Bigger Picture
March Top Madness
Anyway, enjoy the following analysis of last week’s pattern. Trade its natural resolution in my live chaRTroom with real-time intraday market timing setups HERE.
MARCH TOP MADNESS
Markets reached a precipice Friday, we can at least say that. Referencing the below chart, you can see that last week’s new recovery highs were restrained by persistent, concentrated, strong-handed distribution:
- Friday’s complete retracement of Thursday’s rally was the resumption of distribution that I began identifying on Monday. That was a failed probe above prior highs, isolated to the morning’s timing window (1).
- Tuesday isolated another probe (2), and also retraced Monday’s failure (2b).
- Wednesday’s intraday rally probed no prior highs, but it was substantial, and its retracement was completed within the same timing window (3).
- Thursday tried to invalidate the distributive pattern, but the afternoon did not confirm its breakout, because its rise was only a function of having dumped all of that ballast Monday, Tuesday, and Wednesday. It was not strong-handed buying. So, its failure on Thursday was not unexpected, completely retracing the week’s most substantial rally (4).
- More so, the close ended under a prior consolidation (circled red). This triggers the equilibrium shift from distribution into strength, to distributing into weakness. Which tends to become very, very aggressive selling pressure.
Such persistent, concentrated, strong-handed distribution is positioning for more than one week of problems that might be forming on the horizon. Coinciding with Friday’s 2-point surge / capitulation in the 30-year Treasury, which triggered a Cup & Handle pattern, a paradigm shift is permeating among market participants. That reasoned selling is being joined by the next most aware tranche of market participants — those who monitor actions by those who monitor the horizon.
Thursday’s rally could have proved itself by a second consecutive higher close above last week’s range, which it did not. Similarly, now breaking under last week’s range must prove itself by closing lower again on Monday.
Of course, it always seems darkest before the dawn. And, more on point, bull markets have a way of stepping right up to the brink, and then reversing straight up. Is this such a bull market? The alternative to falling into this precipice — the most glaring and pronounced precipice since long before the ongoing Christmas rally — avoiding this precipice would suggest resuming the rally to much higher highs.
Meanwhile, another failed bounce or a lower close on Monday would maintain the distributive pattern. And Sunday night’s Globex open is already probing further below last week’s range…
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Quick note about today’s news, and last week’s pattern…
Last week we tracked a growing pattern of intraday distribution. It culminated in the two-day rally and failure that took price sharply lower into the weekend. It is the most glaring re-positioning among strong hands that I’ve seen in some time.
Meanwhile, Mueller has delivered his “Russia-gate” report, and it’s apparently not the damning conclusion so widely anticipated for so long. Some sort of relief rally tonight is likely.
Could fear of the worst have been responsible for last week’s distribution? An entire week of big money, strong-handed selling into strength? I’m doubtful. That’s not the pattern that I see, but it has a stop — two consecutive closes above last week’s highs, at the latest. Otherwise, retesting last week’s highs or only attacking them would have no effect on the distributive pattern. The distributive pattern should have an effect on any rally.
Monitor Globex price action in the chaRTroom, opening at 6:00pm ET. Note that the link is changed, and also that Adobe has planned maintenance that will make it unavailable for a period overnight… ENTER THE CHARTROOM HERE.
Daily Spot…
A daily summary of high-profile members of several complexes… View a more detailed discussion of each chart at the end of today’s Market Wrap.
Eurodollar Jun Contract (EC, ETF: (FXE, UUP))
Thursday’s rejection of Wednesday’s weak-handed surge had triggered its 1.1465 sell signal, which extended down overnight. Friday morning’s gap down under the original 1.1405 sell signal that was originally avoided and extended down sharply to attack 1.1350. The second consecutive lower close confirmed that at least an eventual third lower close is in-play, but bounces should now hold 1.1425.
Gold Apr Contract (GC, ETF: (GLD))
Bouncing overnight into Thursday’s open retraced 61.8% of Thursday’s intraday drop. The morning held up, trying to probe a little higher. Maintaining the recovery through the close would signal the rally has resumed.
Silver May Contract (SI, ETF: (SLV))
Overnight strength up to 15.55 retraced 61.8% of Thursday’s intraday drop before returning to Thursday’s 15.38 low. Back above 15.55 is still needed to signal the rally has resumed.
30-year Treasury Jun Contract (US, ETF: (TLT))
Friday’s gap up into a 2-point intraday rally to 149-04confirms what was already being signaled above 146-00 and by holding tests of 145-16 — that a bottom is in. Now it is obvious to the world, so the pattern become vulnerable to another pullback. Room down to 147-17/147-25 would keep alive upside momentum without having to fill gaps down to 146-04 or test “lower prior highs.”
Crude Oil May Contract (CL, ETF: (USO, USL) (UWTI-long, DWTI-short))
Thursday’s failure to confirm Wednesday’s breakout had opened the door to a deeper pullback if Friday did not immediately extend higher. Friday did not immediately extend higher, as overnight weakness under the 59.50-59.75 pullback limit accelerated down to attack 58.25. Coinciding with previously influential uptrending support, Friday’s dip must be rejected immediately back above 59.35 to avoid a deeper pullback targeting 56.50.
Natural Gas Apr Contract (NG, ETF: (UNG, UNL))
Failing to greet Thursday’s EIA from a position of strength by not holding 2.84 Wednesday has extended down again overnight to 2.72. Intraday lows held 2.75, but any lower coming out of the weekend could slide back to 2.72 and lower.
Look ahead: Economic Calendar – for Mon Mar 25, 2019
A midday look ahead in preparation for economic reports and events scheduled for the next trading day.
Highlights: Monday’s two econ reports are high-profile, but neither is reliably influential to price action. The pre-open Fed speaker might be high-profile, but is too early to have an intraday effect.
Patrick Harker Speaks
6:30 AM ET
Chicago Fed National Activity Index
8:30 AM ET
Dallas Fed Mfg Survey
10:30 AM ET
Daily Spot…
A daily summary of high-profile members of several complexes… View a more detailed discussion of each chart at the end of today’s Market Wrap.
Eurodollar Jun Contract (EC, ETF: (FXE, UUP))
Wednesday’s surge was retraced had originated from a weak base that was likely to fail eventually. It wasted no time as Thursday retraced the surge’s origin, and triggering a sell signal under 1.1465. The gap back up to Wednesday’s close need not be filled, but it could be attacked up to 1.1500.
Gold Apr Contract (GC, ETF: (GLD))
Extending Wednesday’s post-close surge overnight gapped up sharply Thursday, but it was all retraced anyway back down to Tuesday’s close. The gap up above all prior intraday highs does create an attraction from below that would want to be filled before any durable reversal were credible.
Silver May Contract (SI, ETF: (SLV))
Gapping up Thursday held up relatively well intraday for being under pressure throughout. A second consecutive higher close Friday would confirm a new rally leg underway.
30-year Treasury Jun Contract (US, ETF: (TLT))
Wednesday’s surge extended higher Thursday, its second consecutive higher close from a multi-session range now confirming a bigger rally leg underway.
Crude Oil May Contract (CL, ETF: (USO, USL) (UWTI-long, DWTI-short))
Flat-to-lower overnight ranging was recovered Thursday to retest Wednesday’s highs. All price requirements have been met, so only a second consecutive higher close can confirm the trend remains intact.
Natural Gas Apr Contract (NG, ETF: (UNG, UNL))
Thursday’s EIA report was not being greeted from a position of strength. Not from a position of weakness, either, but that didn’t prevent dipping further under 2.84 to test 2.80. Back above 2.84 would once again signal a rally underway.