S&P
The First Trade & Pre-open Tour Recording… Sellers got their beauty sleep.
Proper context can start the day with a solid win and make all the difference.
DAILY SCHEDULE
First, watch the pre-open Tour recording HERE <<==
Then, meet in the chaRTroom here by 9:15 ET for updates and Q&A
Through the prior close…
Thursday night’s narrow overnight range had dipped only slightly and briefly before Friday’s expriration open, and before bouncing back to earlier overnight highs testing 2492.00. A post-open headline reaction surged to 2508.00. Having stretched the rubber band once again, the market snapped back down, extending eventually down to new lows at 2409.25. The afternoon was influenced by a bearish WedEX, as liquidity evaporated ahead of a 3-1/2 day weekend.
Overnight action’s new info…
Sunday night’s Globex open gapped down to meet the 2402.00-2405.00 target that had been established intraday Friday. Bouncing back to unchanged extended through a 2419.00 buy signal on the way to its 2434.00 target. A 7-1/2 dip was recovered to retest the high into Europe’s opens. But any influence of ES stability was quickly absorbed, and a 13-point dip just begat a 31-point collapse down to fresh lows at 2395.50 — testing this morning’s 2398.25 bias-down target, and having sufficient complexity to form a “new Globex trend extreme” that requires intraday retest.
If, then… (notes to accompany the Tour recording)
Last night I published a few thoughts about the potential for a “bottom,” (here, if you haven’t yet read it). Its two primary thrusts are that 1) we should be aware that a near-term low can appear at any time, and 2) a near-term low can be under Friday’s close by triple digits, perhaps 2,000 Dow points or more. Today’s restrained volume and early close make it a wild card — it’s difficult to get sponsorship that starts trending, and difficult to stop if it starts. Regardless of the holiday factors, delaying this overnight reaction helps today to avoid an UNusual meltdown. Another usual meltdown today would have room down to the next lower objective at 2345.00-2361.00. An intraday rally is unlikely due to the bearish WedEX influence, but 2454.00 would be its likely objective.
First Trade…
[Click here to view the Bias parameters] Exiting the open under 2416.00 would be unlikely to trigger bias-up at 10:15. Exiting the open under 2403.00 would be likely to trigger the 2405.00 bias-down signal. Exiting the open at 9:45 above 2424.00 would be likely also to trigger the 2421.00 bias-up target.
Overnight update, and big picture prep.
As I write this, Sunday night’s ES Globex session has opened by gapping down to meet the 2402-2405 target established intraday Friday, and then bounced back to unchanged. Is it a head-fake that will result in a relief rally, or a warning shot that will resume after filling the gap? Either way, Monday’s early close with its volume limitations may be among year’s the busiest and widest ranging.
There’s always a bullish case. There’s also always a bearish case. One tends to be more dominant, but their relationship is always in flux as price changes, because price levels and price action are a big part of either case. Recently, the bearish case has dominated. But is that relationship nearing an inversion point to create a buying opportunity? I’m not referring to valuation, which would be based on such inputs as fundamentals, intermarket comparisons, etc. Rather, from a technical perspective that is guided by observations of momentum, sentiment, and specific behaviors that can be associated historically with previous turning points.
When I asked whether a bullish setup may be *nearing*, I mean in terms of a couple of hours, or a couple of days. Meanwhile, that could be thousands of points below. We’ve been monitoring the development of my Complex Ascending Triangle topping pattern in April, and now all of its likely downside targets are met, with no signs of slowing.
I’m still concerned that the decline lacks capitulation. Such extreme sentiment is a necessary component to forming price extremes. But how much longer can the decline avoid becoming capitulative? 
My contemporaneous observations of excessive optimism have been a significant rationale for remaining bearish. Meanwhile, sessions have been losing a lot of ground: At its lowest point, in the past 6 days the Dow Jones has fallen 463, 679, 513, 77, 643 and 563 points. This decline may be only hours away from a capitulation low, but that could be a 1500-2000 point intraday capitulation session. So, *nearing* a buying opportunity can be very different in terms of price than in time.
By the way, I’m referring to a trading bottom, and not to a longer-term investment opportunity. Markets peaked at September’s end, and three months in decline is within the 3-4 month average of stock market corrections. That’s not a time limit for the decline, but the time frame does add credibility to an actual reversal attempt. Having said that, bear markets average a duration of 1-1/2 years, during which many reversals are attempted and fail. The current decline may be the beginning of a deeper, longer bear market.
Scroll back up to see the chart we’ve been monitoring since April, with my “Complex Ascending Triangle.” 
It is a topping pattern I discovered that occurs frequently among markets and stocks, among all time frames from intraday to weekly. It projects to a final or “terminal” extreme in the ongoing trend, at a 61.8% or 161.8% projection from two specific price points within the pattern (this instance reached the initial target).
More so, the pattern predicts — before its highs are even met — that the subsequent reversal will be aggressive, which it has been. Again, this pattern began forming more than 6 months before October’s highs, before any talk of tariffs or shut-downs. Additionally, retracement objectives and supportive influences complied with the typical 61.8% minimum objective (that “x” on the chart was placed almost 2 months before price arrived there). Extending lower can become a much longer and drawn out decline.
