The First Trade… Bounce, or boom?
Proper context can start the day with a solid win and make all the difference.
CHARTROOM LINK
(pre-open Market Tour begins at 8:55 ET)
Through the prior close…
Things got off to a normal start Tuesday. Not gapping up had trended down instead, probing under the overnight lows. That was appropriate behavior since Monday’s rally had not gained traction. But then exit polling began claiming the market’s preferred candidate was leading the day’s vote. Despite having triggered the 2123.50 bias-down at 10:15, and despite only threatening to invalidate it at 10:30, the bias environment only rallied. The morning’s 2132.50 bias-down signal was recovered sufficiently to invalidate the bias-down at noon. The noon hour extended up to 2143.50, testing “lower prior highs” of the two-week old highs. The balance of the session ranged choppily back down to 2131.25.
Overnight action’s new info…
Early returns produced retests of Tuesday’s high, first up to 2144.25, and then up to 2152.50, probing the two-week old prior high. Then, quite similar to Brexit, results tightened in unexpected critical areas. I had described Tuesday’s session as being a very unstable base to the next rally attempt, and the evidence could not have come faster or clearer. Soon Tuesday’s “Hillary” rally was retraced to its 2119.00 low, and the same leg — almost the same bar — retraced Monday’s “Comey” rally to its 2102.75 intraday low.. Then last Friday’s lows of the decline were retraced entirely, too, plunging 22 points under it to 2057.25. Reacting up to 2082.00 was reversed down to 2028.50, finally effecting a collar that stopped the decline. That was at midnight, and an eventual bounce has extended to attack 2109.00. Its reaction down tested last Friday’s ~2080.00 lows. A bounce has been chipping away at resistance just under 2100.00.
If, then…
In yesterday’s post-market Wrap I described the multiple instances of excessive optimism: rejecting Tuesday morning’s bias-down, the morning’s inappropriate rally, its retracement holding above Monday’s prior high. At best, Tuesday’s rally had discounted a large portion of Hillary’s victory. Likely, it incorrectly anticipated a decisive decision. Surprisingly, it was blind-sided by Trump’s win. The pattern only favored a correction, but last night’s plunge is not out of bounds. The question is whether its near-term low — which is likely — will be durable. Probably not, because last night’s “new Globex trend extreme” requires an intraday retest, but the pattern suggests that a healthy retest will be prevented by optimism for repeating a Brexit-like recovery. So long as Friday’s ~2080.00 lows hold as support (preferably 2084.50) this morning can produce a bounce to 2121.25 or 2125.25 and possibly higher.
First Trade…
[Click here to view the Bias parameters] Exiting the open at 9:45 under 2077.50 would be unlikely to rally this morning. Exiting the open above 2104.50-2106.50 would be likely to rally this morning.