Post-open Review

ECB reaction retraced entirely. Briefly.

Mario Draghi never disappoints. His press conferences somehow always have a little something for every opinion, regardless of how polarized. But the retest of yesterday’s 2132.25 low that he triggered had not recovered enough to greet the open bullishly. Its retest was likely, and likely to probe lower. And also likely to recover.

The open’s bounce attacked 2137.50 and reversed down to fresh lows at 2131.00. RSIs diverged positively on its retest, producing a bounce back to 2137.50, and eventually higher to where the ECB news had been greeted at 2141.25.

Coming to within 3 ticks of this morning’s 2141.50 bias-up signal neutralized it from becoming “unfinished business above” if left outstanding, after being put into play by earlier holding the test of this morning’s 2133.00 bias-down signal.

Neutralized it, indeed. Its reaction plunged to new lows at 2127.50. Volatility hasn’t suffered much without Mario.

After violating its 2140.25 pullback limit, a pullback was likely to test 2138.00 and only have potential to 2136.50. With no requirement for the latter, I only sold later. The math still works, because a break lower could be a product of the post-open 2131.00-2141.25 bounce. That’s a big measurement for the potential reward to what would still be a relatively low risk parameter.

Regardless of the 2133.00 bias-down signal being probed at 10:30, it was also being overlapped. It was not broken in time to invalidate the no-bias environment, regardless of its objective already above neutralized. Whether or not the plunge intends to extend, 2133.00 should be retested at some point. Its recovery could extend, or resume the decline.

Snuck in another dip before finally resolving up.

A credible post-open downleg would begin immediately. That was its only requirement. Starting quickly was worth already damaging the chart to signal its strength.

So, gapping open in positive territory, and then blipping-up momentarily to 2137.25, disqualified the slow drift back down to 2133.00 from being credible. It would have to be more productive and damaging first. Meanwhile, its sponsorship was assumed to be weak-handed.

Two problems, minor, but problems.

First, the slow drift back down to 2133.00 probed it by 3 ticks. Never any deeper than its first 3 minutes, a problem that could be overcome easily. Which it was, by bouncing back above 2134.50 and extending higher.

The second problem was no-bias had triggered, AFTER testing the 2136.50 bias-up signal. That had put into play an offsetting test of the 2130.50 bias-down signal. And the bounce back above 2134.50 didn’t extend quickly enough to invoke the grace period.

That required a rare invalidation, by recovering the 2136.50 bias-up signal through 10:30. Not still overlapping it then, but exceeding it at 10:30 as cleanly as it had failed to trigger at 10:15. Which happened.

Problem(s) solved.

This morning’s 2141.50 bias-up target didn’t require a test, but it has been attacked to within 1 tick. That was also the likely consequence to yesterday’s mid-day “ineffectual pessimism,” regardless of its deeper drop. Maintaining the upside momentum would next target 2145.50 and 2150.00. At least one of which is likelier than launching new downleg, since overbought RSIs at 2141.25 require a retest.

Gap up becomes post-open dive that retraces half the overnight rally.

The overnight rally had attacked 2140.00, and greeted the open less than 1 point lower. that’s a lot of buying pressure, but was it too much to attract new sponsorship? Testing the 2137.00 prior high during the opening 15 minutes of volatility would soon tell us. That required exceeding it to indicate that the overnight rally’s momentum remained intact.

It wasn’t.

Reacting down under 2136.00 targeted 2132.50, which was soon tested down to the 2131.75 bias-up target. Consolidating there maintained the recovery above 2131.75 through 10:15 to renew the bias-up signal. Sounds bullish.

Perhaps not.

2136.75 is the renewed bias-up target. It was already tested, so its retest isn’t required. Back above 2132.50 (being tested now) would signal its test is underway. But back under 2130.00 first would suggest not. At least not until neutralizing oversold RSIs at the post-open low.

Late attempt to drop is recovered, for awhile.

Bouncing out of the overnight range to greet the open unchanged had required sellers to be immediately obvious. That is, the optimal sell-off would begin post-open without delay. The alternative couldn’t prevent an attempt, but it wouldn’t be very credible.

In fact, the open surged 3 points to touch 2130.00. And then it quickly reversed more than twice that to test this morning’s 2123.25 bias-down signal down to 2120.75. It held, eventually triggering late no-bias, putting into play an offsetting test of the 2132.25 bias-up signal.

The delayed influence cuts both ways. Not preventing the open’s surge before reversing down had made us cautious toward the reversal. Similarly, not maintaining the open’s surge is undermining buyers. Bouncing to within 1 point of the open’s high has reacted down more than 6 points to retest the 2123.25 bias-down signal.Quickly recovering 2123.25 back above 2124.50 could avoid delaying the bias-up signal’s test, which would be confirmed back above 2126.25. Otherwise, more selling pressure would still likely be limited to attacking overnight lows.

Gap up extends through the open.

Wednesday’s 2139.50 prior high is relevant because it resolved down to fresh lows. Testing it during the opening 15 minutes of volatility wasn’t necessary. Coming so close without touching it would not have been bearish. But exceeding it through 9:45 would be bullish.

And it was exceeded through 9:45. Then a close-quarters Double Top (circled red) reacted down to 2138.50 in 3-4 minutes to avoid violating the upside momentum. Its recovery just touched fresh highs at 2143.25.

The 2136.00 bias-up target wasn’t even touched post-open, so it was exceeded easily to renew the bias-up signal. That’s at least 2144.00, which is now in-play. Above 2145.50 would target 2150.00.

RSIs are diverging negatively into the high. Friday morning’s bias signal tends to persist through the noon hour, so a reversal down isn’t likely. Reacting down could extend to 2137.50, and still be likely to recover back to the high.