Another six inches of snow on my doorstep accompanies a true gap lower this morning, although we are not that far from yesterday’s low at this writing. I could not help but reflect that Global warming continues to blanket Colorado with spring snow, just like masks prevent the China virus from spreading. I ask you, what would global cooling do? But alas, I digress, and I better be careful not to question the current Marxist orthodoxy, lest these pages are canceled.
Although gap rules are in play, overnight inventory is actually balanced, muting a full stampede of panicked traders at the open. Current prices are ticking in the lower third of the overnight range, so the primary question is whether Traders will test the overnight lows or highs first.
Yesterday’s break did what it was supposed to do: repair the two recent weak lows and move towards the April 14th volume points of control. Overnight activity has tested that VPOC, but reliable repair doesn’t happen until regular session prices trade there.
In the bigger picture, yesterday gave us a lot of market-generated information in the way that sellers continued to try and press their bets into the afternoon but got little traction. That was encouraging. Although overnight prices are now lower, this is still a carry forward as the tone of yesterday’s session has a lot more weight than the overnight session.
However, to be bullish would require me to ignore the Navigator sell signals and sell trigger violations. There is little, if any, chance I would do so. As such, I remain neutral to bearish, with the caveat that stocks are priced for perfection right now. Some backing and filling would be healthy, but it would not take much to upset the apple cart. Context also tells me that the larger cycles are due to present at any time. Let’s face it, every major correction starts with a minor one, but longer-term conclusions are premature as yet.
If there has been one thing that frustrates me about the markets from time to time, a correction will start minor, fooling you into believing it is not gaining any traction, only to accelerate after a week or two. This is the other side of the coin of sudden downbursts that take out a few weeks of gain immediately. I have never been able to create an indicator to capture this in advance or give us an edge. That is why the context of the cycles and sentiment (to a lesser degree) can be so helpful. ANYTHING is possible here, in the context of a potential peak in the nominal 18-month cycle. Ignore that cycle at your peril.
As pointed out above, we are well off the overnight low, and overnight inventory is balanced. This gives us little direction for early trade. I will focus on whether or not prices can break back up into yesterday’s range. My bias would be long inside the range and short outside of it. Yesterday’s lows are the key bull/bear threshold for all of the major indices.
Any acceptance back within the range that looks to have legs (good internals and tempo) should point you to take your key levels sequentially and monitor for continuation.
Only acceptance below the overnight low would signal enough weakness for more tradable shorts to the downside. As always, monitor for continuation and pay close attention to see if the context is supporting.
Good luck today,
A.F. Thornton