Friday, August 8, 2014

Interesting Overnight Action In Stock Futures

Click on Chart to Enlarge

The short term reversal signal I highlighted Wednesday, did not amount to much.  And yet the set-up remains here that there is divergence in sentiment (also divergence in short term price action/technicals) as prices are making lower lows.

Last night the futures ran down nearly a percent on a headline "negative" news item with US ordering air strikes on Iraq and further conflict news out of Europe.  But here we are in the morning with the overnight losses recovered and a possible hammer candlestick (at least as it appears now).

So stocks look set-up to actually make a small gap up today.  But given the over night lower lows in the futures and yesterday's weak close, I would suggest that we are likely to see price move below yesterday's session low after a gap opening, but with a reasonably good chance that a rally occurs after breaking yesterday's low in the cash session.

This set-up may be most useful for day traders, to try to time a bottom reversal off a 1 or 5 min chart, with the possibility of a rally to close in the upper end of the daily range.

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