The First Trade… Yesterday’s traction seems intent.

Proper context can start the day with a solid win and make all the difference.

CHARTROOM LINK(s)
o Win XP-Friendly entry
o non-xp friendly (ilinc)
(pre-open Market Tour begins at 8:55 ET)

Through the prior close…
Wednesday night”s rally into Thursday”s gap up had extended to the first of my corrective bounce limits at 1986.00, up 48 points on the day. That was met by a 42-point plunge to fresh post-open lows at 1944.00. Sellers gained traction for the effort, and then hibernated on their laurels as the balance of the session retraced that plunge. Entirely. A 96-point round trip in the span of two hours.

Overnight action”s new info…
Initially extending yesterday afternoon”s recovery of 1986.00 to fresh highs at 1992.75 proved short-lived. The balance of the night has been retracing the recovery, back down to 1967.50. A 10-point bounce there was retraced entirely, producing a 7-point bounce to 1974.50.

If, then…
Afternoon traction isn”t signaled as often as it has been this week. Also different for the setup is how the market has been rewarding it, by only preventing the opposition from extending, and not by extending the traction. Of course, extending the traction is difficult in the face of such abnormally wide overnight reactions hasn”t been done all week. Is it surprising that a normal resolution may be a creature of normal market environments? Regardless, the consistent feature to this indicator is the context it provides. And if the open doesn”t immediately invalidate the prior afternoon”s traction, then that traction will still determine direction for the next morning and/or afternoon.

So, will yesterday afternoon”s sellers be rewarded by trending under their 1944.00 low today? When the overnight high has been almost 1993.00 and the open is indicated around 1970.00, perhaps we should focus on whether the morning will be attracted next to 1944.00 or to 1993.00, before bothering with what happens after it gets there. As for that potential to trend under yesterday”s lows, I wouldn”t waste my attention on this just yet. But it”s still fun to keep that notion not too far in the backs of our minds to pull out later — especially if the fast-approaching weekend illiquidity is met by retracing even more of yesterday afternoon”s rally.

First Trade…
Exiting the open at 9:45 above 1980.50 would be unlikely to trigger the 1979.50 bias-down signal at 10:15, which WOULD be likely to trigger if the open were exited under 1970.50 at 10:15. And exiting the open under 1964.50 would be likely also to renew the bias-down signal by not recovering its 1969.50 bias-down target at 10:15. Exiting the open above 1986.00 should at least test the 1990.00 bias-up signal.