Saturday Review

The first several minutes of this weekend”s Saturday Review is a detailed description of the “pivotal uptrending support” setup. It identified the timing of Friday”s late afternoon drop and its minimum target. Watch for that reasaon, alone. An otherwise choppy day nevertheless ended on a high note for us, because of that one setup.

A description of “afternoon traction” is included next. The market”s bigger picture outlook is reviewed, along with Sunday night / Monday morning plays. Several stocks are also reviewed by request.

No transcript will be available this week, but the meeting”s chat is printed below. The drawing to give away a majestic 40-acre garden in London was postponed due to the owner still not accepting my offer for the property. Come on, Ma”am!

Click here for the Saturday Review recording

Enjoy the weekend…

David B: good morning
Mark G: gm
charles d: hi
Mark G: u didn”t mention a possibility of continuing pullback down to 38 or 31 that should recover
Mike D: Sorry. I was late so maybe this was mentioned. Is the ES doing just one big pivot reversal?
Bill G: Based on the character of the 1/16 low ,do you expect new highs to fail or are you neutral as to the outcome
Mike D: yes
Mike D: i thought i saw a longer term chart with a trend linedrawn under the lows. think weeks
Mike D: y
Mike D: start at AUG 7 low
Mark G: any expecation on the timing of the high”s retest – it may not happen for a week or two?
Mike D: correct
Mike D: ty
David B: above 2075 would that indicate it will be agressive higher?
Mark G: why do u consider the base of the rally from 1970 weak – because it didn”t spend enough time forming a bottom there but rallied from a retest of the prior low?
David B: is the new thing now we get a central bank to do a QE and when they finish the next one starts?. my point is is this why we have not had a bear market. what is your feeling about what they are doing?
David B: GOOGL,AMZN
David B: maybe because of earnings this week?
Mark G: CPLP update – probed above 9 but never got to 10 and reversed down on increasing volume but still holding 8.61 – is the rally still has potential to 10?
David B: does the 490 low need to be tested?
Mark G: or rally is over on CPLP?
David B: yes
tom p: panw,pbyi
Mark G: pullbck then should hold
David B: fed meeting this week and end of the month window dressing. do you think this will have any impact on the market?
tom p: thx
David B: MSFT
tom p: up huge yesterday
tom p: thx
Mark G: thx much
David B: thanks
charles d: tks

Here”s the recording for this weekend”s Saturday Review, and the chat that took place during it (no timestamps available). The recording”s transcript has been added, too.

https://roddavid10.mitel-nhwc.com/join/tybtbvx

c d: hi
Mark Glezer: gm
M K: morning
M K: for as much as i”m fundamentally bearish…. “its a bull market stupid”
c d: great overvioew tks
Rod David: ; )
Mark Glezer: Rod, any way to reduce freeze time for the chartroom intraday that is make it more stable? Coincidentally this usually happens at the pivotal points
M K: 2250
M K: =)
tom power: FEYE
tom power: SHW
M K: RY
M K: KR
M K: IMKTA
M K: SFM
tom power: OK THX
M K: wow
M K: thats going on my short list
M K: same story as all the other stocks tha tlook like this
M K: slowly LBOing themselves
M K: i ahve a list of companies like that
M K: that i will eventually short the heck out of
M K: as soon as their charts stop looking like rockets
M K: i have a coupel in my stock requests
M K: M
M K: PCLN
tom power: thx
M K: CCAT
Mark Glezer: CPLP, CS, MS, AAPL
M K: CAT
M K: this has been a great short… i was too small in size though…
M K: ok i”ll cover some on a close above 68
M K: the argumetn for grocers is the drop in oil
M K: but paying 20-25x for 3% margins
M K: stupifies me
M K: but then again
M K: i”ve lost a bunch on AMZN so what do i know
M K: IRM
M K: SFM : breakout
M K: was my question
Mark Glezer: CPLP, CS, MS, AAPL
Mark Glezer: oil mover
Mark Glezer: above 8:30 ?
Mark Glezer: 8.30 – all good?
Mark Glezer: k
M K: XLY XRT IBB and have a good weekend
Mark Glezer: CPLP – downside – 6 & 4.90 right?
Mark Glezer: do u think MS not holding 36 support would mean ES may not be setting new highs ?
M K: BKX/SPX relative performance peaked in mid 2003 and tried a run at the high early 2014 and haver been weak ever since
Mark Glezer: CPLP – could u pls restate the downside targets – 6 & 4.90 right?
Mark Glezer: k
M K: oh sorry i forgot about ULTA… stil lneed to wait for 120 (prior highs) as a sell signal? or could a close under 25 be a more aggressive entry?
M K: 23?
M K: look at the volume on that avoiding of the sell signal
M K: got stopped out of that 300 short
M K: the next day
M K: oh i”m going to do it again
M K: not complaining
M K: just providing color
M K: would you lower the sell signal
M K: ok
M K: cool
M K: ok
M K: gotcha
M K: understoood
Mark Glezer: thx much!
M K: oh quick thing
Mark Glezer: Freeze time reduction Q?
tom power: thank you
Mark Glezer: freezes up randomly
Mark Glezer: at times
Mark Glezer: it was around 2031 pos divergence for instance
Mark Glezer: yep
Mark Glezer: very bad timing :)
Mark Glezer: great weekend thx!

