Market Wrap

If Monday morning”s decline had extended through the close… then any attempt to recover would be doomed to failure. At least a recovery attempt from Monday”s actual pattern could succeed if it included a probe of fresh lows. But even then, no requirement is recovered.

Pattern points… (Setups and technicals)
It too all day, but oversold RSIs at Monday”s 2015.25 low were finally attacked. But still not retested. 

A difference of 2 ticks remained outstanding when the position-squaring window opened at 3:37. Its reaction up to 2026.50 reacted back down 6 points into the close.

Exiting the bias environment under noon hour would have been bearish if the final hour weren”t entered higher. That doesn”t preclude probing fresh lows, but it makes them likely to recover.

Since retesting Monday”s 2015.25 low should include 2013.00, dipping overnight could already be in recovery mode at Tuesday”s open. Waiting until the open before probing a fresh low would be dangerous, but still recoverable if done abruptly.

There is no requirement to recover. Declining since Thursday”s test of 2052.00 is entirely in-line with that being the corrective bounce”s peak. Rallying prematurely overnight — not first neutralizing the nearby attraction below — would be considered a detour on the way to new lows.

What”s Next… (Outlook and opportunities)
AA kicked-off the quarterly earnings onslaught after Monday”s close. And econ reports start picking up again. Keep in mind the market”s reaction to one news item might be retraced entirely and abruptly by the reaction to another news item.

If Friday”s drop can”t attract new sponsorship Monday… then there isn”t much that can attract sellers, or not many sellers to be attracted. And if Friday”s drop was no more than a temporary correction, then new highs wouldn”t take much longer.

Pattern points… (Setups and technicals)
Thursday”s close was above the 2052.00 corrective bounce limit. However, the close was still within a pattern of which 2052.00 was a critical element. And room for noise intraday at 2055.50 and 2058.25 were tested but not recovered through the close. Friday was greeted with the door open to the corrective bounce having ended.

Friday morning”s steep, deep slide might seem to confirm that the direction is reversing down. Especially since that followed rejecting the open”s gap up to 2061.00. And especially since the reversal was so aggressive and the slide was so substantial, down to 2031.00.

But the drop was also limited in duration. It was contained entirely within the morning”s bias environment. The 2045.00 bias-down signal wasn”t even broken until after triggering no-bias, which the afternoon retraced entirely.

So long as last week”s corrective rally may have ended and reversed down, a deeper dip to 2029.00 is likely, and likely not to hold. Otherwise, immediately recovering at least 2052.00 would help to put new highs into play. Especially Friday”s interim dip was steep and deep.

What”s Next… (Outlook and opportunities)
It”s been three weeks since our last Saturday Review, so be sure it”s on your calendar for this weekend, at 9:30am ET. I”ll send out a remind in the morning, with this link.

If the rally from Tuesday”s lows is a temporary correction… then it couldn”t have traded any higher intraday or closed any higher than it did. Not unless the rally is on its way to new highs. Which it will likely be, if the week were to end above Thursday”s high.

Pattern points… (Setups and technicals)
The corrective bounce could have ended at 2022.00, or 2029.00. Testing 2044.00 so quickly Thursday morning left only 2052.00 — and the room for noise above it at 2055.50 and 2058.25. Both met, both held.

At least, 2055.50 was still being overlapped. Closing under 2052.00 would have been more convincing that upside momentum was waning. Having extended to this degree for this duration without yet reacting down, extending any higher at Friday”s open would help to confirm new highs. The alternative open should be down considerably.

Opening significantly higher or lower shouldn”t be difficult. The pre-open Employment Situation report is a reliable catalyst.  Regardless, just not closing lower Friday would further suggest the ultimate resolution is new highs.

What”s Next… (Outlook and opportunities)
There are no preliminary levels before an Employment Situation report. Exceeding either 2052.00 below or 2058.00 above overnight would be likely to extend in that direction ahead of the payrolls report.

If Thursday”s open mimics Wednesday”s gap up… then we”ll have an interesting insight into Friday”s setup for the jobs report.

Pattern points… (Setups and technicals)
Wednesday”s opening print gapped up 17 points to the 2011.50 “unfinished business above,” and reacted down. The first half-hour recovered to quickly fulfill the morning”s 2017.75 bias-up target, and reacted down. The bias environment”s exit quickly recovered the morning”s backing-and-filling by surging 17 points to begin testing the 2022.00-2023.00 target area.

And ranged sideways.

Significant price action Wednesday was essentially contained within the cusps between the three morning timing windows. The timing windows themselves were their setups. This is interesting, because all of Wednesday afternoon only ranged sideways. Was that just a big setup for Thursday?

Recovering Tuesday”s drop, back up from 1984.25 to Tuesday morning”s 2023.50 high, probably intends to probe higher. Wednesday”s “ineffectual pessimism” keeps alive that potential. Resuming the rally would next target 2029.00, then 2044.00 and 2052.00. An interim downdraft Thursday is possible, but a deep downdraft is unlikely.

What”s Next… (Outlook and opportunities)
Wednesday afternoon”s sideways ranging produced three consecutive timing windows that overlapped each other entirely. The recovery had better shake off that potential inertia before it takes root through the morning. Gapping open is not enough — trending out of the open will be needed in order to expect any decent trend intraday.

If Tuesday”s low isn”t THE low… then THE low is much, much lower. Perhaps a brief, compartmentalized probe of fresh lows could still be absorbed. But not rallying Wednesday afternoon could be because the decline is already extending.

Pattern points… (Setups and technicals)
Having broken lower Monday under the decline”s minimum 2040.00 objective, lower sub-2000.00 targets were put into play. But, first, a bounce had room up to 2022.50 or 2029.00. Only the lower bounce target was tested — first overnight, and then at the morning”s 2023.25 bias-up signal.

The sub-2000.00 targets were 1994.00 and 1983.50. Tuesday”s low came within 3 ticks of 1983.50, which suffices. After bouncing to 2010.00, Tuesday”s close dipped back to 1994.00. The decline”s targets were thoroughly tested, and held.

Tuesday morning”s drop under the morning”s 2011.50 bias-down signal was inappropriately timed. That required its eventual retest, regardless of having probed 27 points below it. Recovering it to within 6 ticks does not suffice. So, 2011.50 remains “unfinished business above” to help attract price higher.

Shallow bounce, targets fulfilled, unfinished business above. If that combination can”t launch a rally Wednesday, then a much deeper decline is probably underway. Much, much deeper.

What”s Next… (Outlook and opportunities)
Focus is turning to Friday”s Employment Situation report. Not  We”ll get a glimpse of the market mood with Wednesday”s pre-open ADP report. Tuesday”s session initially reacted positively to weak economic reports, so I”m assuming that template still applies.