NK Nuclear Test

Context: North Korea conducted its sixth and most powerful nuclear test on Sunday, which it said was "perfect success in the test of a hydrogen bomb." "South Korea is finding, as I have told them, that their talk of appeasement with North Korea will not work, they only understand one thing!" President Trump wrote on Twitter. "Any threat to the U.S. or its territories... will be met with a massive military response," said U.S. Defense Secretary Jim Mattis. Japanese yen, gold and bonds rise overnight, while futures pointed to a difficult day for global equities.

/ES Update: Globex inventory is bearish moving below Friday range. North Korea nuclear test is a news-driven event so Scene of Crime (SoC) scenario comes into play. We've 2 options:

A) If the market moves above CLVN 2461 and remains above on subsequent tests, try to be a buyer leaning on steps 2462.75-2462.50 towards ONH 2467.75 YLOD 2470 and NK SoC 2474.

B) If market moves below CLVN 2461 and remains below on subsequent tests, try to be a seller leaning on steps 2462.75-2462.50 towards ONL 2460.25 and CLVN 2456.

Tips: North Korea nuclear test was a news-driven event so Scene of Crime (SoC) scenario comes into play but, overnight inventory shows a double digit gap. Gaps of above 10 points are routinely more difficult to trade in either direction as the large overnight move needs to be digested by the market, often causing choppy action. Any tweet from @POTUS about NK will have market impact.

Disclaimer: All information on this update is for educational purposes only and is not intended to provide financial advice.