Morning. It is Saturday. Time for the Saturday review. Hope everyone had a great night, had a great week. The market did. Alright let’s get to it because we’ve got a lot to talk about it.

Starting with where we are in the scheme of things. This is called a trading range. Maybe that trading range becomes basing and in the context of, as we back out further and further away view, longer and longer back, (1:02______) has data as far back so go to the daily. We had some pretty rough rides here in the last few weeks, the last few months included, but just to keep everything in perspective, this is still an uptrend. Maybe warning sign across the bow. Not that it has to be offset by some sort of an o-thrill of the channel, just to initialize or counterbalance the overthrow, the underthrow I guess, but it’s often done. New highs are not off the table. Despite the breadth and the severity, the aggression and substantiality, that is, of these seemingly more and more constant downdrafts, downdrafts in size, we cannot yet discount the potential for new highs.

Looking at October’s overthrow, underthrow, looking at that in the context of an uptrending channel, a channel that was returned to, a channel who’s uptrending support has now held a couple of tests in December and in January, except the reward for this should be fresh highs. New highs would not be out of context but also would not be required, but it would be pretty soon if it would be at all. It would be pretty soon because let’s look back to this channel, just this portion that I have identified. Here’s a touchback in October of 2013. Next touch that creates the uptrending support of the channels back in February of 2014. The touches in April. July. These are months and months apart. Still a deviation from the norm for there to be tests of the channels uptrending support in December and then just a few weeks later in January. Forgetting the volatile. That volatility is the bigger picture now. That volatility reflects play in the market with that a resignation that it is able to accept without falling to pieces. That is also a reflection of the integrity. If there weren’t that kind of integrity in the market, it would not be able to accept this kind of quick retracement back down to December’s low and bounce.

Maybe it has bounced. These things aren’t always known in advance. Believe it or not, we don’t actually predict the future. What we hear from the process of elimination is the process of elimination based on historical outcomes matching up current cross actions to those templates is narrowed down the likelier resolutions. We are still on the cusp right now on whether the likelier resolution at this current point in the uptrending channel is to resume the decline that started at the beginning of the year. Whether it is produce a fresh high and resume the rally, whether it is back to the upper end of the uptrending channel or through it, to overthrow it, counterbalancing the under throwback in October. Not necessarily to the same degree. Just the same behavior. But we are in the crossroads right now that will help to narrow down those templates.

So, here in a shorter term perspective just back to December’s low, there is December’s low off of the tie where the rally had just lost all steam. Worked its way back up to a fresh high and December’s high into the end of the year, but again, losing all steam, we even had two almost consecutive sessions, two sell signals. The first one being the first session that had developed exclusively above all prior intraday highs for the rally indicating the lack, and that is without buyers getting traction for the upper, indicating the lack of sponsorship when sponsorship was waning and finally gets back to try extending the rally. It tried extending and putting in other such sell signal, another session above all prior intraday highs. It was not the first for the rally. But that, too, did not gain traction for the upper. It’s a big price to pay, and paid pretty quickly.

Now we are at a crossroads where there was potential for this drop in January. The New Year’s drop to have extended down, there was potential for it to correct first. Nothing is a straight line and in fact, January’s new year drop could have bottomed to 2040 and by not bottoming at 2040, put in its next target at 94 and 84, basically 8375, met at Tuesday’s at the same day as 94 was met and 94 held to support through the post. Clear bottoming signal. We had it that afternoon. We had it the next day. The bounce potential to resume that decline without much delay would have been initially out of 2022 or 2029. Having met and it was really 2022, 2023. Having that 2022 at Wednesday’s peak. Probably, if that was not enough to restart the decline, we are going to blow through 2029 to 2044 and get about 2052, but the highest calculable bounce for the whole up leg, the week’s rally being just a correction. Just a temporary rally, avoiding new highs, resuming the decline, at least retest the low was 2052. Could have been 2022 or 44. All those having been avoided by being recovered. 2052 had to be it, and intraday as we get within spitting distance and identify a room for noise around it, 2055.50 and 2058.25, each of which were touched and each of which held as high during the timing window that they were touched.

So, 2052, those being a function of 2052, 2052 held. So did 2055.50 and 5825. Would have been more bearish or at least from the process of elimination, there would have been one less possibility of recovery if 2052 had been rejected to close as well and it wasn’t. The next day, we pretty much plunged through the open, through the morning. That was yesterday. That might seem to be retrospectively evidenced that 2052 did hold. It’s not. 2052 having been recovered through the close could have created a strong tether to allow that pullback, not to gain traction. Not to be destructive, to be recovered. In fact, there was a knee jerk reaction to news. It was not exactly the initial knee jerk reaction to the employment situation report. The employment situation report did initially produce a surge to a fresh high. It was maintained in the open so the open actually gapped up a little.

