The First Trade

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

Through the prior close…
Wednesday”s reaction to the FOMC Minutes was extraordinary. Its 28-point rally originated during a no-bias environment, so the afternoon”s 1933.00 bias-up signal requires an eventual retest. As does oversold RSIs at its 1918.00 low, eventually. Buyers gained no traction since the final hour”s entry wasn”t above the bias environment”s high. That didn”t prevent coming within 2 ticks of the rally”s last target at 1964.50.

Overnight action”s new info…
Potential for at least a shallow correction seemed not to be on the agenda. Only a 3-point dip was allowed before recovering to higher and higher highs at 1968.50. But that has been retraced entirely, now probing 2 points under the original 3-point dip to 1957.25.

If, then…
Extending the rally higher Thursday without delay requires gapping up since Wednesday”s buyers gained no traction. That”s just half the battle, and the overnight attempt seems to be melting away. The failed overnight extension may be giving extra energy to a post-open dip.

First Trade…
Exiting the open at 9:45 under 1954.00 would be likely to test this morning”s 1950.50 bias-down signal. Exiting the open under 1948.50 would be likely also to trigger bias-down at 10:15. Recovering to exit the open above 1964.50 would likely also trigger it.

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

Through the prior close…
Tuesday”s gap down had been consolidating in a wide but narrowing range, The afternoon bias environment”s 2:30 exit came into view at the range”s 1944.00 midpoint, and the decline resumed with a vengeance by plunging to its 1931.00 and 1927.00 targets. The bias environment”s exit under the noon hour”s range was confirmed by the 3:10-3:20 window trending down to fresh lows, so sellers gained traction for their efforts.

Overnight action”s new info…
Lower lows ahead of the Globex open touched 1924.25. But the mood turned 180 degrees from there, eventually firming to touch 1933.00. Its reaction down to 1926.00 has now been recovered to probe a fresh overnight high.

If, then…
Having gained traction yesterday afternoon, sellers are due a reward for their efforts. That”s usually a trending attempt to fresh lows the following morning. Overnight ranging hasn”t precluded that, and might be wasting buying pressure to try avoiding the inevitable. Having said that, we”ll give a rally every benefit of the doubt if properly signaled, while being prepared to reverse short.

First Trade…
Exiting the open at 9:45 under 1929.75 would be unlikely to trigger the 1931.75 bias-up signal at 10:15. Exiting the open above 1933.00 would be likely to trigger bias-up. And exiting the open above 1939.00 would be likely to renew the bias-up signal by also exceeding the 1937.00 bias-up target through 10:15.

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

Through the prior close…
Monday afternoon”s bias environment rallied from the session”s 1950.50 low to 1962.00. The 12-point run probed 2 points into positive territory, testing the 1961.00 bias-up signal”s resistance, and the no-bias environment was lapsing. No new sponsorship was attracted to the rally, and the balance of the session ranged sideways back down to 1956.00.

Overnight action”s new info…
Price began dipping from the moment the cash session closed until Globex opened. After bouncing from under 1953.00 to above 1956.00, another drop extended through Monday”s 1950.50 lows to under 1945.00. Now a bounce”s consolidation is being supported by this morning”s 1948.00 bias-down target.

If, then…
Yesterday”s buyers expended minimum energy while giving up minimal ground. The overnight probe under Monday”s lows could be bearish if not being recovered through the open. The only other credible bullish scenario would be gapping down to hold a test of the next lower support at Friday”s morning”s 1945.25 low — or of Thursday”s close around 1941.00 — either of which would act as a springboard to launch at least a morning rally.

First Trade…
Exiting the open at 9:45 under 1946.00 would be likely to renew the bias-down signal by also exceeding its 1948.00 target through 10:15, next targeting 1941.00-1942.00. Exiting the open at 9:45 above 1955.00 would be unlikely to trigger the 1953.00 bias-down signal, at all, which would put into play an offsetting test of at least the 1962.00 bias-up signal.

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

Through the prior close…
The origin of Friday”s “session-long rally” setup had reason for suspicion, but not its finish. Every timing window but one had probed a fresh session high, as the setup expects. The afternoon”s higher highs didn”t extend higher as each timing window also overlapped the morning”s 1960.00 high. So, despite triggering bias-up, buyers didn”t gain traction for their effort, but neither did sellers.

Overnight action”s new info…
Without having gained traction for the effort, rallying without delay would require gapping up. That”s being attempted since Sunday night”s open spiked up immediately 5 points back to Friday”s 1964.50 high, and has since extended that to 10-11 points higher. A reaction down touched Friday”s highs as support, and has bounced back up.

If, then…
Gapping up today was likely since session-long rallies tend to extend into the next session, and not gaining traction Friday afternoon meant gapping up was the only path higher. That should not be only a momentary probe into positive territory, but a trending effort. It is still vulnerable to being rejected and reversed down, especially since the 1967.00 bias-up target which was left outstanding Friday has now been met.

First Trade…
Exiting the open at 9:45 back under 1960.00 would be unlikely to trigger the 1967.00 bias-up signal at 10:15, or even to recover back above Friday”s 1964.50 high. Exiting the open above 1969.00 would be likely to trigger bias-up.

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

Through the prior close…

In the end, retracing all of Thursday morning”s 24-point slide had expended too much energy. The bias environment was exited above the noon hour”s range, a range that had developed in negative territory. That”s at least enough to marginalize sellers. Then entering the final hour above the noon hour”s range would have triggered a short-squeeze. Fresh highs were probed, but not maintained long enough. The balance of the session drifted back to unchanged. Oversold RSIs were left outstanding at the 1918.25 low, and 1943.50 resistance held another test.

Overnight action’s new info…
Thursday”s last dip from 1945.25 initially extended down to test 1936.00. Then the recovery resumed, trending up to within 1 tick of 1950.00.

If, then…
Gapping up is half the battle to rejecting yesterday”s close under 1943.50. Gapping up sufficiently is the other half. Maintaining the gap up is the other other half. That”s right — three halves. That”s how difficult it is to attract strong-handed sponsorship at this stage. A corollary is that the three halves are well-rewarded by forming a “session-long rally” setup that trends up through almost every timing window. Another corollary is that not triggering this bullish setup after fully positioning for it would be equally bearish. Presumably, sitting still today is not an option.

First Trade…
Preliminary levels aren”t considered ahead of Employment Situation reports.