Pre-Market Outlook – 8/3/2021

We have now painted double sell arrows on the Navigator Algorithm. So if the market closes below the higher of the two trading range lows today (4370.75), we will exit all remaining positions in the SPY, XLF, and XLE. 

It is a tough call here, as we have open targets up around 4550 on the SPY that normally would complete before an intermediate correction. And it may simply be the case that we need to tap the 21-day line at 4356 before we can refuel to reach the target. 

With the XLE and XLF already beat up (which is why we bought them), we may keep these latter two positions even if we exit the SPY. I will see what the day brings but watch your emails.

So for day traders, overnight trading has been inside yesterday’s lower distribution range. We will open in the middle of that range with overnight inventory net long, which gives us no edge as to how to trade the open. So the overnight range boundaries are the key levels this morning, with 4397.50 on the upside (also the start of single prints above us) and 4381.25 on the downside (also the start of single prints below us). In essence, this represents yesterday’s lower trading range.

Because yesterday was a double range day, breaking above the single prints at 4397.50 puts us back into yesterday’s upper opening range with the old support and resistance we worked yesterday morning framed by its own single prints. That is what happens in double distribution range days.

If the market does break lower, monitor for continuation and watch the 21-day line around 4356 for support. On a break higher, the daily Algo trigger line, 5-day line, and the formidable 4400 roundie all sit in the same position around 4400, only slight above the single prints and lower range top at 4397.50. Conquer 4400 and the monthly open at 4408.25, and the all-time highs are in reach.

Notably, value (more important than price) is relatively unchanged for the last six sessions. Also, overnight traders were unable to drive the market to new lows. Of course, they could not drive it to new highs either.

Use the usual map today as the market finds the path of least resistance. Early trade is not advisable; let the market settle in a bit.

While the balance area is large, bounded by the all-time-high at 4422.50 and the absolute range low at 4365.74, Balance Rules still apply.

A.F. Thornton