Post open, immediately price action was down. So, if it was a reaction, it was the post open immediate reaction to news. That can be dismissed. In retrospect, it can be dismissed. It does not have to be but remember reviewing with the process of elimination of how previous patterns, similar patterns, have tended to resolve not all of them but this is one inch has become a rule. Knee jerk reaction but credible for predicting future direction if not counterpredictive. More so that price action, that knee jerk reaction, negative knee jerk reaction to the news was isolated to the one timing window. There is the open into the 10:15 by its timing window. When the bias signal is generated. That is the market telling us what it wants to be when it grows up for the day and bias environment hunted down exclusively, entirely to 1130 right when the bias environment starts collapsing. The rest of the day sideways. You could either characterize this as flat to higher.

The reaction down from having closed not under 2052 but under its room for noise that was tested and held 5050 and 5825 on Thursday. The reaction down was relayed the news. It was isolated to single timing window that I’m not at the end of that timing window, but after several timing windows without resuming that reaction down isolated to that timing window. One more thing that happened as that timing window was being created and that is that the bias down didn’t even trigger. The bias up target was tested. The same morning the bias up target was calculated from yesterday’s close and price action through yesterdays close was 2061.75. The high was 2062 and not as a knee jerk reaction but as an afterthought to the knee jerk reaction. That was tested. That was fulfilled and that wasn’t even just through Thursday’s close. That was the same bias up target calculable through Thursday noon. That is a lot of buying pressure satisfied. It was not satisfied or tested at least close enough to the open to qualify. The fact is it was tested and despite testing it and holding it’s test, the bias up signal itself, 5050, was still tested. The bias down signal, the 45, had been tested. All by 10:15.

That triggered a no bias and at 10:30, not until 10:30 was that invalidated by breaking down under their bias down signal. Too late to trigger. Just in time to invalidate so we give those sellers the benefit of the doubt but what they accomplished by 10:30, they were postured to produce it by 10:15 and didn’t so that undermines them. So we have three things that undermine sellers, so that test of 2052 on Thursday. We don’t know really that that necessarily helped. Just because there is a reaction down, the reaction that has to be deep enough to reverse the trend back and that is under 2029. Two irrelevant timing windows if Monday’s open, opening 15 minutes of volatility, is under 2029, probably bias down has actually triggered a few points lower, but just at 2029, is being probed into the open if the bias environment at 11:30 lasted under 2029, that’s where get to speak with a lot more authority based on history and the measurements winding up with the historical templates. That’s when we get to speak with a lot of authority that yes, this was a corrective bounce to this down leg that is now resuming.

Whether that resumption is to actually resume actually taking this big cotton pattern and reverse the trend down or whether it is just to retest this low which really it should not be at this stage of the pattern but in many cases we haven’t been able from the process of elimination get rid of that. That is to get to say we are back in the bearish slump and next week is played from the short side largely or if in fact sellers were just isolated to this one timing window in reaction to news, and even then those sellers were late to the party, we should be back above 2052 pretty much through Monday’s open or at least exiting the bias environment at 11:30 back above 2052 and that is where we get to speak more increasingly to authorities. Still not definitive until the close that this bounce has resumed and if it is resumed at all, it has resumed a lot. The objective being new highs. Not necessarily 2100, something with a 2090 handle. Does that become a big overthrow as well? That is what we also do not know and will not know until we see the character of the next up leg. Whether its intent is just to satisfy buying pressure on a fresh high up at the uptrending channels upper end before reacting. Or whether in fact there is something that could be a lot more productive and overthrow the upper end of the uptrending channel the same way that the lower end was underthrown in October.

I noticed in this morning Barron’s. It comes on Saturday for the following week. There is a column why the stock market will keep climbing after a strong 5-year run. The bull could slow down in 2015. If history is any guide, but it will probably continue to deliver gains over the next five. We all want to get bearish. Just common sense. The endless proxy printing of money. The almost singular buyer or category of buyers being, by intermediary at least, Central Banks. The questionability in some ways and some times of I cannot make data. Seems like there is as price to be paid that keeps the bar tab growing and growing and growing but the bartender keeps serving and serving and serving. Having said all that though, there is nothing new. Just more and more of it. So, don’t be surprised either way of one of these underthrows does catch, does gain traction, so with the hand that we’ve got. We have to play the game with the opponents that are at the table and that has been the pattern. So, be on watch for January’s low to be taken out. That tells us the tide is turning or is another opportunity for the tide to be turning. The new term indication of that would be back under 2029 through Monday morning. Be on watch for the opposite. That hiding crop is not voided, not leveraged, not extended and instead retraced and reversed and if we get out of 2052, again through Monday morning, we are back in rally mode extending the recovery from last week’s lows.

The recording to this weekend”s Saturday Review can be found here:
https://roddavid10.mitel-nhwc.com/join/shkjhcy

  For your convenience, here is a transcript of the market discussion:

In perspective, starting with yesterday’s new high, if you notice something about this new high, it came very quickly following a new low. And very quickly following a new low that had reversed trend down, reversing the trend down confirming and producing a minimum of a third lower close, and the market could not wait to get back up to an intraday through its prior high. We don’t have a new high close. We have a retest of the prior high, so we do not have a new high close on a Friday, which is an important point to exclude because trends tend not to end on Friday’s. Even when a new trend high close or low on a Friday, is immediately reversed the following week, the following Monday. That reversal itself fails and the trend extreme is revisited if not resumed. So that’s a protection for the trend and this trend does not have that protection. This trend can reverse down abruptly, immediately, and substantially without a moment’s delay once Sunday nights Globex session opens and not be required to recover to print the new high close for the trend, not this date, so that’s important to note not because we just took it off the table. Why dwell on something we just took off the table. But, because that tells us what kind of a market we are in.