So, the current decline was not a recent creation. The market pattern had been working toward it for months before it appeared. Recall my posts nearly one year ago (Dec 26, 2017, Jan 3 2018) discussing the high-profile gift of stocks from Kim Kardashian to her husband Kanye West. This “contrarian alert” wasn’t expected to prevent optimism from rising to new extremes, and it didn’t, as January screamed higher. But then the market crashed into February, because of the pattern that had created the vulnerability, and not because of any catalyst.
As I write this conclusion, Globex is approaching midnight and ES is approaching the 2434 target created by its opening swing. Monday’s shortened, illiquid session could cut either way, triggering a squeeze or resuming the decline. Major trend reversals don’t generally form during expiration, but that doesn’t preclude bounces. Whichever direction your trading, be sure to have a stop at work — and don’t rely on Santa, his rallies, or his reindeer to affect direction.
Morning Bias
| MON morning signal (triggered at 10:15 ET) | SPX | ES |
| Bias-up: above | 2419.50 | 2421.00 |
| …would target | 2429.50 | 2431.00 |
| Bias-down: under | 2403.50 | 2405.00 |
| …would target | 2396.75 | 2398.25 |
| Signal status: BIAS-DOWN, BIAS-DOWN TARGET EXCEEDED | . | |
| NEW: BIAS VIDEOS… INTRO // EXAMPLE | ||
1. At 10:15, trading above the bias-up signal or under the bias-down signal would put into play a test of its bias-up or bias-down target.
2. Not triggering either bias signal at 10:15 would be “no-bias,” and the bias signals should define the bias environment’s range.
— A test of the opposite bias signal would be targeted if one bias signal was tested before triggering no-bias.
3. Touching the bias signal within 3 minutes either way of 10:15 would invoke a grace period through 10:30 to trigger a late signal.
— “Late” signals don’t require testing the opposite bias signal, but it’s still likely.
4. Still testing the bias signal at 10:30 after invoking the grace period would trigger “noN-bias,” with no bias influence.
Market Wrap (recording & summary)
A very narrow overnight range had dipped only slightly down to 2467.00 before Friday’s open. And only briefly, quickly bouncing back to earlier overnight highs testing 2492.00. The range persisted through the open, until optimistic headlines from a Fed speaker triggered a surge to 2508.00. Surges have been serving only one purpose, to stretch the rubber band so it could snap back down. It eventually snapped down to new lows at 2409.25.
The bearish WedEX’s afternoon influence is likely to repeat on Monday morning. Except for the impending weekend’s illiquidity, a hold-short was compelling. Evaporating liquidity ahead of a 3-1/2 day weekend also makes the setup less compelling, as one gentle upward push could trend higher through Monday’s early close.
Meanwhile, the bigger picture continues to unfold, whatever its scapegoats. Notice the accompanying chart. We began focusing on the bearish topping pattern long before tariffs and government shut-down were whispers, let alone headlines. The decline’s real culprits are the massively extended levels of many high-profile stocks long before they hit their highs. They were widely owned, by funds run by really smart inexperienced managers (i.e. theorists). How did the decline not begin earlier, and how is it not down more?
Be aware that a near-term low can appear at any time. Also be aware that a near-term low can be under Friday’s close by triple digits. And finally, be aware that none of that will happen during the next two days. Take advantage of the pause… chaRTroom will re-open Sunday night at 6:00 pm ET.
Details and other markets coverage are discussed in the post-market Wrap recording here.
THERE IS NO SATURDAY REVIEW THIS WEEKEND.
Daily Spot…
A daily summary of high-profile members of several complexes… View a more detailed discussion of each chart at the end of today’s Market Wrap.
Eurodollar Mar Contract (EC, ETF: (FXE, UUP))
Thursday’s rally high attracted no new sponsorship, allowing Friday’s gap down to extend lower and fill the gap back to Tuesday’s 1.1450 close.
Gold Feb Contract (GC, ETF: (GLD))
.Gapping down Friday back under Thursday morning’s high extended lower until filling the gap back down to Wednesday’s 1257.00 close. Resuming the rally Monday would be appropriate.
Silver Mar Contract (SI, ETF: (SLV))
Filling the gap Thursday back up to the 14.83 area had not gained traction before dipping again into Friday afternoon. Closing lower on Monday would be credible for reversing the trend down.
30-year Treasury Mar Contract (US, ETF: (TLT))
A shallow overnight pullback nevertheless recovered to open unchanged Friday, but still resolved down under the 144-28 pullback limit. Back above 145-04 would resume the rally, to produce its requires eventual third higher close.
Crude Oil Feb Contract (CL, ETF: (USO, USL) (UWTI-long, DWTI-short))
Gapping down to fresh low Friday recovered into positive territory, but only to fluctuate narrowly around unchanged. Simply by not extending the rally, closing back above 47.00 can signal a substantial bounce underway.
Natural Gas Jan Contract (NG, ETF: (UNG, UNL))
Recent lows may be forming an Ascending Triangle, after all, as Friday bounced back up to the pattern’s 3.83 resistance and created another higher low in the interim. A break higher would likely be aggressive, but short-lived, reversing down to fresh lows from a test of 4.11.