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…
Despite having consolidated for several hours right up to the open, Tuesday night”s pullback suddenly resumed at Wednesday”s open. Potential to 2088.00 was probed by a couple of points before the 10:15 bias was signaled. The entire post-open drop was recovered to test its 2099.00 opening print by 3 ticks. The balance of the session ranged sideways back down to 2092.50.

Overnight action”s new info…
Flat-to-higher ranging inched its way back up to 2099.00 into Europe”s opens. A dip from there has been recovered to now probe above yesterday”s highs to 2100.50. BOE and ECB have kept monetary policies unchanged. Draghi”s press conference is a half-hour away.

If, then…
If yesterday”s break isn”t the week-old topping pattern”s breakout, then today”s open must reject it. It won”t be enough just to avoid resuming the decline — which would only delay its resumption by a timing window, or two. Gapping up above yesterday”s 2099.00-2099.75 highs wouldn”t earn immediate confidence, either. Rejecting yesterday”s break would all but require gapping up to and/or through Tuesday”s 2105.00-2106.00 close. Draghi”s press conferences have a reliable track record for moving markets, although that movement seems to be narrowing. 

First Trade…
Exiting the open at 9:45 above 2104.25 would be likely also to trigger the 2101.75 bias-up signal at 10:15. Exiting the open under 2095.50 would be unlikely 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”s gap down back to Monday afternoon”s 2108.75 low extended through the morning to probe under Monday”s 2100.50 pre-open low, finally bottoming during the noon hour upon only touching the support of yesterday afternoon”s 2095.50 bias-down signal. Rallying through the bias environment to 2107.25 then ranged sideways to close back above last week”s intraday lows.

Overnight action”s new info…
Initially sliding to 2101.75 ahead of Yellen”s overnight speech, a trading range developed back up to 2104.25. It eventually broke into a much steeper, deeper slide through Europe”s opens. Yesterday”s lows are being attacked now down to 2097.00.

If, then…
Overnight selling has been relentless, but (so far) only within yesterday”s range — yesterday afternoon”s range. Sellers haven”t accomplished anything not already done yesterday (so far). Breaking lower anyway through the open would suggest that the week-old topping pattern is already launching a downleg. Meanwhile, so long as the open isn”t breaking lower, last week”s high remains vulnerable to a retest. And its retest would still likely begin optimistically, by gapping up and/or surging through the open. ADP”s release in a half-hour is a possible catalyst to resolve the overnight dip.

First Trade…
Exiting the open at 9:45 under 2099.00 would be likely also to trigger the 2101.00 bias-down signal at 10:15. Exiting the open above 2104.25 would be unlikely to trigger bias-down.

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 pre-open slide back to Friday”s 2100.75 low was already bouncing into the open. The morning”s extended it back up to the 2111.00 bias-up signal in time to invoke the grace period, and barely triggered late bias-up targeting 2116.00. The afternoon”s pullback to 2107.00 was recovered to within 2-3 ticks of the 2116.00 target, neutralizing its attraction.

Overnight action”s new info…
Monday morning”s highs around 2111.00 immediately attracted price back down. Ranging there sideways back to 2113.50 is finally trying to break, now piercing a fresh low at 2110.50.

If, then…
Retesting last Wednesday”s 2117.75 high today doesn”t require gapping up. Double-topping with last week”s high requires only that its test be overly-optimistic. Gapping up is the likelier scenario that would fulfilll the overly-optimistic characterization. But recovering to fresh highs after gapping down would be optimistic, too — then it would be overly-optimistic if reversed down in time to close back under prior highs, and especially back into negative territory where a bearish Pivot Reversal could form. Despite the overnight pullback, I”m anticipating it will be absorbed similar to yesterday”s pre-open weakness. Duplicating last Thu-Fri session-long ranging in negative territory isn”t likely at this stage, which means that the alternative to recovering would likely be trending down.

First Trade…
Exiting the open at 9:45 above 2111.00 would be unlikely to trigger the 2109.25 bias-down signal at 10:15. Exiting the open under 2106.50 would be likely to trigger bias-down.

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 was the second consecutive session to be spent eintirely in negative territory, probing as low as 2100.75. It was also the second consecutive afternoon for sellers to gain traction. Like its immediate predecessor, its selling pressure failed to close under prior lows. Hold-short through the close barely failed to trigger.

Overnight action”s new info…
Saturday”s surprise rate cut by China wasn”t nearly as influential as its last rate cut in November. That”s assuming it was influential, at all. Sunday night”s 2104.00 open was only 2 points above Friday”s 2102.00 cash session close. Its surge to 2107.75 was quickly retraced to hover at 2104.25, Another surge into Europe”s opens reacted back down sharply from 2109.25. And now fresh overnight lows are attacking Friday”s 2102.00 cash session close.

If, then…
Not closing under a prior low gives the rally a significant advantage. Overnight ranging has created a little extra room for selling pressure to be expended before it can gain traction. That doesn”t prevent the open from trying. The burden of proof is still on sellers, but triggering bias-down would be sufficient. Meanwhile, the past week”s topping pattern is still vulnerable to retesting its upper-end if sellers haven”t yet retaken control.

First Trade…
Exiting the open at 9:45 under 2099.75 would be likely also to trigger the 2101.50 bias-down signal at 10:15. Exiting the open above 2104.25 would be unlikely to trigger bias-down.

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…
The topping indicated Tue-Wed while probing new highs was followed by Thursday”s entire session being spent in negative territory. The post-open dip to 2103.75 was retraced entirely back up to the 2111.75 opening high, and the afternoon”s lower low at 2101.50 was recovered to 2110.25, but neither recovered positive territory. The setup is called “ineffectual pessimism,” since selling didn”t actually reverse the trend down. Still, sellers were productive when it mattered to gain traction — exiting the bias environment under the noon hour”s low and entering the final hour even lower. They also left oversold RSIs outstanding at Thursday”s 2101.50 low.

Overnight action”s new info…
Thursday”s late bounce was soon retraced down to 2106.00. Price action since then has ranged around it between 2105.25-2108.75

If, then…
Will yesterday afternoon”s sellers be rewarded for having gained traction? That would give them control of this morning”s bias-environment, whether just probing under the open all morning, or actually trying to trend under yesterday”s low. It”s not yet too late for a rally effort that gaps up above yesterday”s highs to invalidate yesterday afternoon”s sellers, but it will be too late soon. After opening flat-to-lower, this morning”s only remaining path higher would be to duplicate Tuesday”s late rally — its effort would be doomed to failure, as Tuesday”s effort finally failed Wednesday. But patient sellers squeezing out the last bit of weak-handed buying wouldn”t be inappropriate for the topping process.

First Trade…
Exiting the open at 9:45 under 2101.50 would be likely also to trigger the 2102.25 bias-down signal at 10:15. Exiting the open above 2115.25 would be likely to trigger the 2112.75 bias-up signal.