In this case, it actually adds to our understanding of what kind of a market we are in. A market that was having trouble advancing. In fact, two weeks ago on Saturday after Friday, another new high close that was below multiple sessions intraday highs telling us this trend was just done. If it could pull off another new high, it would be rejected abruptly. Instead, it started breaking lower and triggering a trend change signal. Huge intraday moves that gave great signals all the way down. The minimum objective for that leg being 1969. We’re right back in that area this quickly after testing, retesting, re-retesting 1969 when a template that told us to expect a correction out of FOMC was delayed for another test of 1969. So, the template told us to expect a correction into and out of FOMC and by the way, when FOMC had ended, we were stopping pessimistically short of touching two prior highs and that told us to expect that correction to may not be a correction. In any case, the target new highs or a retest of the high. Not that that isn’t still a correction, but a common misunderstanding of corrections is that they cannot produce a new high. They have to erase some percentage of the previous down trend less than 100%. That is not the case. This can be a corrective leg to a new high. It can’t be a runaway to higher and higher highs at some point. It is no longer just a retest of this high. Not some arbitrary point, but a pretty big point in this case because that point is a 61.8% extension of that swing. I’m actually going to go with the outside potential in doing that calculation.

We could get to 2140 and still consider this leg to be just a retest of prior highs. Literally then, it is just a correction. That does not really make any difference. If you have to call it a new rally leg to be able to be long, call it that if you want, but I have to call it until it actually exceeds 2140, if it even gets there. A correction, a retest of the prior high, so I know that it is temporary, not going to last. Going to keep big enough. Keep that in mind and we are going to extrapolate that out backwards actually, historically and move forward. So, there is that much room. It does not have to be that much room. There’s a lesser range that’s actually based off of this pattern that instead of looking at this as this entire swing being retraced, we’re really just correcting this. We don’t get too much higher, 87. I didn’t do this subjective right because that actually should be 8675, but anyway, we can get to 87 area and again, still be in the process of retesting the prior high.

By the way, a retest of this very long and drawn out extended top that reacted down that was recovered aggressively, if it is probed, if it continues to be probed aggressively, which frankly it has to be probed aggressively. Remember at the top, this is a correction. Think of Satchel Paige. Kansas City Monarchs baseball player famously said, “Don’t look back. You don’t want to know what’s gaining on you.” This is a weak-handed rally. It cannot afford to look back and see what’s gaining on it. It has to extend steeply, aggressively, or it fails. And that’s the character of this and it’s retest and how does that fail aggressively. Like this. As soon as this hits whatever level it is hitting to be done, it does not wait around like this topping action did.

So, if that’s the bearish scenario, what’s the bullish scenario? The bearish scenario is to head higher aggressively, optimistically. The bullish scenario would take this expiration high that was just probed yesterday. Once again, closing under multiple sessions prior highs despite probing them intraday and just put the brakes on the rally. Ease off the pedal, pull into a gas station, 2050.50. One pullback objective — the most bullish pullback objective without probing any higher high, before moving any higher high –to fill the gap back to the FOMC-news which actually is a retracement of this down to 1997.75. So, a shallow dip and hesitate here and then lift off has a better chance of extending being a durable bull market. A deeper drop has a better chance at being a durable bull market than does immediately extending higher into next week.

So, am I bullish or bearish? Well as it happens, we had a bullish WedEX. That is, at Wednesday’s close, my Wednesday expiration indicator triggered bullish. Not so much because of Wednesday’s session what it did. It was an inside day. It did not probe under a prior low and reprint. It did not probe above a prior high and was above it. So, nothing really remarkable about Wednesday’s session that you can hang your hat on. It is not what Wednesday’s session did. It is what it did not do and what it did not do was interrupt the sequence that had formed. The same sequence that had told us the template calling for a correction into the FOMC events, would actually extend through the FOMC events. So that inside day unless we are going to be very powerful to the upside, through the close, became a bullish indicator that big money ahead of expiration was posturing out of its exposure, out of its negative exposure to upside. Remember process of elimination. Big money had successfully fully postured to be out of its negative exposure to upside. Downside exposure had been absorbed.

So, at Wednesday’s session, for instance, in the set up that it was presented with. Had Wednesday’s session probed above these prior couple of intraday highs and closed back under them. I am being simplistic here, not just by a narrow margin, but under the last relative portion of those swings, but you get my point. Probe a fresh high, but failed to close above them, that would have been a bearish indicator. That would not have represented patience. That would have represented impatience that was not able to sustain itself. That would have been bearish. And bullish is what we got. Bullish all the way through Friday afternoon and that’s what the Wednesday expiration indicator controls. Friday afternoon and Monday morning. There’s a chance that the positioning, the reposturing by big money would have shifted its paradigms so quickly by returning all the way back up to the prior highs within a day or two. There was a chance that that 180 degree turn into expiration would have then encouraged reposturing in the opposite direction. It happens and, therefore, inverting that signal. But the mornings by its upsignal triggered was not rejected despite testing or fulfilling the bias up target, momentum never reversed down so the signal never inverted. So, Friday afternoon was biased upwards, and if Friday afternoon is biased upward in a bullish Red-X, Monday morning will be biased upward, too. That’s the premise that tends to see the signals success.

