Day Trading Signals and Strategy - 02-05-2015

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...
Wednesday''s gap down held its bias-down signal. The offsetting test of its bias-up signal was fulfilled at the morning''s 2046.25 high, which probed 2 points into positive territory. Consolidating back into negative territory at 2036.00 never gained traction. In fact, rallying out of the bias environment''s exit came to within 2-3 ticks of the afternoon''s 2049.75 target. Having originated too late to be strong-handed, and having fulfilled buying pressure, negative ECB-Greece news triggered a 20-point plunge to fresh session lows attacking 2030.00 before the close.

Overnight action''s new info...
The plunge extended down immediately to 2022.50. Sideways ranging between 2021.00-2027.50 formed an Inverted Head & Shoulders. The pattern broke higher into Europe''s opens. Yesterday morning''s 2046.25 was just attacked to within 1 tick.

If, then...
The plunge began too late to invalidate the relevant action of two consecutive mornings that had rejected sellers. The recovery I described during Market Wrap is exceeding my minimum expectation for 2041.00. It may have gotten ahead of itself by already testing this morning''s 2044.50 bias-up target. But the potential for extending higher still outweighs the trend reversing down.

First Trade...
Exiting the open at 9:45 above 2042.00 is likely also to exceed the 2044.50 bias-up target through 10:15 to renew the bias-up signal. Exiting the open under 2034.00 would be unlikely to trigger the 2038.25 bias-up.

EC-who? Yesterday''s plunge totally recovered, and then some.

Opening at the 2044.50 bias-up target initially ranged sideways up to 2047.00. Then it broke higher to test 2052.00. Twice.

Their 2048.00 interim low was also tested. Twice. And now 2052.00 is still being tested as resistance.

This is a renewed bias-up environment. Of course, its renewed bias-up target(s) at 2051.00 and 2053.25 have been met. But they haven''t been rejected. Extending higher in a bias-up environment is entirely credible. The next higher objectives are 2059.00 and 2061.50.

Back under 2050.50 would instead target a retest of this morning''s 2044.50 bias-up target.

THU afternoon signal (triggered at 1:20 ET) SPX ES Bias-up: above 2062.50
2056.50
...would target 2067.50
2061.50
Bias-down: under 2050.50
2044.50
...would target 2045.00
2039.00
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))
Thursday''s strength helped to confirm that the confirm breakout was resuming on schedule, after Wednesday''s corrective dip held the 1.1400 pullback limit through the close. The gap back to Tuesday''s 1.1500 close was still being tested, so extending higher without delay Friday would be helpful, too.

Gold Apr Contract (GC, ETF: (GLD))
Initially dipping Thursday suggested the decline''s resumption remained intact. The dip didn''t extend, and a close under 1257.50 should make the decline''s resumption obvious by extending down sharply.

Silver Mar Contract (SI, ETF: (SLV))
Gapping down Thursday helped to confirm that Wednesday''s fresh reaction high was entirely distributive. Closing under Thursday''s low would help to confirm the decline has resumed.

30-year Treasury Mar Contract (US, ETF: (TLT))
Immediately spiking down Thursday suggested Wednesday''s late bounce was being rejected. That would be interesting, because the late bounce had prevented yet confirming Tuesday''s sell signal. Regardless, Friday''s pre-open Employment Situation report should either resume the decline, or else trigger backing-and-filling up to 150-15.

Crude Oil Mar Contract (CL, ETF: (USO, UWTI))
Wednesday''s deep drop absorbed slightly lower pullback lows overnight to rally sharply Thursday, testing 51.50 resistance. Recovering it would have been suspiciously impatient. But the rally is free to extend at any time.

Natural Gas Mar Contract (NG, ETF: (UNG, UNL))
Wednesday''s dip prevented greeting Thursday''s EIA report from a position of strength. A reaction down to the news did probe the 2.61 prior lows. The drop didn''t extend and was still overlapping prior lows, so another bottoming setup may develop. Closing back above 2.70 would be bullish.

If this third visit to recent highs reacts down again... then is it likely to retrace back to interim lows? No. Having tested the area of Thursday''s high twice during the current multi-month channel, the only credible reaction down would come from a fresh high close. Dipping any earlier from any lower would likely retrace only a portion of the past week''s rally.

Pattern points... (Setups and technicals)
Two consecutive mornings Tuesday and Wednesday reflected accumulation that made their midday flat-to-lower ranging likely to resolve up. And despite Wednesday afternoon''s buyers not gaining any traction before probing higher, the post-close plunge was recovered anyway.

Now comes Thursday''s session, apparently trained to expect the afternoon probe of fresh session highs. The midday flat-to-lower ranging once again prevented buyers from gaining traction. But a very late effort extended higher.

The rally from January''s ~1980.00 low eventually targeted 2059.00. It was attacked to within 1 tick at Thursday''s late high. Hesitation there reflects pessimism, which is potentially bullish from a contrarian perspective. This doesn''t require trending higher without delay, but it makes an initially negative knee-jerk reaction to the Employment Situation report likely to reverse up.

What''s Next... (Outlook and opportunities)
Gapping down under Thursday''s 2048.50 noon hour low might be the only credible way to avoid fresh highs Friday. Fresh highs would be vulnerable to reversing down -- earlier rather than later, if at all.

FRI morning signal (triggered at 10:15 ET) SPX ES Bias-up: above 2065.00
2059.00
...would target 2070.25
2064.50
Bias-down: under 2053.50
2047.75
...would target 2047.00
2041.00
Signal status:BIAS-UP 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.