Post-open Review

Invalidated no-bias after post-open drop finally extended deeply enough.

The overnight range held through the open to avoid a false breakout within 60-90 minutes of the open. But the overnight range held to greet the open flat, not indicating any trending in either direction.

And then it did. Post-open action was not at all restrained. Volatility immediately increased with a couple of bars during the first 3 minutes that were wider than any overnight bar. Trending down didn’t bounce until attacking the 2906.00 bias-down signal to within 1 tick. Which held in time to trigger no-bias.

And then it didn’t. Breaking under 2906.00 through 10:3 invalidate the timely bias signal. This is a no-bias environment. Probing under 2906.00 does not require being retraced for having originated during a no-bias environment. And the 2899.00 bias-down signal doesn’t require being tested.

Meanwhile, a 5-stage pattern has developed that’s likely to test 2904.50 as resistance (being tested now).  Its resolution would be predictive through the afternoon bias environment. Either higher to retest the 2912.25 open and higher, or back down to test “lower prior highs” at or under 2898.00.

Suddenly trending from the overnight ranging can extend. But probing the 2900.50 low while RSIs diverge positively would enable a bounce to neutralize Friday’s 2910.00 gap up.

Gap up’s extension fails.

Room for noise above 2902.00 up to 2911.00 was probed by 3 ticks pre-open. Its consolidation down to 2908.25 fluctuated narrowly through the open, and then surged even higher to attack 2915.00.

But the fresh high’s reaction down to 2911.00 never recovered. Still overlapping it at the top of the hour started to suggest the post-open surge was weak-handed.

Not that the trend must reverse down — the potential for a quick post-open collapse became invalidated not only by the post-open surge, but also by coming so far past the open. However, retracing the open’s gap became likely.

The retracement’s 2904.50 target is met and pierced by 3 ticks. Back above 2907.25 would start to signal a retest of the 2908.25 open, if not also 2911.00. Otherwise, fresh pullback lows under 2903.75 would target 2898.00.

Obligatory resistance is being attacked slowly.

There’s a fine line between strong-handed patience, and ineffectual optimism. The difference becomes clearer as pessimists reveal themselves.

This morning’s pessimists are preventing the overnight retests of 2900.00 from probing higher. Not even to 2902.00. But their reactions down are unable to gain traction.

Sellers did prevent triggering the 2895.00 bias-up signal. But its inverse didn’t trigger no-bias. Instead, still testing the bias-up signal at 10:15 and 10:30 has triggered noN-bias. Neither the bias-up target above, nor an offsetting test of the bias-down signal below are required.

Trying to trend higher or lower is still possible, but not to satisfy an objective. Meanwhile, the first hours five 15-minute checkpoints all overlapped the same relevant 2895.00 level, forming a “Dry Cleaners morning” setup. It doesn’t prevent trending either, but makes trending attempts difficult and likely to return to 2895.00.

Testing 2902.00 is still likely for its proximity, and for sellers not using the first hour to reverse from its obligatory resistance. Testing 2902.00 is still vulnerable to violent rejection, for the unstable base that is forming in the interim.

Gapping up avoids trending.

The overnight rally came within 1 tick of this morning’s 2891.50 bias-up target. Its resistance was already pushing back when pre-open ECB events and CPI triggered a reaction down to test the 2884.25 bias-up signal as support. The 2887.75 open was within 1 tick of yesterday’s open.

The open has continued attracting price to it since then. More tests of the 2884.25 bias-up signal as support have held, and now 2887.75 is being retested. Already before the open fluctuating between the bias-up parameters, and then through the open almost triggering “Dry Cleaners morning,” the market seemed reluctant to trend.

Meanwhile, multiple test of the 2884.25 bias-up signal as support all but require an obligatory probe lower, probably to 2881.00 if at all. Back under 2885.50 would suggest that’s underway.

Otherwise, fresh highs decisively through 2887.75 would have room to fresh highs, but no predictability of its path before this afternoon’s FOMC Minutes.

Speaking of which… This morning’s sloppy choppiness might be the product of this afternoon’s FOMC Minutes already inhibiting sponsorship. Similarly it reflects the market’s focus on the Minutes. So, a volatile opportunity in its wake remains likely.

Open’s slide makes upside target more attractive.

During the Market Tour I noted my reluctance to sell under the 2902.00 target which was just 6-7 points higher. I would be more inclined to buy a pullback for its likely recovery. But the open wasn’t greeted there. A slide suddenly began and extended through the open down to 2880.00. And I’m inclined to buy the pullback for its likely recovery.

In fact, we identified 2881.00 as a good spot for the drop to make a stand. The drop originated from an overnight range (blue triangle in lower chart) that broke within 60-90 minutes of the open, which is often impatient weak-handed sponsorship. The 2884.25 bias-down target has held as support through 10:15 to avoid renewing the bias-down signal. A bounce has already touched 2888.50.

None of which prevents retesting the 2880.00 low, or even from extending the decline. There is a “session-long decline” setup that maintained its gap down under yesterday afternoon’s 2892.00 bias environment low after having trended up into the close. So, all but one timing window’s low could be probed intraday.

For now, we’re focused only on intraday setups, but also cognizant of the potential for violated pullback limits to produce fresh lows — and also willing to consider buying fresh lows for another bounce.