Question:Was Friday afternoon biased upward?

Answer:It’s actually not an easy answer here, because here’s Friday afternoon begins coming out of the noon hour, and here’s Friday’s close, cash session close, so we’re pretty much above prior sessions highs. We’ll give it some priors that the session was biased upward. There was a sell here late in the day. Its target was to intersect with this uptrending pivotal support. Actually one, but then fulfill that after the close, so even more so, selling pressure has been flushed out. We will interpret this, I don’t really have any problem interpreting it this way as bulls having been in control, or that is Friday afternoon’s have been biased upward. Higher highs, higher lows. So, if that’s the case, then typically that being in line with the bullish Red-X, for Friday afternoon, so Monday morning will be bullish as well. Higher highs, higher lows. It can be more aggressive or less aggressive, but here’s another important point to note. It does not have to come immediately from Friday’s close. So, post open through the morning, Friday should be biased upward. Rather that means opening flat, gapping up, or gapping down. Friday should be biased upward. We do not have that assurance of continuation from Friday’s close because we know what happens overnight. But, that’s a premise. That’s the lens through which we view the cash session open, that there’s import bias. If something is to prove that, if the opening 15 minutes of volatility trends down throughout, the reliability or not, we may not want to put any money on that. Maybe news events overtake whatever posturing was done by big money the week earlier. So we remain eligible but that’s the premise going into the session. And that’s the problem with ending this rally up here to start a retest to come back and correct itself, take it’s foot off the pedal and pull into a gas station because unless there’s a gap down significant gap down on Monday so that the mornings biased upward price action can be absorbed without probing a fresh high just extending the rally is going to make it vulnerable to reversing down sharply.

Here”s the transcript for yesterday morning”s Saturday Review, and its recording is linked here: https://roddavid10.mitel-nhwc.com/join/ypykkym

Good morning and welcome. It’s Saturday and time for the Saturday review. A fairly productive week on our part. I don’t know about the market if it can claim the same. It wasn’t unsuccessful. Began the week with a gap down. That is, the market wasn’t successful. Beginning the week with a gap down. The gap down really at this stage or that stage actually of the pattern of the trend wasn’t likely to extend down. There is unfinished business below at various levels but that was not the way to kick it off. There was a new Globex trend extreme upstanding from the prior week. That was the reaction remember way back when. Wasn’t that the China rate cut?

This is not the way to start a decline even from a failed descending triangle. Had that failure been from a little bit higher, had this ascending triangle probed at least a 61.8% extension outside of the range instead of just slightly higher, yeah we could have seen something much more substantial get underway, but to stop the rally short, not that it had any specific upside necessary at any given time, but then to stop short from a Friday following Thanksgiving, a half day, and then to gap it down aggressively. Just was not going anywhere. We have lower prior highs back here. In fact, lower prior highs, a singular representation of that range being 2051 held its support.

One other influence, too. Greeting the new week with extreme sentiment is often a sentiment extreme. Gapping not just out of this particular construct or out of the weekend. Very often that is an extreme reaction to some sort of news that did not have acquitity. All that pent up, in this case, selling pressure, resolves down and finds the bottom but this did not resolve up too quickly. It took the day. In fact, the day did not resolve up. Test after test after test, look at it after 1 minute. Repeatedly testing 2051. There was a lower low in the morning. Positive divergence on our side. Because Monday did not recover by Monday’s close, really through Monday afternoon, because the balance of the session was spent testing and retesting and I lost track. Quadruple quintuple retesting 2051. At some point, there is an obligatory lower low required. At some point, some lower lows under 2051 under Monday’s lows is required. This pattern began, this recovery that is, began without that. Gapping up we caught the move and caught it all and it was obvious after the open. When the open was not going to give anything back, there was one opportunity during the noon hour to reverse the trend down.

So, this whole recovery this week, as productive as it was to absorb Monday’s opening drop to fulfill the objective, the reward for having absorbed Monday’s drop was no less than to probe prior week highs to have produced that reward. Still this is not a strong rally. It recovered pretty quickly, not just by gapping up Tuesday and extending higher throughout Tuesday and already testing the high Wednesday, new highs Wednesday. Because of that speed with which Monday’s gap down was even though delayed that day, then made up the lost time by recovering to produce that fresh high. It already is indicative of the weak handed sponsorship. The weak handed sponsorship that was too impatient here gapping up Tuesday to allow test of Monday’s low first. Now into the end of the week, that has not mattered. Into the end of the week, tests of support have also held. Knee jerk reaction down that is. Mario Draghi’s comments is CLE unchanged and change did not do anything. No change in rate. No change in easing or, that is, open market buying. Same thing with the ECD, but then Mario Draghi starts talking and as promised, stirs things up. In fact, that is actually two legs down, but that did not get anywhere ultimately. The knee jerk reaction down yesterday to the employments choice report, as expected, recovered immediately. Finally produced new highs. So, we are getting some pessimism in here, but the sponsorship that got us here is recanted, so, as strong handed as sponsorship is at this stage, it is not going to get very much farther than to the upside and really should not unless it does show vary steeply and then if it takes that route by rallying steeply, it can be pretty productive in absolute terms, price-wise, but not for very long. There is one or the other. Either this pattern produces some deeper pull back before mounting a more durable rally effort. Some deeper pull back that corrects the premature, impatient buying printer that recovered from Monday’s gap down, preferably a probe under Monday’s low, or this rally simply extends higher. Pretty much without any further delay, but only for 2 or 3 days before finding a peak and then reversing back down more substantially.

