Pre-Market Outlook – 7/9/2021

Flip the script! We are slated to gap open with overnight inventory that is net long, so gap rules are in play, but this time heading north. Opening at these levels is still within yesterday’s gap down. Could this possibly leave a bullish island reversal on the 5-minute RTH chart? That would be a positive for the bulls.

Moving north again, you have the overnight high at 4237, the top of the gap at 4748, and then the old resistance around 4350 or so with the all-time high at 4252.25. I am looking for a trading range as a potential outcome of this week’s break of the bull microchannel, so I am reticent to be long above the recent highs. But there is an equal chance that the bull channel is still up, just wider now. Again, all of that applies if the market continues on the northerly route.

However, with long overnight inventories, look for the gap to potentially fade back to yesterday’s RTH high at 4323.50 on any inventory adjustments after the open. Don’t forget the WWSHD trade if there is no fade. You can buy one tick above the first one-minute bar on the way back up if the fade is faint. 

If the market continues south, on the other hand, then you can look to yesterday’s VPOC around 4309 on down to the halfback at 4301 for support. In a very negative pinch, yesterday’s low at 4280.25 should also provide support. Reference to our collection of other key levels should help if the market ventures even further south – which is doubtful today. Though the market has been horribly inefficient lately, the WEM low at 4300 should hold the downside in place before weekly options expiration on the close.

As always, watch internals for cues. There has been a lot of good trading this week with the wide swings, but that is atypical. A sideways market is overdue on the intraday charts.

Good luck today. I don’t typically trade Fridays unless something jumps off the screen to tempt me.

A.F. Thornton