bias almost guaranteed signaling no-bias that afternoon. And signaling no-bias that afternoon almost guaranteed ranging narrowly through the close. Which is how the session did play out, but for a couple of minor blips up to the morning”s 2054.75 high around Yellen”s pre-close speech.

Overnight action”s new info…
Like Friday afternoon, Sunday night”s opening blip-up was retraced back into the range. But its dip to 2047.25 reversed back up to fresh highs at 2061.50 before consolidating. Eventually surging to 2069.00 on China rate-cut rumors has been retraced to 2061.00.

If, then…
Friday”s session should be treated as a non-event. And since Thursday afternoon”s buyers and sellers both failed to gain traction for their efforts, gapping open is the only reliable path to trending this morning. Gapping beyond the range of Friday”s inside day won”t be enough — the gap must exceed Thursday”s extremes. That”s especially important if Thursday”s extreme is touched during the open. So, maintaining a gap up above Thursday”s 2058.75 high would be likely to trend in that direction (possibly forming a session-long rally setup), but not maintaining the gap above Thursday”s high could suddenly become bearish.

First Trade…
Exiting the open at 9:45 above 2058.75 would be likely to trigger the 2057.00 bias-up signal at 10:15. Exiting the open above 2067.00 would be likely to exceed the 2064.75 bias-up target at 10:15 to renew the bias-up signal.

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

Enter the Chartroom here
(pre-open Market Tour begins at 8:55 ET)

Through the prior close…
Thursday afternoon”s bias environment had triggered no-bias. But it probed above its untriggered 2054.00 bias-up signal, anyway. That “no-bias trending” up to 2058.75 required being retraced entirely, possibly down to its 2048.00 1:20pm print. And that”s where the no-bias trending”s retracement did return into the close, 5-6 points under Wednesday”s 2053.00-2054.00 close.

Overnight action”s new info…
Rallying into midnight up to 2057.75 came within 1 point of yesterday”s no-bias trending high. A bigger reversal down extended to 2041.00. That has now reacted back up to being almost unchanged at 2048.00.

If, then…
Yesterday”s negative close did not signal that the week”s decline had ended. Neither buyers nor sellers gained traction for yesterday”s efforts, so trending attempted either way beyond the 2048.00-2054.00 range will remain vulnerable to returning back into the range, if not also through it more substantially in the opposite direction. Extending beyond the 2041.00-2059.00  range will be difficult, assuming that either end is tested. Trending from one bias signal to the other would be much simpler and more reliable. This being a Friday, the morning”s bias signal is likely to persist through the noon hour.

First Trade…
Exiting the open at 9:45 under 2042.00 would be likely also to trigger the 2043.75 bias-down signal 30 minutes later at 10:15. Exiting the open above 2051.00 would be unlikely to trigger bias-down.