Market Wrap

Was Friday’s bearish WedEX influential? The session contained a couple of productive downlegs. But the signal applies to the afternoon, and the afternoon’s downleg was largely retraced.

The morning had already trended down from 2352.00 to 2345.00. Bouncing reversed down suddenly at noon to attack the morning’s low. The noon hour’s exit broke sharply lower to touch the afternoon’s 2340.75 bias-down target. Pretty productive.

Bouncing to 2349.50 was triggered by news that tax reform is coming next week. That’s an artificial catalyst. And anyway, the bounce didn’t recover the noon hour’s high, so the intraday trend remained down. We’re assuming WedEX was mildly influential, which means that it should be very influential on Monday.

Friday’s drop retraced all of Thursday’s post-open gains. And since Friday’s low was at the obligatory support of Thursday’s 2341.00 gap open, the afternoon’s bounce is extra vulnerable to being retraced. Its break could open the floodgates. Meanwhile, the burden of proof is on the recovery to reassert itself.

Details and other markets coverage are discussed in the post-market Wrap recording here.

REMINDER: This weekend’s Saturday Review begins at 9:30am ET — I’ll email its link to you early in the morning. See you there!

Thursday was at the very least a surprising day. At the very most, one more surprise is yet to come.

Wednesday’s sellers had gained traction through dropping from 2349.25 to 2331.25, but that didn’t prevent gapping up Thursday. The gap wasn’t above the prior afternoon’s high, but that didn’t prevent trending higher throughout the day. A lot, back to and through Wednesday’s high to test the next higher objective at 2355.00.

Closing above 2355.00 would have put into play 2360.00-2361.00. It was probed up to 2358.25, but that didn’t enable extending higher. Instead, Thursday’s last two hours ranged sideways back down to 2353.25.

2355.00 was still being overlapped throughout those two final hours, neither extended nor rejected. Closing under 2352.00 would have confirmed 2355.00 held as resistance. Opening Friday under 2352.00 would suggest as much. But opening under 2345.00 would confirm that Thursday’s intraday rally had been exaggerated by expiration jockeying. Holding a test of 2360.00-2361.00 would be vulnerable to reversing down, too.

However it might start, reversing down would be more surprising than Thursday’s rally, because it would be much more productive. The bearish WedEX could retrace this week’s lows back down to and through last week’s lows. And lower.

Details and other markets coverage are discussed in the post-market Wrap recording here.

Monitor overnight Globex trading in the chaRTroom here.

Don your protective gear.

This week’s unstable rally had been retraced already Tuesday back down to Monday’s 2331.00 open. That had retraced the 2347.00 overnight high, which was probed Wednesday morning. Despite the interim pullback having been productive — i.e. producing a new high — the interim pullback’s low and Monday’s open were retested again Wednesday afternoon.

There is no bullish reason for that extra test. The interim low is likely to break lower.

The retest of the interim low was itself approached bearishly, in at least two ways. First, sellers gained traction for their efforts by exiting the bias environment under the noon hour’s low, and entering the final hour under the bias environment’s low. Second, the decline was a relentless trend, an ongoing series of lower lows and lower highs. It was not at all capitulative or aggressive, which could have been bullish from a contrarian perspective.

Meanwhile on a separate track, WedEX has triggered passively bearish. Bearish, due to several conditions. Passively, due to one of those bells (or whistles, I forget which) of the morning’s failed probe above prior highs. Thank “Wreversal Wednesday” for that. The break was almost actively bearish, as I describe in the Market Wrap video.

Details and other markets coverage are discussed in the post-market Wrap recording here.

Monitor overnight Globex trading in the chaRTroom here.

Tuesday morning’s first reaction down was normal. The gap back up to Monday’s 2345.00 close was the opening surge’s objective, and it had just been filled to within 2-3 ticks. The reaction down was excessive, all the way back to the morning’s 2337.75 bias-down signal that already had held a test to avoid triggering. It held again. Its offsetting test of 2347.25 was in-play.

Tuesday morning’s second reaction down wasn’t abnormal. It originated precisely as the bias environment began lapsing at 2341.00. And it extended precisely into noon. It was also excessive, and that made it unusual. But still not abnormal, ending almost the same minute as testing the morning’s 2332.50 bias-down target (albeit by 2 points).

Trending back up through the noon hour and afternoon bias environment recovered to test 2341.00. Actually recovering 2341.00 into the final hour or proxy window would have been bullish. More bullish than not bothering to test 2341.00 — twice — without even closing above it. Then the unusual, not abnormal, intraday decline could have been dismissed. Unfinished business above could have been addressed.

But the afternoon’s recovery was a little slow, especially in not recovering 2337.75 earlier, and in holding a test of 2341.00 later. That means keeping the door open to another downleg, which wouldn’t be so unusual at this stage. And that also means tolerating little or no delay before extending the recovery Wednesday, and preferably extending it relentlessly.

Details and other markets coverage are discussed in the post-market Wrap recording here.

Monitor overnight Globex trading in the chaRTroom here.

Monday afternoon’s probing above its 2339.00 bias-up signal was appropriately delayed until exiting the no-bias environment. Then its break extended to probe its bias-up target to 2345.50. Its origin was late enough to not be “no-bias trending” that otherwise would be doomed to failure. That’s a little different from the pre-open surge that originated too late to be the product of strong-handed sponsorship — which has yet to matter.

The optimism is doubly interesting, since fresh highs were probed all this afternoon ahead of high-profile earnings due after the close. While not abnormal, it is unusual. Often, anxiousness paralyzes price action ahead of high-profile news. This suggests that optimism may be a little excessive.

Earnings of high-profile companies often inhibit trending attempts. This is regardless of negative reactions not having a track record of influencing the broader market. But probing fresh highs Monday afternoon ahead of its post-close earnings does seem like excessive optimism. And that is a concern when it develops in the context of trending that has ignored its vulnerability to reversing down already.

Retracing Monday’s rally could be obvious by already trending down overnight. That would be optimal, and in-line with the recent pattern of only retracing prior downlegs, and not actually probing above their origin — Monday’s rally retraced all of Friday afternoon’s downleg. Alternatively, probing higher Tuesday morning should be rejected coming into the noon hour. Otherwise, a bigger corrective bounce or rally is underway.

Details and other markets coverage are discussed in the post-market Wrap recording here.
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Monitor overnight Globex trading in the chaRTroom here.