Day Trading Signals and Strategy - 01-23-2015

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

Enter the Chartroom here (pre-open Market Tour begins at 8:55 ET)

Through the prior close...
Thursday''s pre-open surge from the ECB QE had largely round-tripped during the morning. Sideways ranging through the afternoon bias environment was resisted by the untriggered 2043.50 bias-up signal. The timing window''s exit broke higher and rallied sharply into the final hour until touching its 2059.00 target. The balance of the hour ranged narrowly again.

Overnight action''s new info...
Even narrow ranging persisted overnight, albeit at a slightly lower level between 2053.00-2055.00. Firming into Europe''s opens became a surge to fresh highs at 2062.00. Its reaction down to 2055.00 has bounce back up to 2059.00.

If, then...
Yesterday afternoon''s rally gained traction for its efforts, so its buyers should be rewarded with control of this morning''s bias environment. Losing traction before the open would forfeit the reward. A pullback still has room down to 2047.50-2048.75 before even threatening the upward momentum. A lot of optimism is expended in avoiding a last hour pullback and again overnight. Probing fresh highs this morning would expend even more optimism, and be vulnerable to reversing down into the weekend. Until triggering bias-up above 2061.50 -- which is the room for noise above 2059.00, and which held the overnight surge -- I would be cautious about the morning''s upside.

First Trade...
Exiting the open at 9:45 above 2059.75 would be less likely to trigger the 2049.25 bias-down signal at 10:15. Exiting the open under 2047.50 would be likelier to trigger bias-down. The open must be exited above 2065.25 to be likelier to trigger the 2061.50 bias-up signal.
 

Slow-playing is in the eye of the beholder.

Yesterday''s buyers haven''t yet been rewarded for having gained traction yesterday. Typically, that would be trending above yesterday''s highs during this morning''s bias environment.

Instead, the bias environment so far has been spent testing and retesting this morning''s 2049.25 bias-down signal as support. Each test has bounced, but only back up to 2055.00. 

That''s preventing a recovery from fulfilling an off-setting test of the 2061.50 bias-up signal. It''s in-play because the 2049.25 bias-down signal was tested before ultimately holding through 10:15. Breaking under it through 10:30 would have invalidated that, but it was probed later. 

In fact, probing 3 points under 2049.25 after 10:30 nevertheless held its 3-minute low. And a 9-point surge returned right back up to 2055.00.

Having dipped to 2050.00, back above 2053.50 should launch a recovery leg through the bias environment''s 11:30 exit. That''s now within 10-15 minutes, so probing fresh lows back under 2048.50 would undermine the rally potential.

FRI afternoon signal (triggered at 1:20 ET) SPX ES Bias-up: above 2064.75
2058.75
...would target 2070.50
2064.50
Bias-down: under 2053.50
2047.50
...would target 2047.00
2041.00
Signal status: NO-BIAS FAQ INTRO VIDEOS #1 and #2

1. At 1:20, trading above the bias-up signal or under the bias-down signal would put into play a test of its bias-up or bias-down target.
2. Not triggering either bias signal at 1:20 would be "no-bias," and the bias signals should define the bias environment''s range.
-- A test of the opposite bias signal would be targeted if one bias signal was tested before triggering no-bias.
3. Touching the bias signal within 3 minutes either way of 1:20 would invoke a grace period through 1:30 to trigger a late signal.
-- "Late" signals don''t require testing the opposite bias signal, but it''s still likely.
4. Still testing the bias signal at 1:30 after invoking the grace period would trigger "noN-bias," with no bias influence.

A daily summary of high-profile members of several complexes... View a more detailed discussion of each chart at the end of today''s Market Wrap.

Eurodollar Mar Contract (EC, ETF: (FXE))
Trending down overnight and gapping down sharply Friday created three obstacles for a recovery. First is the 1.1200 gap down, under all prior lows, which will need to be retested after bouncing back into the prior range at least above 1.1385. Second, trending through Friday tends to be duplicated Monday morning, which would only add further difficulty to a qualified retest of Friday''s gap down from above. And third, Friday''s low is a second consecutive lower close, confirming Thursday''s breakout from a multi-session range and requiring an eventual third lower close. Meanwhile, gapping up would create another obstacle, needing to fill the gap close left outstanding below.

