Post-open Review

Warning shot across the open’s bow.

If you’ve only caught every other blog post lately, or even every third, or fourth, then you still probably know my criticism of this leg of the rally. That is, ongoing optimism ahead of today’s tax reform vote(s).

Finally, some semblance of defensive posturing arrived at the open. Pre-open action had twice touched yesterday morning’s 2698.00 high. It was never pierced, and the 2697.25 opening print added only a single tick, only a single tick short of touching this morning’s 2697.75 bias-up signal, before collapsing to 2690.00.

Triggering no-bias after touching the bias-up signal would have put into play an offsetting test of the 2688.75 bias-down signal. One wasn’t touched, so the other isn’t required. Regardless, a lower low has now attacked 2688.75 to within 3 ticks, so it wouldn’t become unfinished business, anyway. Also, simply returning down to 2692.50 already makes 2688.00‘s test likely.

So, fresh session lows remain likely so long as 2693.25 isn’t recovered. I’ll also anticipate a test of 2688.00 to recover 2292.50 through whatever timing window it’s tested, or else a more substantial downdraft may be underway already. And back above 2695.50 would signal that a probe of fresh highs is underway targeting 2699.75-2700.75 or 2703.00.

Open’s surge outlasts WedEX return.

The open gave retail trades a chance to express the same sentiment that had driven the overnight rally. Ranging flat-to-higher around 2690.00-2693.00 into the open was replaced suddenly by surging to 2698.00. Backing-and-filling since then has retraced the open’s surge down to 2693.00.

The opening 15 minutes of volatility trended up. This invalidates the bearish WedEX. Trending back down is still possible, even throughout the bias environment as the setup would. But it won’t be because of the WedEX influence. Similarly, trending back down through the bias environment is unlikely.

Retracement is still possible. Ending the session much lower is less likely, although still possible, while some temporary intraday dip is likelier. Currently testing 2695.00 support, its break’s minimum objective is to test 2688.00.

Back above 2697.00 would target new highs, to 2699.75 and then 2703.00. I’m not going to dismiss the potential for an already excessively optimistic rally to exhibit yet more excessive optimism without an interim pullback. I can only caution that its presumed catalyst is vulnerable to headline risk at any time.

Rubio catalyst does a 540-degree turn, while the market’s content with a 180.

The overnight rally that had been ranging flat-to-higher had just started breaking higher when we finished this morning’s Market Tour. Extending to 2665.25 was retraced 3 points to attack the flat-to-higher ranging from above. The two never touched before surging to 2667.75 pre-open.

Immediately improving another point immediately began consolidating through the 10:15 bias timing window, ranging between 2666.00-2669.00. The 2565.75 bias-up target was only attacked to within 1 tick, and the bias-up signal was renewed.

Almost like clockwork, the Rubio catalyst behind yesterday’s drop announced another reversal. Spiking up through the 2671.75 renewed bias-up target to 2675.50. The doubly-renewed bias-up target is the pre-existing 2677.75 “unfinished business above.” It can be neutralized by attacking it to within 1 point.

Almost like clockwork again, the Rubio headline is being walked back, sort of (“hasn’t seen the text”). Even if not, its knee-jerk reaction should be retraced to its 2668.00 origin, probably down to 2666.75. Already, the spike has been retraced to 2670.50. Back above 2673.75 would suggest the high’s overbought RSIs will be retested first, presumably at least 2676.75, too.

Meanwhile, we have two contradictory setups trying to co-exist. Maintaining the gap up above yesterday afternoon’s 2664.00 bias environment high has formed a “session-long rally” setup. Every timing window but one should probe its prior timing window’s high. Which will be difficult this afternoon against the bearish WedEX’s influence. Unless the one window exception is the bias environment or last 60-90 minutes. Either of which could contain a deep slide.

As a reminder, the week’s earlier indications of strong trending attempts, which fail and reverse, continues to play-out. Nothing has changed, and this morning’s rally is as vulnerable to reversing.

Post-open action is ranging narrowly.

Tuesday night’s dip and Wednesday’s intraday choppiness are reflecting the market’s widely disparate opinions, and little inhibition from expressing them. The action is warning us that the market intends to try trending, and may even succeed, if not reject an otherwise extended attempt along the way.

Measurements of last night’s swings suggest the template remains influential. But the open has been relatively subdued. A little more volatile than a Saturday or Sunday, but not much.

The pre-open recovery from yesterday’s late 2666.25 low had extended to 2673.50. It was the second overnight retracement, and both had measured 61.8%. But the 2670.00 open only dipped deeper, attacking 2667.00. And now it has been retraced to test 2671.00.

Post-open action isn’t wide enough to have the same sponsorship behind the recent choppiness. And it’s not a function of having expended either buyers or sellers. More of a “dry cleaners morning” is suggested — even if not contained narrowly, still frustrating to trade.

Expiration related? Possibly, if not probably. Yesterday’s WedEX signal suggests there’s sellers into strength. This morning suggests there’s not sellers into weakness. Fresh session lows testing the 2664.25 bias-down signal remain possible, but an organic downdraft (i.e. not triggered by a news) is unlikely.

The open probes new highs.

After recovering the overnight drop to 2659.25 back up to its 2669.00 origin, a pre-open pullback extended down to test 2665.00. At least a 61.8% retracement back into yesterday’s mid-day range was likely — essentially this morning’s 2671.75 bias-up signal. Fresh highs were also possible.

The open was greeted by already improving to 2671.25. Post-open action surged back into yesterday’s midday range, and then higher to 2674.50. New highs. Reacting down tested 2671.75 as support, recovering enough in time to trigger a clean bias-up. Its 2677.75 target is in-play.

That’s a lot of optimism ahead of this afternoon’s FOMC events. The overnight drop helped to create upside momentum, but that wasn’t intraday, and it has already been rewarded. Without the bias-up yet producing a fresh high since triggering, it is vulnerable to another detour. But the target above remains intact so long as 2671.75 holds tests as support.