Post-open Review

Not so much required, as outstanding.

Friday’s reversal from the morning’s fresh highs had probed negative territory very briefly that afternoon. It just didn’t qualify as correcting the two prior sessions’ substantial combined rally. A deeper correction was likely.

Monday morning’s rally only exacerbated that corrective influence, by expending more buying pressure from a shallow pullback. Expending, and fulfilling. And that afternoon’s probe into negative territory confirmed the market knew its limitations, even leaving unfinished business below to encourage the correction to extend.

Which last night’s dip did, and could have fulfilled. Its pre-open reaction up to unchanged offered an opportunity to reverse up, but its natural resistance only launched a new downleg. The next lower objective other than bias calculations was to test last Thursday afternoon’s 2713.00 low. Obligatory support, at best, and likely to be probed down to 2705.00.

That was just met down to 2703.25. Oversold RSIs have helped to launch a bounce, now testing 2711.00, with potential to probe it up to 2714.00. That’s not required, and not required to hold, and back under 2707.75 would signal the decline is resuming.

Target met, held, but not rejected.

The overnight pullback from 2741.00 ultimately extended down to pierce 2733.00 by 3 ticks before the open.. The open rallied immediately up to 2737.00 and then extended to pierce the 2939.25 bias-up target.

Its reaction down has recovered to a fresh high at 2741.25. It’s too late to renew the bias-up signal, but this is still a bias-up environment. Extending higher would next target 2747.25.

There’s still cause for suspicion about this morning’s rally maintaining its gains — let alone extending higher. The overnight pullback will have to serve by proxy as generating pessimism, in lieu of a deeper pullback under Thursday’s highs. That’s not optimal, but it gets a benefit of the doubt until reversed.

Gap up and new highs are holding up.

The 2726.75 overnight high had pulled back before the open. It was similar to the earlier defensive posturing ahead of Europe’s opens. Neither was deep enough to reverse down, so my pre-open comments in the chaRTroom reiterated expectations for opening strength.

The open did gap up, albeit under yesterday’s high. Post-open did surge to probe yesterday’s high. And after consolidating back down to the 2722.75 bias-up signal, higher highs fulfilled the 2730.00 bias-up target up to 2731.25.

Which held, triggering bias-up, bias-up target met. The window’s lower-end should be defined by its 2722.75 bias-up signal if tested. If probed before that window lapses, then it should be retraced. Perhaps for longer, as this is a Friday when the morning bias signal tends to persist through the noon hour, although that’s not required.

Meanwhile, this is still a bias-up environment, regardless of having met its target. But today is unlikely to duplicate the prior two sessions’ strong intraday rallies. That’s also not required, and exiting the bias environment above its 2730.00 bias-up target would suggest. Otherwise, a flat-to-lower afternoon would be likely.

Gap up maintained above yesterday’s high.

Buyers didn’t gain traction for their effort yesterday. So, another rally day required reinforcements (actually, new sponsorship). That would be indicated by gapping up above yesterday’s high. Overnight action teased at it, then retraced.

And then recovered again.

A pullback from 2702.00 back into yesterday’s range found support at 2696.75. That is natural support at yesterday’s close, and also the next higher objective above 2684.25. Reacting up 10 points tested 2707.00 before the open, and extended higher to 2709.00 post-open.

The gap up was maintained through the open, creating a position of strength.

Not that the position of strength has been productive. It doesn’t preclude weakness. In fact, the 2704.00 open is being tested as support. But weakness from a position of strength is likely to recover, if not also to resume the prevailing uptrend.

A pullback has room down to 2700.50 before even suggesting momentum may be reversing down. Meanwhile, back above 2707.25 (being tested now) is likely to resume the rally. The 2710.25 bias-up target is in-play, and potentially also 2721.50.

Pre-open pullback holds resistance… and support.

Reacting down from the overnight test of 2684.25 isn’t surprising, since it’s the next higher objective, or the room for noise above 2674.00 and 2681.00. Reacting back down to 2677.00 isn’t surprising either, since it’s the open’s preliminary level.

Surprising, or unusual, is that the first hour has essentially produced six 5-6 point swings, each overlapping 2677.00 and the 2681.00 bias-up target — three of the swings during the opening 15 minutes of volatility. And still no resolution.

The 2674.00 bias-up signal did trigger. But its 2681.00 bias-up target is already met. Often. It’s still a bias-up environment that could break higher anyway. But meanwhile fresh lows should be limited to testing 2674.00 as support during this window.

I had assumed during the Market Tour that hesitating to test 2684.25 would at least reflect restrained optimism, potentially bullish from a contrarian perspective. New information arrived later, that the reaction down was back under Monday’s 2681.50 prior high. Monday’s prior high, not yesterday, but the Isolation setup still forms by remaining under the prior high.

So, the opening range has formed a position of weakness. It’s able to launch a probe of fresh highs, e.g. 2684.25. But from a position of weakness that would be doomed failure. And there’s no “unfinished business above,” so a break lower is possible at any time.