North Korea Crisis

Context: Flight to safety trade is being seen across the markets after Pyongyang fired a ballistic missile over Japan, while the U.S. and South Korea wrapped up their annual military drills in the area. Futures are flashing red, while gold and the yen are all getting a bid. Describing the test as an "unprecedented, grave threat," Prime Minister Shinzo Abe called for an emergency meeting of the UN Security Council. No tweet yet from @POTUS about North Korea missile, if he does this morning that it will have market impact.

/ES Value: YVAH 2444.50 YPOC 2443 YVAL 2440.50

/ES Plan: Yesterday closed balanced, after testing upper edge and failed. Overnight inventory is bimodal moving below yesterday range. North Korea missile is a news-driven event so Scene of Crime (SoC) scenario comes into play. We've 2 options:

A) If the market moves above CHVN 2428 and remains above on subsequent tests, try to be a buyer leaning on steps 2429.75-29.25 towards ONH 2434 CLVN 2441 and SoC 2444. Internals should be neutral or positive. Failure to take out ONH early is signal of weakness and potential for a move lower.

B) If market moves below CHVN 2428 and remains below on subsequent tests, try to be a seller leaning on steps 2426-24.75 towards ONL 2421 and CLVN 2419. Internals should be neutral or negative. Failure to take out ONL early is signal of rejection and potential for a move higher.

Tips: North Korea missile 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.

Today's Economic Calendar

08:55 AM Redbook Chain Store Sales
09:00 AM S&P Corelogic Case-Shiller Home Price Index
10:00 AM Consumer Confidence
10:00 AM State Street Investor Confidence Index
01:00 PM Results of $28B, 7-Year Note Auction

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