Market Wrap

The day began at the edge of the precipice, gapping down to critical support at Friday’s low. Extending deeper would have launched a much deeper downleg. Avoiding that would squeeze the trapped shorts to probe the drop’s origin.

At least, avoiding a post-open drop should have recovered. Perhaps because Tuesday’s open barely touched Friday’s low, instead of probing it, Tuesday’s session only  bounced. It wasn’t actually a bounce. The intraday series of higher highs and higher lows qualified as a trend. And it wasn’t random noise. Only one timing window didn’t participate (the noon hour).

A 61.8% retracement of the open’s drop had defined the afternoon’s high, recovered only by surging into the close. That’s essentially “equilibrium.” It suggests a very wide-ranging session Wednesday without trending until late-afternoon. The stage is set for Wednesday afternoon’s FOMC policy statement and Chairman Yellen’s quarterly Q&A.

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

Monitor overnight Globex trading in the chaRTroom here.

Monday’s sloppy, choppy session probed above Friday’s high but didn’t close higher. The breakout is not confirmed. Meanwhile, buyers gained no traction for recovering from the gap down. And the close reacted back down into the range. Tuesday can try the same rejection of Friday’s range that could have been tried Monday. But it would be much less capable of reversing the trend after not quickly rejecting Friday.

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

Monitor overnight Globex trading in the chaRTroom here.

The topping template is dead. Long live the topping template.

We began tracking the template last Saturday. For four consecutive sessions, the market didn’t do anything not allowed by the template. Last Friday’s relative high close made specific requirements for Monday, which were fulfilled. But rejected surges weren’t converted into a mid-week collapse, opening the door to fresh highs.

This Friday’s fresh highs end the topping template. That topping template. But Friday’s close was also a breakout, so a new topping template would begin tracking if Monday doesn’t confirm it. And Monday’s don’t often confirm Friday breakouts.

Meanwhile, the bigger picture is threatening new highs. The highest calculable corrective bounce limit was tested last Friday. Confirming this Friday’s close above it would put into play new highs. Not confirming it would maintain the rally is a correction, and vulnerable to reversing down sharply… We’ll review it all in detail at the Saturday Review.

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

Thursday afternoon’s rally from 1958.00 exited the bias environment probing fresh relative highs, but still within the noon hour’s range. Entering the final hour higher tried gaining traction, but the 3:10-3:20 window failed its attempt to trend higher. That didn’t prevent extending to fulfill the required retest of 1981.75, probing it by 2 ticks.

So, the attraction above is neutralized. The opportunity to gain traction wasn’t exploited. And the close avoided recovering a relevant level, which keeps alive the topping template. Meanwhile, Friday morning’s relentless plunge was a glimpse of the character expected if and when the trend reverses down.

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

Monitor overnight Globex trading in the chaRTroom here.

NOTE: S&Ps front-month rolls forward from Mar to Jun at Thursday’s open.

Nothing bullish about Wednesday, despite not being carried sharply lower by the topping template. The morning’s plunge stopped optimistically short of touching Tuesday’s low. Multiple recovery attempts exploited as much room as possible without launching uplegs. “Unfinished business below” from the morning was left outstanding at 1967.75 (basis Jun, 1977.00 basis Mar).

No traction was gained either way Wednesday. Trending immediately would require gapping open beyond Wednesday’s 1969.00-1982.00 (basis Jun, 1978.00-1992.00 basis Mar) range, or else probing one end temporarily before richocheting more substantially back in the opposite direction.

The bearish topping template remains intact until a rally gains traction. That might seem to allow indefinite time before resolving. But getting past mid-week without yet trending sharply does make undermine the credibility of starting later.

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

Monitor overnight Globex trading in the chaRTroom here.