Day Trading Trading Signals - 01-06-2016

Proper context can start the day with a solid win and make all the difference.

CHARTROOM LINK(s) o New! Omnistream o backup (launched AFTER the tour) (pre-open Market Tour begins at 8:55 ET) * backup is launched AFTER the Tour

Through the prior close... Opening almost flat Tuesday at 2009.00 was retraced to attack Monday's late 1994.75 buy signal as support. Bottoming just after noon then began recovering back up to the fresh highs testing 2014.00 as the afternoon range narrowed back to 2009.00. Overnight action's new info... Ranging narrowly just above 2009.00 was shocked by another Yuan devaluation, which triggered a slide under Tuesday's low to 1986.00. That was well before midnight. Firming back up to 1998.00 was shocked by Europe's opens, which triggered another slide under Monday's low to 1975.50. That's down 36 points from yesterday's close. If, then... Narrowing into yesterday's close had laid the groundwork for gapping sharply at today's open. The likely direction was down -- not likely enough to short at the close, only likely enough for overnight trending to be credible. The likely direction was down, since buyers had not gained traction for their considerable efforts since Monday's too-late surge. Narrowing into yesterday's close also had laid the groundwork for "equilibrium," which trends convincingly in one direction, and reverses convincingly at least once. But the first reversal becomes unlikely if opening too far from the orbit of Tuesday's range, which is defined by 1998.00. Meanwhile, the orbit under Monday's range reaches 1973.75 and 1965.25. Testing and holding either through a relevant timing window would be credible for launching a reversal back up, or at least a substantial effort. Otherwise, breaking under either would more likely lead to doubling the overnight drop intraday. First Trade... Exiting the open at 9:45 above 1987.50 would start to suggest at least a bounce to 1998.00. Exiting the open at 9:45 above 1973.75 after touching it would also suggest a bigger bounce underway. Exiting the open under 1984.00 without yet touching 1973.75 would be likely to extend down.

Late surge trying to extend the open's firming. The open immediately surged through 1978.50, avoiding a test of 1973.75 first. Testing 1973.75 first and then recovering 1978.50 would have accomplished two objectives of a bottom. Post-open selling reflects pessimism, and recovering it casts that pessimism as weak-handed, which is bullish from a contrarian perspective. Only recovering 1978.50 isn't necessarily overly-optimistic. But it does keep the burden of proof on buyers to maintain the open's pace. Otherwise, turnabout is fair-play -- post-open optimism can be proved weak-handed, too. Room for noise has been probed up to 1991.75, but never exceeded through a relevant timing window like 10:15 or 10:30. Now RSIs are deteriorating into the higher high. A reversal signal under 1987.75 is being tested. Probing any deeper than its first 3 minutes' low would target 1977.25. Any lower than that would target new session lows. Exiting the bias environment above 1991.75 would a big step toward extending the bounce through late afternoon.

WED afternoon signal (triggered at 1:20 ET) SPX ES Bias-up: above  2004.00 1996.00 ...would target  2009.50  2001.50 Bias-down: under  1992.25  1984.25 ...would target 1986.50  1978.50 Signal status: noN-BIAS, STILL TESTING 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.

Morning's recovery has stalled. Quickly surging through 1978,50 extended to within 3 ticks of this morning's 1996.00 bias-down target. First dipping to 1973.75 would have been rewarded by a 1998.00 target. So, no big deal. Except... Dipping first and extending higher would have laid two bullish eggs: First, the deeper dip would have expended more selling pressure, while vesting more buyers with an interest in defending against reactions down. Second, extending higher would have created more room for absorbing a pullback without it gaining traction.

Stated another way, rallying immediately at the open was optimistic. Having extended higher into the bias environment lapsing, literally as much buying pressure as could be expended for as long as it could be expended, without that optimism gaining traction for its effort.

Triggering this afternoon's 1984.25 bias-down signal could open the door to much greater selling as the afternoon progresses. The only reliable bullish scenario at this stage would be to avoid triggering bias-down.

Wednesday's last hour bounced. Sharply. Its 14-point rally from a fresh low at 1970.50 retested the afternoon's 1984.25 bias-down signal as resistance. Of course, the 45 minutes before it had fallen from 1988.00. During that late fall, the bias environment was exited under the noon hour's low, and the final hour was entered lower. Sellers gained traction for their efforts, likely to be rewarded Thursday morning by probing under Wednesday's low. Extending higher into and out of Wednesday's close did attack the prior high to within a couple of ticks. Too late, though to gain traction for its effort. Gapping up Thursday above Wednesday's 1995.00-1998.00 highs could invert the decline's traction, instead. Details and other markets coverage are discussed in the post-market Wrap recording here.

Monitor overnight Globex trading in the chaRTroom here.

THU morning signal (triggered at 10:15 ET) SPX ES Bias-up: above  1995.50 1987.50 ...would target  2001.25  1993.25 Bias-down: under  1981.00  1973.00 ...would target 1974.00  1966.00 Signal status: BIAS-DOWN, BIAS-DOWN 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.