Market Wrap

Thursday night’s rally deposited the market at the door of invalidating the bearish Globex-flip setup, but only stumbled through. I needed either a gap up above 2788.00 or simply exiting the open above 2784.50 to signal the Globex-flip wouldn’t be influential. Neither was recovered until too late to be predictive. And they were recovered on the way to fresh recovery highs at 2794.50.

Fresh intraday recovery highs. Wednesday night’s 2798.00 “new Globex trend extreme” is higher, which disqualifies Friday’s close from being a new trend extreme. That would have required an eventual higher close. But having recovered into the orbit of 2798.00 for the first time since already leaving it before Thursday’s open, its retest should be imminent.

Meanwhile, Thursday’s Isolation setup is in jeopardy. It had formed by not probing back above Wednesday’s high intraday. It would remain intact by not closing back above Wednesday’s high — which Friday did. The close’s probe above Wednesday’s high began after entering the position-squaring window, so it could be credibly reinstated by trending back down through Monday morning, perhaps attracted to oversold RSIs at Friday afternoon’s 2781.25 low

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A lot of selling pressure went into triggering Thursday’s Globex-flip setup. Probing 10 points above Wednesday’s ~2788.00 highs was reversed to open under the earlier 2784.50 Globex low. The 2778.00 open extended down 9 points to 2769.00 through the 10:15 bias timing window. That’s 30 points under the overnight high, a lot of selling pressure. This is probably responsible for limiting the bearish Globex-flip’s morning influence only preventing a recovery, and not extending down.

Bouncing through the noon hour held tests of the open. More important, the afternoon bias environment did not bounce, signaling that the bearish Globex-flip’s influence would persist through the following morning. In fact, the afternoon trended down to sharply lower lows attacking 2764.00.

A bounce was retraced to retest 2764.00, where RSIs made higher lows. Firming through the position-squaring window began surging to eventually attack 2776.00 at the close. Now a great deal of buying pressure has been expended, during a window not likely to gain traction for its effort, and without recovering a relevant level.

Resuming the decline would next target 2753.00-2757.50, and then 2730.00 to fulfill the Isolation setup’s objective. Gapping up above Wednesday’s 2788.00 highs would suggest the 2798.00 “new Globex trend extreme” retest was underway, first.

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Monitor overnight Globex trading in the chaRTroom here.

Wednesday afternoon’s reaction to FOMC Minutes was the most volatile I’ve seen in years. Policy statements and Chairman Q&As are reliably opportunistic environments. So long as the committee plays rhetorical games with the gas pedal, the Minutes reaction should be wide-ranging again.

The relatively narrow overnight range had warned before the open to expect only a 3-4 point trending attempt, if any. Further proof the market lacked sponsorship came from neither of the morning’s bias signals even being attacked. The 2786.00 bias-up was tested at noon.

Now the rubber band was stretched, and the market was no longer in the middle of a dull range. The morning’s bounce was followed by an 11-point reaction down through the noon hour attacked the 2775.00 bias-down. It was just a warm-up for the FOMC reaction which spiked up to attack 2791.00, and reacted down 17 points to attack the 2773.25 overnight low.

2786.00 was recovered in time for the last 90 minutes to fluctuate narrowly around it through the close. No “unfinished business” was left outstanding. And having essentially only fluctuated at or around Tuesday’s final hour range, the session contained no predictive value.

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Monitor overnight Globex trading in the chaRTroom here.

Tuesday’s open gapped down from Friday’s 2776.00-2777.00 close, but only to test its 2766.50 last relative low. Immediately reacting up filled the gap back to Friday’s close. The bias environment exit converted the morning’s recovery into a new rally leg that fulfilled its 2784.00 objective at noon. Higher highs into the final hour at 2787.50 gained no traction, and the balance of the session dipped back down to unchanged through the futures close.

The cash session close and 3 minutes prior were both testing 2779.00-2780.00. That’s not deep enough soon enough to be confident that Tuesday failed to produce a second consecutive higher close. And that keeps alive Friday’s close above 2751.00/2757.00 to invalidate the two-month old rally still being only a temporary correction.

Just closing above 2751.00/2757.00 would have sufficed, had Tuesday not also probed fresh highs. That raised the burden of proof for a confirmation to close positive. Which wasn’t the most credible. So, gapping down or exiting a timing window back under Tuesday morning’s 2766.00 low would invalidate the confirmation. Otherwise, the rally’s next objective would be new highs — albeit not at all protected from beginning a corrective pullback.

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Monitor overnight Globex trading in the chaRTroom here.

Friday’s bullish Globex-flip setup was influential, but only to preventing a reversal down. Post-open action ranged relatively narrowly sideways. A very last-minute surge did probe fresh highs, but that was too late to ensure the Globex-flip setup would extend through the following morning. Meanwhile, the very last-minute surge invalidated the bearish WedEX. I would still give sellers a benefit of the doubt if Monday’s open were to gap down deeply enough.

How deep is deep enough? Back under Wednesday’s 2762.00 prior highs would form an Island out of Friday’s range. Gapping down under at least 2757.00— if not also under 2751.00 — could reject Friday’s close above them and prevent a second consecutive confirming close, keeping alive the current bear market rally. Friday’s underperformance by NDX and outperformance by the Dow makes me very suspicious that a bigger rally leg is only now getting underway.

Otherwise, a fresh trend extreme close on expirations doesn’t often reverse the trend. And a fresh trend extreme close on Fridays requires an eventual higher close, regardless of any interim dip. Regardless, the three-day holiday weekend is not global, so there’s no assurance of greeting Tuesday’s open with only little change.

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