Post-open Review

Gap up extends.

Yesterday’s 2918.75 high was being attacked when I recorded this morning’s pre-open Market Tour, and published the First Trade blog post: “If overnight price improvement is going to be predictive, then it’s time to start being obvious about it.”

The market soon obliged by surging up to 2927.00. The open was greeted several ticks higher, and the opening 15 minutes of volatility trended up to establish strong-handed sponsorship. Post-open action has extended already up to 2933.00.

Gapping up does two things. First, it entrenches the rally. So, even if price were to collapse suddenly, today’s gap up above all prior highs will need to be retested eventually from below. Second, gapping up serves by proxy to convert yesterday’s WedEX to actively bullish. That refers to expiration’s influence tomorrow afternoon, but any interim dip should recover.

Keep in mind that historically a trend extreme is very unlikely at expiration. In case of a pullback today, the rally’s health depends on not yet touching “lower prior highs” from yesterday.

Pre-open lows reverse up through the open, then stop.

Overnight action had ranged sideways down to 2909.00. Probing lower 90 minutes before the open reflects late sponsorship that often fails. It failed this time, too, surging from 2906.00 to open unchanged at 2911.50.

More so, the surge extended up to 2917.25. In the first 3 minutes. One hour earlier, the 2908.00 bias-down signal was in jeopardy, and suddenly the 2915.25 bias-up signal is threatening to trigger.

It didn’t.

Triggering no-bias has put into play an offsetting test of the 2908.00 bias-down signal. Price has trended back down to 2910.00. The thin volume environment remains difficult to trend to new extremes, and more vulnerable to retracing recently covered territory.

At least two bullish setups triggered.

Yesterday’s failure to close above 2897.00 was done by proxy. Exiting the next relevant window recovering the next relevant level — today’s opening 15 minutes of volatility, above yesterday afternoon’s 2903.00 last relative high.

Pre-open action had jeopardized the setup. Already touching 2903.00 overnight, and eventually probing it by 1 point, another trade war headline triggered a drop to 2895.50. But that allowed us to identify an immediately actionable buy signal above 2901.25 that triggered on the way up to this morning’s 2907.50 bias-up target. Proxy success.

Its reaction down touched this morning’s 2901.50 bias-up signal as a detached bar. That launched another surge to fresh highs attacking 2909.00. The 2907.50 bias-up target wasn’t exceeded in time to renew the bias-up signal. But this is still a bias-up environment, so the 2901.50 bias-down signal should define its low if retested, and extending higher would next target 2912.25.

Of course, the Isolation setup is forming, so long as this morning avoids probing under yesterday’s low. Its minimum objective is to retrace the origin of the pullback’s isolated low, which is Friday’s highs — including the 2917.25 “new Globex trend extreme.”

Similar to last week’s Rosh Hashanah holiday, tomorrow’s Yom Kippur observance will dampen volume and liquidity. That effect will begin this afternoon as participants leave early today for evening services. So, more important to the rally is not whether it extends, but how the afternoon is greeted, which we’ll review later.

Open retesting overnight low.

Last night’s pullback to 2904.00 had recovered after Europe’s opens, retesting Friday’s 2911.25 close. Its reaction down was recovered to 2910.25 through the open. But its touch reversed down sharply, and has extended lower to 2903.50.

Meanwhile, this morning’s 2907.00 bias-down signal triggered cleanly, putting into play 2900.25. Back above 2908.00 could trigger a premature recovery attempt, which is unlikely.

The bullish scenario largely depends on fulfilling 2900.25 sooner, rather than later. That would allow time to start recovering into a late-afternoon rally. RSIs haven’t even gotten oversold, yet, and a bottom probably doesn’t happen without sellers breaking at least a little sweat.

Overnight highs abandoned.

Rallying into and out of Europe’s opens up to 2917.25 contained just enough complexity to consider it a “new Globex trend extreme.” That requires its intraday retest, often the same day, but not necessarily.

Retesting the overnight high today isn’t looking good. Opening at the 2912.25 bias-up signal held its resistance to trigger no-bias. This puts into play an offsetting test of the 2903.25 bias-down signal. Often the same day.

Fulfilling the bias objective isn’t looking much better. The signal has yet to produce a retest of the 2905.50 pre-10:15 low. And the 2912.25 bias-up signal is now being retested as resistance.

Fluctuating around 2912.25 is still likely to hold, and back under 2910.00 would signal momentum reversing down. But exceeding the range around 2912.25 would be credible for “no-bias trending” back up to the overnight high, a detour that would require being retraced.