Gold Feb Contract (GC, ETF: (GLD))
Is 1310.00 going to be avoided? Retesting Wednesday''s 1307.00 prior high Thursday was enough to react down to Thursday''s 1284.50 low Friday. A bounce there may have formed the right shoulder to a Head & Shoulders reversal pattern. Another break under 1284.50 could trigger it. Meanwhile, fresh highs remain in-play.

Silver Mar Contract (SI, ETF: (SLV))
Friday''s narrowly ranging inside day still didn''t probe prior highs, which Thursday pessimistically avoided, which is potentially bullish from a contrarian perspective.

30-year Treasury Mar Contract (US, ETF: (TLT))
Thursday''s lower close was all but rejected by Friday''s gap up. The session only ranged around Thursday''s 149-24 high. Closing above Friday''s 150-11 post-open high would target a retest of the prior high, presumably up to 151-28. Regardless, a close under Thursday''s 147-12 low is required eventually.

Crude Oil Mar Contract (CL, ETF: (USO))
A bilp-up in reaction to Abdullah''s death Thursday night was reversed back under 46.25 support before Friday''s open. The extended ranging at its support without yet rallying was already threatening to launch a new downleg. Friday afternoon did trend down to fresh lows at 45.35. Back above 47.80 would trigger a recovery. Otherwise, a second consecutive lower close would confirm a new downleg is underway.

Natural Gas Feb Contract (NG, ETF: (UNG, UNL))
Gapping up Friday helped to confirm that Thursday''s probe of new lows did not gain traction. But gapping up creates "unfinished business below" at the gap back to Thursday''s 2.84 close, so probably cannot launch a recovery. Friday afternoon''s action was testing the 2.98 buy signal.

If Friday had wanted to kill the rally... then it had ample opportunity to get the ball rolling well before the afternoon slide. Unless the decline were extending down into Monday''s noon hour, its recovery remains likely.

Pattern points... (Setups and technicals)
Friday morning''s no-bias signal gets every benefit of the doubt for being valid. Having held a test of the 2049.25 bias-down signal through 10:15, an offsetting test of the 2061.50 bias-up signal has become "unfinished business above."

That doesn''t preclude a detour, however deep and for however long, but usually the unfinished business is resolved much sooner. Regardless, so long as there is unfinished business above, we assume that any drop is only a temporary detour.

Was Friday afternoon''s 13-point slide the end of the detour? It did fulfill its objective of retesting the morning''s low. It did close at 2044.00 support. And it didn''t break under a prior relevant low. All during an otherwise irrelevant Friday afternoon. Enough immediate strength Monday would be credible for at least probing fresh highs up to 2065.00 or 2075.00.

Also credible would be extending Friday''s pullback to 2038.50 or 2031.00. In fact, that would be likely, if this pattern were greeting any other day but the weekend. Time heals all wounds -- we''ll see if this one can be healed after two days.

What''s Next... (Outlook and opportunities)
Join us at 9:30am ET for this weekend''s Saturday Review. We''ll discuss the bigger picture''s longer-term potential. And we''ll also do on-demand instant chart analysis. Click here up to 30 minutes before the start time.

MON morning signal (triggered at 10:15 ET) SPX ES Bias-up: above 2056.50
2050.50
...would target 2061.25
2055.50
Bias-down: under 2046.50
2040.75
...would target 2039.50
2033.50
Signal status: noN-BIAS, STILL TESTING BIAS-DOWN SIGNAL FAQ INTRO VIDEOS #1 and #2

1. At 10:15, trading above the bias-up signal or under the bias-down signal would put into play a test of its bias-up or bias-down target.
2. Not triggering either bias signal at 10:15 would be "no-bias," and the bias signals should define the bias environment''s range.
-- A test of the opposite bias signal would be targeted if one bias signal was tested before triggering no-bias.
3. Touching the bias signal within 3 minutes either way of 10:15 would invoke a grace period through 10:30 to trigger a late signal.
-- "Late" signals don''t require testing the opposite bias signal, but it''s still likely.
4. Still testing the bias signal at 10:30 after invoking the grace period would trigger "noN-bias," with no bias influence.