Day Trading Signals and Strategy - 02-26-2016

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... Surging momentarily at Thursday's open was followed by consolidation through the morning and noon hour. The afternoon bias environment finally broke out of the funk to fill the gap back to Monday's 1942.00 cash session closing equivalent. The final hour surged into and out of the futures close to within 2 ticks of its potential to 1952.00-1953.00. Overnight action's new info... Ranging narrowly flat-to-higher repeatedly attacked 1953.00 closer and closer. Its break was underway already into Europe's opens. And it kept going, rallying along with Crude Oil to attack 1969.00. If, then... The rally's good news is that it's unlikely to end today. Sliding immediately and relentlessly would leave a gap outstanding at the open. The rally's bad news is that it's vulnerable to sliding immediately and relentlessly. Testing 1952.00-1953.00 need not peak there, although it did until Europe's opens approached. Without a consolidation above 1952.00-1953.00 there is no requirement to recover its eventual reaction down. And not much motivation, not ahead of two days of illiquidity careening into a 2-day, 82-point rally. The rally's nightmare would be to open well under the overnight high, making its gap easier to fill sooner, with plenty of time to attract counter-trend sponsorship. First Trade... Exiting the open at 9:45 above 1959.50 would be likely also to exceed the 1958.00 bias-up target at 10:15 to renew the bias-up signal. Exiting the open under 1956.50 would be unlikely to exceed the bias-up target at 10:15.

Overnight rally retraces entire excess. 1946.00 was the minimum objective to retesting Monday's highs, potentially to 1952.00-1953.00. That potential became likelier as reward for recovering from a deeper and more prolonged pullback. In fact, it was relevant resistance when attacked overnight. And its eventual break launched a rally to sharply higher highs at 1968.75. But only momentarily. The reaction down from 1968.75 still held up enough to gap up at 1960.00. But trending down from there has touched yesterday's 1949.50 high. 1949.50 happens also to be yesterday's cash session close equivalent, which is natural support. While 3-minute RSI made a higher oversold low, 1-minute RSI diverged positively. And now a bounce is testing 1955.00. A bigger bounce would target 1962.75, while filling the open's 1960.00. gap. Holding its test and closing negative would seal a top. Meanwhile, this morning's noN-bias signal has no objective of its own.  

FRI afternoon signal (triggered at 1:20 ET) SPX ES Bias-up: above  1958.50 1955.75 ...would target  1965.75  1962.00 Bias-down: under  1948.75  1946.00 ...would target 1943.00  1940.25 Signal status: NO-BIAS, TESTED BIAS-UP SIGNAL 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.

Morning's range chips away at yesterday's highs. The 1960.00 opening gap up trended down through the first hour to attack 1949.00. That pierced yesterday's 1949.50 high, which also equates to its cash session close. A bounce to 1959.00 resolved in a fresh low testing 1948.00. But the noon hour's entry was still overlapping 1952.00-1953.00 -- neither recovering its test as support, nor rejecting it. Entering the bias environment above or below 1952.00-1953.00 would still likely trend in that direction. Trending up would likely drift higher into the close, probably probing the 1968.75 overnight high. Trending down would likely be steep and deep. Currently, the noon hour's bounce has been ranging narrowly around 1952.00-1953.00. And now that the noon hour is 61.8{faed0d6dca04cec8b6b7985efddb9b0651107a3aebb05f69f0166038b8c951f6} elapsed, a resolution should become obvious soon.

Friday afternoon probed fresh session lows, but it didn't melt down. That's significant, since that was the vulnerability. Once breaking back under 1952.00-1953.00 and extending down to 1943.00, the next bounce was reversed to 1942.00 into the close. But only grudgingly. Meanwhile, avoiding a new trend high close on a Friday prevented the rally from further entrenching itself. Closing under 1952.00-1953.00 on the same day it was tested suggests that upside momentum is lapsing. And closing back under Thursday's prior high prevents putting into play higher targets.

None of which broke under a prior session's prior low. Monday's "lower prior highs" were tested throughout Friday's last 60-90 minutes, but not broken.

There's still a path to extending higher, or at least to backing-and-filling up within Monday's range. But now there's also a path to launching the next downleg. The latter path is the scenario described during last weekend's Saturday Review, which had anticipated fresh highs. We'll update that during this weekend's Saturday Review (login link will be sent overnight). Details and other markets coverage are discussed in the post-market Wrap recording here.

MON morning signal (triggered at 10:15 ET) SPX ES Bias-up: above  1955.75 1953.00 ...would target  1962.25  1959.75 Bias-down: under  1942.75 1940.25 ...would target 1935.75  1933.00 Signal status: NO-BIAS 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.