Post-open Review

Gap up extends too late to be credible.

The open’s gap up to this morning’s 2949.00 bias-up target only touched 2850.50 before dipping. The dip stopped 1 tick short of touching yesterday afternoon’s 2846.25 bias environment high, whose break would have rejected the early strength.

So, early strength isn’t being rejected early? Not necessarily. At least, not decisively enough to default to being bullish. While the gap up was ultimately maintained through the opening 15 minutes of volatility, it didn’t extend. But neither was it rejected, so sellers weren’t marginalized.

Not until after 9:45 were overnight highs probed up to 2852.75. Regardless of the opening pattern, maintaining the recovery above this morning’s 2849.00 bias-up target would have renewed the bias-up signal. Then a very last-minute 4-point spike down probed under 2849.00 by 1 point just in time to prevent renewing bias-up.

If this sounds like a lot of contradicting indications, that’s because it’s a lot of contradicting indications. The offsets undermine each other, and make trending in either direction difficult. So does this: Since 3 of the first hour’s 5 15-minute checkpoints overlapped the same relevant level (2849.00), this is a “dry cleaners morning” which is unlikely to trend.

Breaking beyond either end of a 2848.25-2851.75 range would be credible for trending in that direction. Its upper-end is being pierced now, to touch an unconfirmed fresh high at 2854.00. This is still a bias-up environment, albeit having failed to renew. And there is room down to the 2843.75 bias-up signal until the bias environment comes within view of lapsing.

Taking a stab at resuming the rally has failed.

The overnight rally had consolidated an attack on 2850.50. A pre-open knee-jerk reaction to news surged to 2853.75, and then drifted to greet the open at yesterday’s 2848.00 opening print. Its attraction is neutralized. And there is no requirement to retest the pre-open high.

Since yesterday’s close I’ve been describing the distributive pattern forming. Early strength has become likely to be rejected early. This morning’s open offered an excellent — if not also extreme — example. The first half-hour plunged to 2833.75.

Bias is being influential, but also contradictory. Rejecting tests of both bias-up parameters puts into play offsetting tests of both bias-down parameters. But the 2835.50 bias-down signal was still being tested at 10:15 to invoke the grace period. And it held through 10:30 to trigger no-bias.

The 2843.00 bias-up signal should define the no-bias environment’s upper-end. It’s being tested now. Exceeding it this morning would be “no-bias trending” that requires being retraced. Holding it has room down to the 2835.50 bias-down signal until the no-bias environment lapses, or else probing any lower would also be no-bias trending. The most bearish scenario would start dipping again, and break lower into the afternoon.

Pre-open rally’s pullback finds impatient buyers.

Not much digging was required after the open before attracting new sponsorship to resume the rally. Resume it, and extend it, at a steep slope.

The overnight rally had extended to within 1 tick of its 2854.00potential, forming a “new Globex trend extreme” that requires intraday retest. Its reaction down greeted the open this morning’s 2848.00 bias-up target. Retesting the overnight high was likely, but likelier from a little deeper, which I identified on the chart at 2845.50. Its touch did react up, first to the open’s peak, and then surging 8 points to pierce 2854.00.

Piercing 2854.00 again finally left 1-minute RSI behind. Its reaction down to 2850.50 must either recover to resume the rally, or else reverse down. Being is a bias-up environment this morning — albeit having held the renewed bias-up target — pullbacks should be defined by either 2848.00 or 2843.00. Lower would be possible after the bias environment begins lapsing, and waiting until after noon would be bearish.

On a side note, here’s a chart that Zerohedge posted this morning. It’s of the Shanghai China SSE Composite SHCOMP. And it might become a chart of my “Up/Down-Crash setup.. So far, it is at only 9 consecutive up sessions with 1 counter-trend exception. My definition for the setup is “A rubber band is being stretched to its maximum integrity. At 10-12 sessions in the sequence, the pattern’s resolution becomes increasingly binary, and increasingly polarized. Either the rubber band snaps back, or its restraint (i.e. dam) breaks.”

SHCOMP fluctuations usually have only a brief effect on other indexes. But popping a China bubble could be indefensible. I’m not sure that iot extending higher would be any more bullish generally.

Downside threat absorbed, upside reward imminent.

the overnight dip to 2828.75 had recovered to yesterday’s 2835.00 cash session close, and consolidated narrowly into the open. A blip-down to the earlier 2834.00 overnight low was quickly rejected on the way up to 2841.50.

That’s new highs, and that’s within 2 ticks of the overnight “new Globex trend extreme” requiring intraday retest (often the same day). But being more than 2 points above the 2839.25 bias-up signal didn’t ensure it triggering. It did not.

Collapsing down to within 1 tick of this morning’s 2831.75 bias-down signal didn’t trigger it. And its eventual recovery back up to 2840.50 didn’t trigger bias-up. This is a no-bias environment. An offsetting test of the bias-down signal is in-play, but won’t become “unfinished business below” after already having tested it to within 1 tick.

Meanwhile, the bias-up signal should define the window’s upper-end. So far, it is. Probing above it anyway would be “no-bias trending,” doomed to failure, but not necessarily before extending to test 2848.00.

Probing fresh highs that aren’t likely to be maintained is entirely appropriate for a trend that may have begun a distributive phase. The initial rally’s collapse may reflect the lack of sponsorship at these levels. More so, the lack of reinforcements, as yesterday’s rally is already assumed to have been very weak sponsorship regardless of its degree.

Retail selling offset by resolution rumors.

Our premise was that negative knee-jerk reactions to the weekend’s government shutdown would keep this morning under pressure. Last night’s gap down to the 2803.75 bias-down signal all but affirmed the expectation. A pre-open surge to 2812.00 only returned to unchanged, attacking the bias-up signal to within 2-3 ticks. Anyway, it reacted back down 4-1/2 points, presumably preparing for all of that retail selling pressure.

Which never appeared. Or, if they did, retail sellers were overwhelmed by buying in reaction to favorable headlines of resolving the shutdown today.

The nearest inflection point to consider fading was 2811.25, with a stop or stop-and-reverse to long above the 2812.50 bias-up signal. Working through it eventually formed a detached bar that required an immediate resolution. That resolution was up, and Friday’s 2815.00 high was soon retested. And soon exceeded.

Bias-up was not renewed because this morning’s 2819.50 bias-up target was only being overlapped at 10:15. But this is still a bias-up environment. It has been exceeded anyway to 2822.50, and the next higher objective is 2824.50. Back under 2818.50 would signal a reversal underway, albeit limited to the 2812.50 bias-up signal.