Things have perked up in the last hour, and we will open with a small gap higher, but not a true gap as we are still well within yesterday’s range. Gap rules are not in play, and the higher odds trades are likely to develop later rather than earlier in the session.

Yesterday’s activity represented a “look above and fail” as per the balance rules. The rule portends potential for rotation to the opposing end of balance which is roughly at 4173. Remember that potential is not certainty and the 5-day EMA is powerful support above that level.

We have a 45-degree line overnight, and 4198 is the wide part. The 45-degree line is at odds with the balance rules thesis that we should move to the low end of balance. The 45-degree line is a sign that sellers have painted themselves into a corner near the lows of the session and creates the potential for an upward reversal in the next session. The 45-degree low at 4191.75 should be viewed as secure. A move up through 4210 (the single prints) would signal strength for long bias.

On weakness, watch the 4198 area to see if we can get any acceptance below there. The odds of moving to the ONL at 4191.75 increase with acceptance below 4198. The low end of balance at 4173 lies as the next support below 4191.75.

As always, don’t discount the potential to hold within balance. This would be signaled by range-bound trading that doesn’t find acceptance above or below any of the key levels listed above. Watch for confirmation from strong internals on a break above, or weak internals on a break below.

A.F. Thornton