Day Trading Signals and Strategy - 05-23-2016

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... Friday's gap up to 2043.50 held up through the open, and extended up to 2055.50 through the morning's bias environment. Up was then replaced by down. Trending down to 2044.75 through the afternoon bias environment did not exhibit a bullish WedEX influence. But sellers didn't gain traction, as price remained in positive territory, and a late bounce retraced 61.8{faed0d6dca04cec8b6b7985efddb9b0651107a3aebb05f69f0166038b8c951f6} back to the bias environment's 2053.25 high. Overnight action's new info... Roller coaster enthusiasts worldwide would love the price action seen so far. Five swings, each wider than the last, from 8 points on the first to 12 points on the fourth, each one testing and holding a bias signal. First, Sunday night's gap up peaked immediately upon touching Friday afternoon's 2053.25 bias environment high. Its reaction down touched Friday afternoon's 2044.75 low. Then came another hill that climbed back to the high at 2053.75. So, back down again, to a fresh low touching Friday's 2043.50 open. A brief stop to let children exit was followed by the biggest swing of the night -- a 30-minute surge to fresh highs at 2056.00, which was quickly retraced to attack Friday's low down to 2945.00. If, then... It had already become too late for WedEX to invert to bearish. Gapping up would be the clearest indication that its influence on this morning's price action remains intact. Gapping down under Friday's lows would be likely to recover from testing  Thursday's 2039.50 "lower prior highs" as support, unless that were broken already by the open. First Trade... [Click here to view the Bias parameters] Exiting the open at 9:45 under 2040.75 would be likely to trigger the 2043.00 bias-down signal at 10:15. Exiting the open above 2050.50 would be unlikely to trigger bias-down. Exiting the open above 2056.00 would be likely to trigger the 2054.00 bias-up signal.

Volatility narrows considerably from overnight. The fifth and final overnight swing almost matched the 12-1/2 point surge which had originated at Europe's opens. That's not to say its 11-point reaction down has reacted much. In fact, its 7-point pre-open bounce to 2051.75 was only now touched -- and only touched -- more than 30 minutes past the open. Trending is difficult to launch from a standing stop, that being the 2049.00 equivalent to Friday's cash session close. Further making any upside and downside difficult this morning is the first hour's five 15-minute checkpoints.

If any three of the first five 15-minute checkpoints overlap the same relevant level, the bias environment tends to be directionless. And the first three checkpoints (9:30, 9:45, 10:00) each overlapped 2049.00. The 10:15 bar was within 1 tick.

Recovering the 2054.00 bias-up signal through 10:30 would invalidate the no-bias, and clear a path up. Otherwise, this is basically a "dry cleaners" morning, i.e. time to run errands. No offsetting test of the 2043.00 bias-down signal is required, but drifting back into negative territory would become likely.  

MON afternoon signal (triggered at 1:20 ET) SPX ES Bias-up: above  2055.50 2052.50 ...would target  2061.00  2058.00 Bias-down: under  2047.50  2044.50 ...would target 2042.50  2039.50 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.

The morning's warning might also apply this afternoon. Three of the first hour's five 15-minute checkpoints overlapped the same relevant level, being Friday's 2049.00 cash session closing equivalent. That suggested sponsorship was lacking, and that choppy ranging would be likelier than trending. The dry cleaners morning only narrowed its range. Only after the bias environment began lapsing at 11:30 was trending attempted again. The reaction down from 2051.25 did pierce the morning's low by 3 ticks down to 2045.75. But it hasn't extended. Fresh lows remain likely to test Thursday's lower prior highs at or under 2039.50. At least a retest of overnight highs could be signaled above 2050.50. But there's no requirement for either, so a dry cleaners afternoon can't be discounted.

Monday's "inside day" was a miniaturized version of the overnight choppiness. A lot of swings, but essentially unchanged. We caught all of the early clues for a dry cleaners morning -- the difficulty in starting from a standing stop, the first hour's 15-minute checkpoints, no-bias. The dry cleaner's afternoon simply had to signal no-bias again. Now the question is whether Monday's late break resolved the range. Fresh session lows were being probed before coming to within 3 minutes of the cash session close. But only just before, and only by a little. So beware of another narrowly ranging dry cleaners morning Tuesday if  the opening 15 minutes haven't yet trended. Meanwhile, an overnight detour down into Thursday's range is possible, whether to 2039.50 or to 2034.00. Much lower, especially through the open, would not be likely to recover. But even from that low an overnight recovery would be possible, and so would gapping up above Monday's 2054.00-2056.00 highs. Details and other markets coverage are discussed in the post-market Wrap recording here.

Monitor overnight Globex trading in the chaRTroom here.

TUE morning signal (triggered at 10:15 ET) SPX ES Bias-up: above  2056.25 2053.25 ...would target  2062.50  2059.50 Bias-down: under  2043.75  2040.75 ...would target 2037.25  2034.25 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.