Bigger picture.This is FEX, cash. Notice something about the closes. We have a new high close on a Friday. We got a new high close back here on Wednesday. Problems with those new high closes, they are not above prior intraday highs, and not just the prior days high, but the prior swing high. So, new high close also Thursday and Friday’s high closes with a product of last minute bounces. It’s not the lack of trying. It’s not that the market was just barely making it back to the prior highs, those sessions have probed prior highs and still could not maintain. So, normally, when we have a new high close on Friday, the observation is even if there were an immediate reaction down on Monday, it could last days, weeks, we would still know since trends don’t end with new high closes on Friday’s or new low closes for that matter, we would know the context of that reaction down, that it is temporary, no matter how long a temporary may be, that it would be recovered. That’s not the case here, because this Friday new high close is just not significantly different. In fact, it’s significantly un-different. Not just from the previous day’s closes, not just from the previous days intraday highs, but from the previous swings high. Still does not take off the table the upward momentum and the potential to probe intraday highs, it takes off the table that confidence if there is an immediate downturn, then it has to be recovered.

So, just comparing SPX as we have been doing, probing fresh highs this week, but not maintaining probes above the prior highs through the close. Comparing that to Dow, Dow doing better relatively speaking. This is what a strong trend in S&Ps would look like. These are each day’s. There’s the Dow spending pretty much the entirety of yesterday above prior highs. That new high close is above all prior intraday highs. The Dow is not leadership so the Dow does not get to call this shot. What the S&Ps look like would be confident that an immediate pullback for whatever reason it would be temporary. Instead, the Dow, which is 30 docks among the highest probed file, most liquid, most widely followed. If you are a money manager, not just on the cutting edge, not a hedge fund, trying to outperform, but your number one goal, despite being in stocks, is preservation of capital and whatever you do, don’t let the market outperform you too much. In other words, institutional safe money. You still have to be in stocks or even for those times if you have the latitude or decision not to be in stocks, you still want to have some exposure in stocks for whatever reason, but you are not willing to take the risk of the S&P 500 broader based exposure as well on NDX or Russell, more speculative indexes. You’re going to focus on the Dow and the Dow, therefore, is going to start outperforming the S&P 500 when the preponderance or we pass that point of equilibrium among those safer institutional managers shifts their focus. The question is whether that has happened for two consecutive days because one day does not make a difference. One day is one day. There are too many times that one day does not lead to second consecutive days where one day just cannot be influential.

What we find is, yeah this is just one day. This one day would have been very important to the S&P 500 had it performed like this, but it also is not as consequential for the Dow unless it follows up on Monday with another higher close. Then we can start to consider the Dow as outperforming instead of that being just a one on. Compare that to the NDX, the NDX more speculative. Now it is not as great an indicator but still indicative of what bigger institutional money is doing. What is their risk tolerance is, but in this period of historical low, negligible interest rates, where you are paid to be exposed to the risk of NDX components that is still widely followed by not as predictable of a stream of earnings and not as liquid as the Dow stocks. This kind of underperformance does reflect less risk tolerance when the Dow is at least performing in lost step with our control group, the S&Ps, if starting to outperform. NDX is definitely underperforming. To some degree, this is Apple. To some degree, that has caused that immediate underperformance by Apple. That is an overly of Apple. As you can see, Apple was already underperforming even in the NDX. That is the NDX having so much exposure to Apple, it is underperforming, but that has gone on for more than a couple of sessions, and so even Apple’s poor influence. You can see Apple outperforming. That is not really having the same effect in the NDX.

We cannot dismiss it to Apple altogether and, in fact, what we do is consider that Apple itself may be a canary in a coal mine. Just real quickly, looking at the Russell, which is not as influenced by interest rates fully underperforming and that has been the case for a while. Those stocks will be chanced regardless or not chased regardless of the interest rate environment. I have started adding the NYA, the NYSE Composite, and that is also just representative of every stock on the New York Exchange, but you can still see the divergences.

So, to get a picture, I’m not ready for a thought, but ask me Monday. If we get follow through on Monday, every single day in this pattern at this stage of the pattern, every single day that does probe a fresh high, every day that probes a fresh high is vulnerable to reacting down, reacting down roughly.

