Market Wrap

Best wishes for a continued Happy Passover and Happy Easter weekend.

Thursday’s pre-open dip under Tuesday morning’s 2333.50 low was recovered enough to avoid gapping down under it. It was still a gap down, but the likely consequence of not extending down was to rally through the morning.

Reversing straight up did probe Wednesday afternoon’s prior high by 1 point to 2345.00. And then hovered there, waiting for the morning bias environment to lapse. Then it was straight down. The 2327.25 objective was thoroughly tested, and still being tested at the close.

Trending down into the close enables a “session-long rally” setup to form by gapping up Monday above Thursday afternoon’s 2336.25 high. Gapping up and extending through it would qualify. The setup would be more reliable overnight than after a weekend (let alone a holiday weekend). Retracing back down through the open from gapping above it would only resume the decline.

Trending into a holiday weekend isn’t usual, but usually reflects weak hands. Extending down anyway would next target 2321.00 and 2311.00. Recovering from their test would remain possible, but decreasingly likely. A lot of unfinished business above has been left outstanding, which also tends to identify weak-handed sellers. But that hasn’t much affected the trending.

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No-bias trending during Wednesday afternoon neutralized one or two attractions above. The morning’s 2344.25 bias-down signal and the 2346.00 10:15 print were both tested by a surge that attacked 2347.00. Ironically, that surge developed during the afternoon’s no-bias environment, originating under the 2343.50 bias-up signal. It was later retraced, along with the 2341.50 1:20 print.

Also retested was Wednesday’s 2340.00 lower prior highs. Its test Wednesday morning was likely to hold, which it did. Its retest Wednesday afternoon was under no such obligation, but it held anyway.

That last point underscores how difficult it is to attract sponsorship ahead of a three-day holiday weekend. If that Friday will be closed, then trending should start by Wednesday morning, or have played out by Wednesday afternoon. Wednesday was an “inside day.”

Regardless of having avoided a break lower for this long, still being in close proximity to the lows demands vigilance. But fresh lows Thursday would still find it difficult attracting sponsorship. Meanwhile, there’s a lot of room for simply gravitating from the range’s lower-end, up into the weekend.

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Largely recovering Tuesday morning’s 18-point plunge has the same two or three meanings the same setup had on Monday. The drop was the product of weak-handed sellers, nothing prevents probing even lower intraday again, and probing lower could attract strong-handed sellers anyway.

The strong-handed / weak-handed struggle can cut either way. It stops being bottoming, and starts rolling over, if there’s rotation between the sponsorship.

For example, Tuesday’s drop to 2333.25 recovered 2343.50 too late to be the product of strong hands. The next threshold of recovery at 2349.00 was met, but not exceeded. And not for lack of opportunity — it was tested before entering the afternoon bias environment and coming out of it, then again into the close.

So, sellers haven’t definitively retaken control. The intraday probe under the 2345.00 area now requires buyers to leverage that hesitation, definitively themselves by greeting Wednesday’s open in rally mode. The setup is similar to what Monday’s close left for Tuesday’s open, but no longer optional — any delay creates large vacuum that would require 2321.00 to plug it.

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Monitor overnight Globex trading in the chaRTroom here.

Happy Passover to those subscribers celebrating this evening and this week.

Ranging through Monday afternoon’s bias environment, and into the final hour, is the opposite of trending. It’s consolidating. Consolidating entirely in positive territory is a sort of anchoring. Strong hands don’t typically wait until the session’s last possible window before breaking lower, not from an anchored consolidation in positive territory.

That describes Monday’s late dip. It began from the upper-end of the afternoon’s 2354.50-2360.00 range, collapsing to its lower-end during the 3:10-3:20 proxy window. Still in positive territory, the 3:37-3:52 position-squaring eked out fresh afternoon lows down to 2351.75. Still in positive territory.

Anxiousness ahead of Yellen’s post-close speaking engagement? Some quarterly earnings due? More global geopolitical concerns? Limited participation ahead of the evening’s Passover holiday celebrations? Whatever prevented resolving up through the close, it wasn’t able to turn the market negative.

Of course, there’s nothing inherently bullish about closing unchanged. Regardless of the potential downside that was avoided, the market remains in proximity to starting down that road.

Monday’s open needed only to avoid initial weakness for maintaining the potential of a morning rally. Due to probing above Thu-Fri ~2361.00 highs without closing above them, Tuesday’s open needs to rally quickly, if not already be rallying overnight. The only unfinished business is above, now at 2362.75 in addition to 2364.50. Opening lower anyway would be bearish.

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

Monitor overnight Globex trading in the chaRTroom here.

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That was an impressive recovery overnight from Thursday night’s missile attack. Too bad. If the recovery couldn’t exceed its origin’s prior resistance (i.e. 2357.50), then it would have been better served by leaving something on the table to attract strong-handed intraday buyers.

The same applies to the afternoon’s surge. If not recovering 2357.50 in time to trigger its bias-up, then probing it later only reflected weak-handed sponsorship. As a corollary, the same applies to the balance of the afternoon bias environment, which wasted even more buying pressure just to hover above 2357.50. Breaking down 6 points under it to 2351.50 into the close reflected weak hands getting flat before the weekend.

That late drop came too late, itself, to be predictive. So long as the pattern remains under 2357.50 through relevant timing windows, the pattern remains vulnerable to capitulation. Strong-handed sellers may have launched such a drop already Friday, if not for the overnight plunge attracting weak-handed sellers ripe to be squeezed. We should know one way, or the other, at Monday’s open.

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