Day Trading Signals and Strategy - 02-12-2015

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 choppiness still managed to include an afternoon rally from 2053.25 up to 2069.75. The overall effort was very disjointed, first creating "unfinished business below" at its oversold RSIs, and ultimately neutralizing unfinished business above at the morning''s bias-up signal. The singular probe above Friday high was not complex before reacting down to 2061.00.

Overnight action''s new info...
Firming into and out of Wednesday''s futures close was apparently caused by rumors from the Eurogroup meeting of agreement to kick the can further down the road. Within minutes, it was touching 2079.50. Greece soon walked that back, and eventually negative territory was probed down to 2058.50. Having been corrected, firming again into Europe''s opens soon resumed rallying, so far reaching 2077.75.

If, then...
Yesterday''s close barely managed to form a hold-short whose bounce limit was exceeded a minute too late to disqualify the setup. Its maximum stop was triggered moments later, illustrating why the setup is not appropriate for any illiquid cash instrument. The setup illustrated something else, too -- context. Greeting the news from the hold-short''s position of weakness made the knee-jerk reaction suspicious. The question now is whether already having reversed it all overnight, having probed back under the setup''s original low, allows the overnight rally to extend higher intraday uninterrupted.Other than stopping short of touching Wednesday afternoon''s oversold RSIs, the bullish template''s pattern and timing is playing out. Even the overnight selling''s measurements fit, albeit from a much higher level that avoided touching yesterday afternoon''s low.

First Trade...
Exiting the open at 9:45 above 2078.00 would be likely also to exceed the 2074.00 bias-up target through 10:15, which would renew the bias-up signal. Exiting the open under 2070.75 would be unlikely to exceed the bias-up target in time to renew the signal. But the open must be exited under 2065.50 before suggesting the 2067.75 bias-up signal won''t even trigger.

About last night...

The pre-open recovery to attack yesterday''s 2079.50 post-close high was retraced up to 2077.75. Its pre-open dip touched 2070.75, which had been identified already as the preliminary limit to at least make a bias-up likely.

Firming into the open then spent the first 15 minutes of volatility overlapping the 2074.00 bias-up target. That finally resolved up until piercing the overnight high up to 2080.00.

This is a renewed bias-up environment. Its minimum renewed target has been met. It just reacted down to attack 2074.00 and to pierce the opening range''s congestion. 

Did I mention it''s still a bias-up environment? The dip back into the open''s range probably isn''t reversing the rally, but correcting it. Back under 2075.25 would signal at least a deeper correction targeting 2072.25. Otherwise, extending back above 2077.00 (being tested now) would be likely to resume the rally, especially if maintained at a steep pace.

THU afternoon signal (triggered at 1:20 ET) SPX ES Bias-up: above 2084.50
2079.50
...would target 2088.75
2084.00
Bias-down: under 2077.50
2072.75
...would target 2071.25
2066.25
Signal status: BIAS-UP 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))
Two consecutive sessions of ineffectual pessimism launched Thursday''s rally that quickly extended to 1.1425 resistance. That''s natural resistance at the 61.8{faed0d6dca04cec8b6b7985efddb9b0651107a3aebb05f69f0166038b8c951f6} retracement of the last singular plunge. Having held its test intraday, closing above 1.1455 Friday would signal the trend reversing the trend up.

Gold Apr Contract (GC, ETF: (GLD))
Gapping up Thursday held a test of the 1227.00 before reversing to fill the gap back down to Wednesday''s ~1220.00 close. Another midday bounce also failed. Being only a slightly lower close and still within Wednesday''s range, Wednesday''s break wasn''t confirmed. But the trend still remains down.

Silver Mar Contract (SI, ETF: (SLV))
Ranging choppily Thursday, mostly in positive territory, didn''t resolve up. The "ineffectual optimism" makes credible any initial attempt to resume the decline Friday.

30-year Treasury Mar Contract (US, ETF: (TLT))
Another momentary probe of fresh lows Thursday was retraced back up into Tuesday and Wednesday''s prior range. Closing above 147-18, which is otherwise resistance, would start to signal the trend reversing back up. The trend otherwise remains down.

Crude Oil Mar Contract (CL, ETF: (USO, UWTI))
Wednesday''s ongoing test of the 49.35 pullback limit proved it had held when Thursday''s open gapped up above Wednesday''s own recovery highs. The morning''s high contained the balance of the session''s price action. Back above 51.85 early Friday would be credible for trending higher into the weekend.

Natural Gas Mar Contract (NG, ETF: (UNG, UNL))
Greeting Thursday''s EIA report, after Wednesday''s close confirmed Tuesday''s breakout, couldn''t prevent an initially negative knee-jerk reaction down, but it requires the reaction''s recovery. Having held a test of 2.70 as support, back above 2.77 would start to signal the rally  had resumed, with at least one more higher close still outstanding.

If this were expiration week... then the WedEX would have been bullish into and out of the weekend. However barely mildly bearish it was Wednesday, was totally invalidated by gapping up Thursday. There are differences in applying the WedEX setup ahead of a three-day holiday weekend, but the expectation would still be bullish into the weekend.

Pattern points... (Setups and technicals)
The rally is entrenched. By exiting Thursday''s bias environment above the noon hour''s high, and then by entering the final hour above the bias environment''s high, buyers earned the reward of controlling Friday morning''s bias environment.

The weekend''s impending illiquidity can leverage that entrenchment, since counter-trend sponsorship is difficult to generate. All the more so ahead of a three-day holiday weekend. The entrenchment, which marginalizes sellers -- not necessarily the gain, since Friday afternoon''s can suddenly stop trending and start ranging narrowly.

Usually, the reward is produced by literally trending above prior highs during the morning, even if the open were to gap down. A similar setup Wednesday was less rewarding, or at least delayed the reward until the afternoon. Perhaps that was news-related, but the likelihood is still for probing higher highs.

This particular Friday has less exposure to headlines. But being a Friday, the morning''s bias tends to persist through the noon hour. So, triggering bias-down in the morning could still produce downside. And considering all of the bullish setups, not trending higher in the morning would suggest a deeper afternoon drop is possible.

What''s Next... (Outlook and opportunities)
Don''t forget there is no Saturday Review on holiday weekends. Please be sure to request stock chart analyses during the day Friday. Also, we''ll review the bigger picture during Friday''s post-close Market Wrap, which all Saturday Review attendees are welcome to attend. We''ll be discussing the ongoing template that looks for aggressively probing new highs and then rejecting them just as aggressively.

FRI morning signal (triggered at 10:15 ET) SPX ES Bias-up: above 2091.50
2087.50
...would target 2096.50
2092.75
Bias-down: under 2083.00
2079.25
...would target 2078.00
2074.00
Signal status: LATE 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.