The First Trade… Two steps forward, one step back.
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…
Monday’s recovery of Sunday night’s slide had probed fresh highs by a 2-3 point margin. Despite that coming very late, a last-minute dip ended the day 2-3 points into negative territory. No traction was gained by the intraday rally, and Friday’s breakout was not confirmed, two elements of “ineffectual optimism.”
Overnight action’s new info…
Narrow ranging at Monday’s close eventually began sliding. Ranging narrowly again at what is this morning’s 2004.00 bias-down signal eventually broke lower to range around this morning’s 1998.50 bias-down target. Probing its lower-end down to 1996.50 has snapped back up into the range.
If, then…
We began monitoring a topping pattern last Saturday. It defined intraday action until Friday’s overnight rally and gap up to fresh highs. Was Friday an exception, or the new rule? Monday’s session somewhat validated by not rejecting it. But not confirming Friday’s breakout leaves the door open to rejecting it. Of course, the burden of proof is greater for its delay. Yesterday’s ineffectual optimism in S&Ps offers more evidence. An index comparison offers more evidence, in that only the Dow has extended to fresh highs for two consecutive days, while NDX has only now closed above its prior high. S&Ps opening under Friday’s lows (as is indicated overnight) would not be required to fill the gap back to Monday’s high. Last week’s intraday dips only trapped shorts whose squeeze fueled Friday’s breakout. Similarly, absorbing this morning’s gap down would trap more shorts for another squeeze to fuel the rally.
First Trade…
Exiting the open at 9:45 under 1995.00 would be likely also not to recover the 1998.50 bias-down target by 10:15, renewing the bias-down signal. Exiting the open at 9:45 above 2001.50 would be likelier to hold the bias-down target through 10:15, and to avoid renewing bias-down. Exiting the open above 2007.50 would be unlikely to trigger the 2004.00 bias-down signal.