Day Trading Signals and Strategy - 04-08-2016

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... Thursday's gap down to Wednesday afternoon's low was on a mission. There were attraction below to neutralize. From "unfinished business below" at 2044.50 and its lower attraction to 2039.00, to retesting the 2035.00 lows that had defined the week-long range. Probing even lower into the final hour to 2026.00 finally found a relevant price accompanied by improving RSIs at a relevant time. Recovering into the close fulfilled a corrective bounce target at 2036.50. Sellers gained traction. Overnight action's new info... Dipping to 2030.25 retraced 61.8{faed0d6dca04cec8b6b7985efddb9b0651107a3aebb05f69f0166038b8c951f6} of Thursday's late bounce, and bouncing retraced the dip. The bounce extended back into yesterday's opening range up to 2049.00 before consolidating. If, then... Having gained traction for their effort, yesterday's sellers should be rewarded by trending down through this morning's bias environment. That can begin from gapping up, as the open is currently indicated. But gapping up above yesterday's 2043.00 prior high would suggest that buying pressure is inverting the bearish setup to bullish. This possibility was raised by yesterday's close having eked its way back above the trading range's 2035.25 lower-end. A "session-long rally" setup is not possible, but marginalizing sellers for the day would make a bullish morning. Of course, turnabout is fair-play. In the same way that negating yesterday's bearish setup may become bullish, now the overnight bullish setup would become bearish by not opening high enough. First Trade... Exiting the open at 9:45 above 2044.50 would be likely to trigger the 2040.75 bias-up signal at 10:15. Exiting the open above 2050.50 would be likely to renew the bias-up signal by recovering the 2046.00 bias-up target through 10:15. Exiting the open under 2039.25 would be unlikely to trigger the 2040.75 bias-up signal at 10:15.

Gap up finds new sponsorship. The pre-open surge to 2053.00 had dipped to greet the open at 2049.00. Post-open action dipped a little deeper to 2046.00. Any lower would have triggered a sell signal. So, literally, as much selling pressure as could be expended without gaining traction was expended. Literally? Numerically. Anyway... The opening 15 minutes ranged narrowly sideways. This wasn't bearish since the burden of proof was on sellers. In fact, the range resolved up to 2054.25.

Reacting down has violated the 2053.00 pullback limit down to 2049.75. Back above 2052.50 would signal that the rally had resumed, next targeting 2056.25-2057.00.

Meanwhile, the open's delay in extending higher makes me suspicious about the recovery's post-open sponsorship. Reacting down under 2048.75 would start to signal momentum reversing back down. It's not a likely scenario, but there's no assurance that this week of reversals has ended.

FRI afternoon signal (triggered at 1:20 ET) SPX ES Bias-up: above 2054.50 2047.00 ...would target  2059.75  2052.25 Bias-down: under  2046.00 2038.50 ...would target  2040.00  2032.50 Signal status: NO-BIAS, TESTED BIAS-DOWN 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.

Week of reversals continues. Maintaining the gap up above 2046.00 was rewarded by extending to fresh highs. Delaying that extension had made me suspicious of the ability to maintain fresh highs. They weren't. Reacting down from 2054.25 through 2048.25 has extended down to 2040.00. The morning's bias environment finished lapsing under the open's range. The burden of proof has shifted back to buyers. Fro the same reason that the week's ongoing reversals that raised suspicions about the recovery, it should not increase confidence in its reversal. Entering the afternoon back above the 2046.00-2049.00 opening range could be squeezed higher through the close. Otherwise, plenty of "unfinished business below" and other attractions can keep the afternoon occupied. Trending under Thursday's 2026.00 low is still a possibility.

Friday's reversal down could have been a lot more destructive. Exiting Friday afternoon's bias environment beyond all other intraday timing window extremes tends to extend in that direction through the close. But Friday afternoon's bias environment was AT the 2038.00 prior extremes. Even the 3:10-3:20 timing window's downward bias avoided actually trending down under 2034.00. Selling pressure was expended, but didn't gain traction. Reacting up to 2040.75 into the close also didn't gain traction. Either end of the week-long range could be tested next. And either end could be probed without extending in that direction. Several specific parameters will help to signal which attraction is dominant, and I'll describe them at this weekend's Saturday Review. Details and other markets coverage are discussed in the post-market Wrap recording here.

[I'll email the Saturday Review link overnight.]

MON morning signal (triggered at 10:15 ET) SPX ES Bias-up: above  2052.75 2045.25 ...would target  2057.75  2050.50 Bias-down: under 2042.00  2034.75 ...would target 2034.50  2027.00 Signal status: BIAS-UP, BIAS-UP TARGET EXCEEDED 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.