Pre-Market Outlook – 7/7/2021

We are set to open inside yesterday’s range, with overnight inventory net long. We are in the top end of the range, and overnight traders had absolutely no success pressing prices lower, forming another poor low keyed off yesterday’s VAH around 4330. The S&P 500 index remains above the 21-day line, so the short-term bias is still bullish.

Yesterday, we sold off in a bear trend from the open with a series of sell climaxes. Because we fell below Friday’s low, we technically ended the bull microchannel. The midday bull trend reversed up from 4305, which was lower than Friday, just above the WEM low at 4300, and a major trend reversal from just below the 5-Day EMA. We closed in the upper half of the day’s range, increasing today’s chance of more sideways to up price action. I would expect to test Friday’s all-time high by the end of the week, if not today.

Since buying climaxes on the daily and 60-minute charts were unusually extreme recently, we could go sideways for a week. Also, wide-range days like yesterday are typically followed by low-range days. Having said all of that, there is no evidence of any weakness overnight or this morning.

There could be a fade at the open, as overnight inventory is net long, and there are still profits to be taken from yesterday’s turnaround. On the other hand, there could be poorly positioned shorts from yesterday that may cover at the open, which will offset the inventory sales. Again, none of this really helps guide us in taking a trade at the open. 

For my part, I will wait for the 30-minute breach and retreat trade or go with a breakout and retest of the all-time-high (also the recent highs from Friday and Yesterday). Still, the first target is only up to around 4357 – so you better have strong internals or dominance by the FANGMAN+T group if you are expecting a successful breakout of any magnitude.

Today’s Plan

I don’t see a clear opportunity for early trade, but there are still potential measured moves above us at 4250 from yesterday and 4400 from the three-month trading range. If we can surpass 4348, the market could move towards those goals. Keep in mind that markets generally have to work to get through the ’50 handle lines. If this market doesn’t, take that as a positive WWSHD signal. We also have a top channel line around 4490 if the market wants to climb Mt. Everest.