Market Wrap

Friday morning was a downtrend. Its 2152.00 bias-down signal required a test for having held a test of the 2161.50 bias-up signal through 10:15. Thursday afternoon’s outstanding 2151.50 bias-down target had been neutralized overnight to within 3 ticks, but it was thoroughly tested anyway Friday down to 2149.00.

Then came the trend reversal. Friday afternoon’s bias environment was entered back at the noon hour’s high. Its exit began probing higher. And the position-squaring window was entered at 2157.00.

That was enough to consider the bullish WedEX a success. Monday morning should behave bullishly, too, and probably more aggressively. That didn’t protect from dropping into and out of the close to 2152.00 amid news of a coup attempt in Turkey.

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The 2168.00 “new Globex trend extreme” wasn’t retested Thursday. Its retest is required at some point intraday. Meanwhile, there is also “unfinished business below” at Thursday afternoon’s 2150.50 bias-down target. Whichever is tested first should be reversed to test the other. Either could be probed by 7 points before reversing.

Thursday’s bounces still maximized their “ineffectual optimism” before reversing. But those reversals were too shallow to be considered excessive pessimism, which would have been bullish from a contrarian perspective.

It’s not yet enough of a disparity to prevent the WedEX’s bullish bias into and out of expiration. Dipping Friday morning back into the Tuesday-Wednesday range down to 2048.00 or 2043.00 could clean out near-term pressures. But only gapping up Friday morning and extending higher would be credible for extending into a blow-off rally leg.

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Wednesday’s overnight probe above Tuesday’s high to 2152.25 came too late to be sponsored by strong hands. The open’s shallow gap up to 2150.75 confirmed as much, as did its immediate reversal back down into negative territory. That created the requirement to test 2141.00, which the morning probed down to 2139.50.

But that’s as far as sellers got. And they could have gotten away with much more. If that were due to patience, then the close would not have been unchanged and back above the prior afternoon’s low. Sellers didn’t exploit the opportunity to trend down, which suggests they are weak hands.

Gapping down Thursday under Tuesday and Wednesday’s ~2138.00 lows would signal stronger handed sellers had arrived, at least for the morning. Similarly, immediately resuming the rally Thursday morning would require gapping up above Wednesday’s 2149.00 highs — being an easier task doesn’t make it any likelier to be exploited, either.

Two observations of the bigger picture: First is that Wednesday was a second consecutive higher close above 2143.00. An interim dip would be likely to recover to fresh highs targeting 2158.00 and potentially also 2168.00. Second is a bearish bullish WedEX signal triggered. So, from whatever level at the time, Friday afternoon and Monday morning will likely be biased down.

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There was much too much similarity between Monday and Tuesday’s patterns. Similar patterns that appear sequentially tend to resolve differently. But Tuesday was Monday’s doppelganger.

So, it was a second consecutive session for not gaining traction. This time, the afternoon hovered optimistically throughout. Wednesday is vulnerable to the same intraday gyration and resolution as was Tuesday.

Meanwhile, an up/down-crash count has emerged. It’s at least 10 consecutive trending sessions, with 1-2 non-consecutive counter-trend sessions. S&Ps don’t fit the set-up neatly, but NDX and the Dow are there.

Closing above 2143.00 puts into play the next higher objective, which could reach 2168.00. Of course, that’s subject to a second consecutive higher confirming close Wednesday, And the second session of B\limited afternoon volatility isn’t helping.

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Monday finished with several mixed signals. They suggest that the rally isn’t required to extend higher immediately, but an immediate pullback would require eventual recovery.

Extending higher at all is aided by two factors. First is the proximity to the next higher objective at 2143.00, which was put into play by closing Monday above 2125.25. Second is Monday’s second consecutive higher close above Friday’s breakout close.

Momentum hasn’t reversed down, but the rally avoided triggering two of its sponsorships. First was Friday’s new trend high close, which had created the requirement for an eventual higher close. That attraction was neutralized already by Monday’s higher close.That’s not a sell signal, but it didn’t trap shorts.

Second is Monday’s 2127.50 gap up, which was tested after a dip touched Friday’s “lower prior highs.” It won’t become an attraction above to require recovery from a break lower.

A third factor challenging the upside is that Monday’s buyers gained no traction, so only maintaining a gap up Tuesday would signal new sponsorship had arrived.

I suspect the groundwork has been laid for 2-3 very volatile intraday sessions, with significant trending attempts in both directions. The end o’quarter earnings onslaught may be the catalyst, as warnings and beats fight it out on the news ticker.

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

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