Here”s the link to this weekend”s Saturday Review, and its transcript:

https://roddavid10.mitel-nhwc.com/join/vsmvjsh

Good morning and welcome. It’s Saturday. Time for the Saturday review. Everything checks out. Interesting spot for the market to greet the next week which is a new high close. New high close above a multisession range that is a breakout. Breakouts on a Friday are not often confirmed on Monday’s so we will see how that goes. It is a new trend high close so some new higher close following it, whether immediate or eventual is pretty much historically mandated. That new high close may not be above Friday’s range. It could be within Friday’s range just so long as Friday is not the highest close of the trend. As I say, it need not be immediate. The trend itself, I think a little extended here, could retrace immediately, begin reversing down, not durably, remember? You do produce one more higher close at least. Maybe 100 higher closes. As soon as we get that one more higher close, that information becomes less useful but if we start trending down immediately, very useful information to know that the trending down is temporary.

Then there is also the matter of yesterday’s open. The opening print being above all prior highs. Itself has to be retested. Has to be retested. Not arbitrarily from some post open dip that recovers. Did not happen Friday and Monday. It will not qualify. Not until these lower prior highs are probed and Friday’s low came within 3 tics but did not touch those lower prior highs. So, we still need a little bit more weakness before recovering back up to Friday’s open can neutralize it’s attraction, can allow a down leg down turn to be durable. And just more on that, doesn’t have to be as clear-cut as that. That is, to dip back down under these lower prior highs and then neutralize that attraction above. It’s possible to avoid that. Form a complex pattern. Multisession complex pattern, not single session. Then dip back under these lower prior highs and rather than having to retest Friday’s open just retest some relevant portion of that complex multisession pattern. You have to be determined what that actual price is until we actually see the multisession pattern.

These are all unfinished business above. These are all finished paths down. These are all choices open to the market and here’s one more of two remaining. That one more would be, I think I’ve given away part of it since Friday’s low did not touch lower prior highs. Since Friday breakouts tend not to be confirmed on Monday. We have not even addressed the momentum is down on an expiration Friday. Trending down throughout the day on Friday tends to be duplicated Monday morning. Not necessarily opening down. We can gap up and then trend down, but all of those combined do create the potential for gapping down back under those lower prior highs trending down. What does that do? What does that make out of Friday’s session?

If I have not given it away with my descriptions of the other conditions or elements, it should look kind of obvious, exactly right, an island. Islands are reversal patterns. They are called island reversals and that is because they reverse direction. However, that is a mainstream description or definition. In fact, islands are always retested again. Knowing that the Friday trend high close, that already tells us that will be retested, knowing that the Friday gap up above all prior highs needs to be retested. That will be recovered. All of these if in fact there is an immediate down turn. But also, if that downturn were to begin by gapping down back under last week’s prior highs, to whatever degree. Temporary, substantial, steep, shallow, whatever the character of it, multisession whatever the reversal, it’s only temporary and that island needs to be recovered, retested. Not necessarily exceeded. Probed, sure, but whether that recovery resumes the rally having trapped shorts, squeezing them to help refuel the rally’s resumption or whether that island is just retested to form a more durable top at that point. Neutralize those attractions outstanding, the new high close, the open, etc.

That’s irrelevant to that one fact that islands are always retested. And, we cannot forget about that one other and there is just one other outcome here. One other resolution to Friday’s pattern, just resume the trend. Whether it’s from a shallow opening dip, gapping down, dropping, whatever. Monday is certainly welcome to gap up and resume the trend. Normally, on Wednesday’s expiration week, we have an indicator called the Wed X, Wednesday expiration indicator, Wed X, and it is just a few observations, comparisons, reference points, sequences, a few bells and whistles that I created that identify what big money is trying to do in positioning itself ahead of expiration. Not all big money utilizes the options markets and so even if we do get a signal, there are times that it is not influential. There are times when it is obviously going to be influential. We can have a bullish or bearish Wed X. We can have an actively bullish or bearish or passively bullish or bearish Wed X. Actively meaning if it’s a bullish Wed X, an actively bullish Wed X, that price will plow higher. If it’s a passively bullish Wed X, that dips will recover and vice versa with the bearish, and it applies to Friday afternoon and Monday morning.

Friday afternoon bounced but more so arranged sideways. It’s bounced within the range. Irrelevant to Friday’s open other than to compare Friday afternoon’s actions to the session. That’s passively bearish. And then retrace anything relevant remained under the gun. I should back up a second and point out the indicator did not trigger this week because Wednesday’s session was an inside day, the day prior to it was the first day of any trending. It was a breakout effect, so we didn’t have enough there to get a signal and we still don’t. What I’m trying to do is reverse engineer this just to keep the options open as to what kind of resolutions might anticipate or be prepared for. So, we can’t actually call that an actively bullish signal because Friday’s bounce or this actually Friday afternoon’s bounce would not have qualified, would not have fulfilled an actively bullish signal. But passively, bearish signal, maybe passively bullish if the lower prior high has been tested but it wasn’t so if that is the case, if perhaps the signal didn’t trigger because it was restricted from triggering. For some reason, one or more of the bells and/or whistles could not connect in time, then did that mean that the big money is not necessarily in a big way trying to reposition or position itself ahead of and into and out of expiration? It doesn’t. And, it’s also possible that the overnight action really threw the market for a loop and that is price was already firming, but then China’s interest rate cut triggered this big spike.

