The First Trade… Hunkering down.
Proper context can start the day with a solid win and make all the difference.
CHARTROOM LINK <<==click here
(pre-open Market Tour begins at 8:55 ET)
Through the prior close…
Wednesday’s record-challenging gap down and extension to new lows had lost sponsorship at the 1804.25 noon hour low. The window had isolated a retest of the 1815.00 October 2014 “V” bottom. The balance of the afternoon rallied sharply to probe Friday and Tuesday’s “higher prior lows” up to 1869.25. The last half-hour settled back down to 1849.00, but the rally had already gained traction for its effort.
Overnight action’s new info…
The recovery immediately resumed and eventually extended to a fresh high at 1876.00, filling the gap back to Tuesday’s close. It was retraced entirely by midnight, on the way down to 1836.25 ahead of Europe’s opens. Choppy ranging since then has been narrowing around 1846.00.
If, then…
Durable bottom? No. Trading bottom? Possibly. Invulnerable bottom? No. DeMark is calling yesterday’s selling intensity on par with the starts of 5-8% corrective bounces. Fair enough, but I would add 2-1/2 points: First, that it’s not a straight-line there, and second, Wednesday afternoon’s bounce already covered 2/3rds of the 5% objective. A corollary to those points is that correcting so much so quickly — during the same session as the alleged low — actually undermines the low instead of reinforcing it. In fact, half of yesterday’s recovery is already retraced overnight. Don’t forget that my active templates suggested that a capitulation was likely to span multiple sessions, which is not yet the case. Rising enough early enough would allow extending the bounce to reward the recovery for traction its gained. But fresh lows pre-open won’t have much time to recover before that traction finds itself inverting, and new lows are in-play.
First Trade…
Exiting the open at 9:45 under 1843.25 would be likely to trigger the 1846.00 bias-down signal at 10:15. Exiting the open under 1833.00 would be unlikely to recover the 1840.00 bias-down target in time to avoid renewing the bias-down signal, next targeting 1829.25. Exiting the open above 1853.25 would be unlikely to trigger bias-down.