Market Wrap

Thursday night’s relentless rally had originated from its open retesting the 2782.75 low. Already having rallied 20 points to 2803.00, a last-minute surge through the open extended to neutralize the “unfinished business” back to Monday’s 2807.75 opening gap. Some resistance was expected, but not necessarily substantial. That didn’t prevent collapsing 20 points to essentially fill the gap back to Friday’s closes.

That was the morning. As with most Friday mornings, its effort tends to end there. In fact, the balance of the session repeated the overnight pattern of simply rallying relentlessly. And as with most Friday afternoons, exiting the bias environment above its noon hour high effectively marginalized sellers for the day. Not as reliably or productively as if also exiting the bias environment at fresh session highs, but reversing down would not be done by strong-handed sponsorship, if at all.

Friday morning’s 2808.25 high was attacked to 2807.00 before closing at 2804.50. Friday’s close is a new recovery high close, but still under prior sessions’ intraday highs, which would otherwise require another eventual new recovery high close. So, reversing down immediately would leave no unfinished business above.

Slightly likelier than reversing down immediately is to first extend higher. Stopping pessimistically short of the morning’s high Friday afternoon suggests probing higher anyway. That’s likely either to attack last Monday’s 2814.00 high to 2812.50, or probing it up to 2817.50. Slightly less likely is to reverse down immediately, attracted initially to Friday’s low where the delayed recovery didn’t isolate the post-open low to the bias environment.

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The week’s earlier volatility catalysts had largely subsided before Thursday’s open. Left to its own devices, intraday price action proved uninterested in resolving to either direction. Two considerable trending attempts overnight had remained within Wednesday’s range. Morning choppiness was restrained by a shrinking range. And the afternoon range was narrower still.

Price action from a narrowing extended range has limited predictive value. But gapping down and ranging exclusively in negative territory suggests that weak hands are bearish, which would mean strong hands are bulls. This factor isn’t predictive, but would reinforce an immediately bullish move Friday.

With the narrowing range behind, and weekend illiquidity ahead, credible trending would appear sooner rather than later Friday. Appear early, and quickly extend beyond a prior relevant level, or else Friday’s biggest risk would be remaining within the relatively narrow range.

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Closing flat Tuesday with the opening print seemed too little reward for having recovered from Monday night’s drop — regardless of the wide intraday range. That’s why Tuesday night’s drop to lower lows wasn’t surprising. Keep that in mind.

Tuesday night’s drop to 2780.50 was recovered enough for a post-open surge to 2792.50. None of which absolved the same weak-handed sponsorship that was likely to resolve down. And it did, collapsing to test the next lower objective at 2777.00 and retesting it by 2 points.

Everything under the morning’s 2784.25 bias-down target was a knee-jerk reaction to China trade headlines, an artificial catalyst likely to be retraced. Its timing was ultimately isolated to the bias environment, inhibiting another timing window from repeating the effort. The intraday recovery eventually reached 2796.25, back in positive territory and above the open’s initial high.

So, was that enough reward for having absorbed the open’s collapse? Not necessarily. The cash session close was still overlapping Tuesday’s 2791.50 open and close. Post-close action extended up to 2797.25, but that’s post-close action. Thursday’s open should already be in rally mode unless another downleg is underway.

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Perhaps it was just defensive posturing ahead of Tuesday morning’s Fed Chair Senate testimony. Monday’s slide from its 2814.00 morning high had extended overnight down to 2783.25.

The relatively deep decline didn’t prevent recovering to greet the open back up at 2791.50 support. It was also the morning’s bias-down signal, and holding its support put into play at test of 2802.00. The first attack stopped 2 points short before Powell comments seemed to trigger a retest of 2791.50 by 2 points. But there was just enough time and plenty of volatility to test the objective up to 2803.25 by noon.

A mid-day dip ranged narrowly throughout the afternoon’s no-bias environment. The window’s exit rallied back to morning highs, but only back to morning highs. Tuesday’s last half-hour retraced the mid-day lows, and lower as futures settled back at 2791.50 support.

Just as the afternoon recovery’s steepness left it vulnerable to any hesitation, the rejection’s steepness now leaves it vulnerable to another recovery. A retest of Monday night’s 2783.25 low can’t be dismissed, since its recovery’s ultimate productivity only fluctuated around unchanged. Otherwise, not already probing lower at Wednesday’s open probably will have begun recovering Tuesday’s late drop.

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Globex gapped up to 2799.50 had extended only momentarily to 2803.50. Its retracement down to to 2794.50 was necessary to find sponsorship capable of trending to fresh highs. Monday’s 2808.00 open was no more eager to extend than was Sunday night’s gap up. It eventually probed higher to test its 2813.50 target, but the bias environment lapsed back under the open’s range. And that put into play a deeper pullback, still.

In fact, the highs reversal extended through the close to within 2 ticks of the 2794.50 Globex low. It already seemed disappointing to have retraced Sunday night’s open, despite having recovered Globex’s gap up and extended it higher both pre-open and post-open. Falling through the close isn’t surprising, but ONLY falling through the close would be.

Extending down overnight is necessary to reinstate the Isolation setup. It had required closing Monday back under 2790.75, but exiting Tuesday’s open under 2788.00 would suggest the interim rally was rejected. Otherwise, a new reversal setup would be needed. Meanwhile, Monday’s open gapped up above all prior highs, and would want to be retested from below to neutralize its attraction above.

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