That changes things dramatically as you can see. The balance of this session really just retraced all of that. So, it is possible that there is a Wed X in there just to be prepared for it. If it is a passively bearish signal and Friday afternoon’s price action barely qualifies as passively bearish, then we would normally expect Monday morning to be very actively bearish so that whether it is a gap down that trends down, a gap up that trends down, just flat, I think you’ve seen a consistency here as half of the open to trend down and to trend down aggressively through the morning.

So, that still leaves the door open to a lot of outcomes. I really have not been able to narrow down the template for Sunday night let alone Monday morning to a great degree, but we do have several options in front of us. Now I think Sunday night is going to help to limit those options but this cannot be the high even if there is an immediate downturn, a gap down that trends down, that high will have to be retested. Now, let’s say there is a downturn immediately, how it is deep and its probe essentially it is this, so let’s look for the difference in sponsorship, clear difference here, and we, if you recall last Monday afternoon, off of the 2035 high on Monday afternoon. Three consecutive timing windows that were the first three consecutive timing windows to trade exclusively above all prior intraday highs. That was not a turning point, but a reference point and that action stopped. Stopped influencing the market at that point where there was a breakout.

So, basically, what we’re looking for is some sort of retracement of this leg. Where it begins, where it extended to, and so my minimum objective would be of 61.8% retracement of the low to the high of that leg. 2022.25. Considering this to be its own entity, and if in fact that is peaking, not topping necessarily, just peaking, but it needs to refuel back into the prior leg. Once we start getting through there, there being room for noise below there down to basically 2017.50, 2014.50. Before when it starts assuming something more dramatic underway, before we would get out of the orbit of this high that would still require a retest. Anything down to this area, any probes lower that keep recovering back above 2022, dup under 1750 and recover 2022, dip under 1450 and recover 2022. That’s all accumulation. Start closing below it, and below them, and suddenly we have actually a much bigger leg that takes the place of this leg.

So, this is the leg that is now generating a retracement back into a previous leg. And you can see how those measurements then, the potential drops and this is just ballparking, but you can see how those potential drops start expanding as the legs start extending. So, if there’s an immediate downturn, it’s objective 2022.25, room for noise around it, down to 2014.50, 2017.50. Otherwise, extending higher and assuming that that previous leg was accumulative and so it’s targets are guiding the market higher if in fact that previous leg does break out as it did which we now look for signs that that is extending higher. There’s room for noise around it by 61.8% or 61.8% projection above it, 2063.25. Was pretty influential trapping Friday’s recovery attempt. If 2063.25 is not the high, 2096 may be the next objective put into play. It does not happen just as simply as that closing above 63. This whole range that tested 2063.25 the room for noise above this leg. That’s now resistance. Close above Friday’s highs and the next working target becomes 2096.25. A second consecutive higher close above Friday’s highs would be needed to confirm that, but until being confirmed, that is still the working target.

Otherwise, this area needs to be the high. There’s reasons to suspect that it still could be the high. Remember, coming out of last Monday or the prior Monday, I should say at this point, having had those three consecutive afternoon timing windows, all developing above all prior intraday highs indicating a trend change and the trend did change. It went from up to flat. Trend change warning at least. That told us the next attempt to trend higher would be met intraday by a reversal down. In fact, the last three attempts to trend higher have been met intraday with reversals down.

So, those are signs of distribution. That can continue indefinitely and the rally can appear to be extending but that’s distribution into the rally. Doesn’t mean we have a sell year. In fact, unless we get the right open on Friday, I wouldn’t be a seller, and if we got that right open, that down leg would still be recovered. But if you think that this is extending this huge rally from October’s, we can’t even exceed all of them, from September was it 19^th? September 19’s high and October’s low, and back up again and now higher. If you think that is just a little abrupt and that V bottom will require retest. There was already new bullish reason for Thursday’s low to retest Wednesday’s low. Wednesday’s low, a very natural common occurrence to retest lower prior highs after a breakout that had already been done. There was no bullish reason for that to be revisited. Overnight would have been alright had that been recovered but the open. That needs to be retested and not only retested but flipped. Actually punitive damages as it were.

So, there’s downsize out there piling up. There’s the weight of those downsizes evident from our post open action. At least this early morning drop was still in that range but this drop came late in the day. This drop came right away. See that weight getting heavier.

Alright, let’s look real quickly at comparisons among the markets. I didn’t see anything that was really going to be, but we do like to do those. Here’s our control group. The EX, higher and higher highs, the Dow. Also substantially higher and higher highs. Its intraday pullback. Even much more glaring, the margin, the buffer back to lower prior highs. NQs, these were flashing a warning last week and really on a net basis, they have not improved. They tried but NQs, that is the NDX 100 stocks, technology stocks, dominate, less predictable, less reliable. Can’t really say they are not widely covered but something I have widely covered is the Dow stocks would be not as liquid as the Dow stocks are. You would have to say that there is more of a focus on Dow than on NQs. That is to the extent this represents speculation among bigger money institutional tension, mutual funds, the stuff that is mandated to be in the market and will take risks when it can but this idea of no risk is not cash because it’s mandated to have X-exposures, X percent exposure. It will go to the Dow type of stocks. This under performance not great but it is not too sessions in a row. That’s where that becomes predictive. This is just the kind of behavior that if it repeats consecutively, then we’ve got an issue. Finally, Russell, which is smaller, speculative, not even making a new high.