Pre-Market Outlook – 7/12/2021

The NASDAQ 100 is well ahead of the S&P 500 futures at this writing. For the S&P 500 futures, our main broad-market proxy, there was a new all-time high in the overnight session, just slightly above Friday’s regular session high.

Friday’s regular session left a large wake of single prints from the market’s opening drive which were tested briefly overnight. Continue to carry them forward into today’s narrative. The 4350 area is my bull/bear line in the sand today where a lot of recent, important levels congregate.

Assume that Friday’s reversal of the Thursday weakness is a short term long signal unless the Thursday low (4279.25) is taken out. Note that the selling on that day was not able to even test the rising 21-EMA on the daily. Buyers remain in firm control of the market and traders should continue to do what works until it doesn’t.

The balance of the overnight session range almost matches the Friday value area. This tells us little about how the open will play out. The better trades should develop later rather than earlier in the session. Favor the buy side as long as the prices are above the top of the single prints (4347) from Friday. Watch the NASDAQ 100 closely as it it the obvious leader in relative strength.

The S&P 500 11-bar bull micro channel ended this past week when Tuesday traded below Monday’s low. Bulls typically buy the first pullback in a bull micro-channel, which they did this past week.

There is a 5-day expanding triangle (broadening/megaphone pattern), but no downside reversal as yet. Traders continue to expect higher prices, but there is often a 5 to10-bar trading range after a buy climax, such as manifested  in the overthrow of the recent bull micro-channel.

Look at the April bull micro-channel and aftermath as an example. The bulls will continue to buy every one to three-day reversal down, betting that each reversal will fail and lead to a new high. That is, until it stops working.

A.F. Thornton