Market Wrap

If Monday afternoon”s low had printed earlier… then its reaction up would have been early enough to attract counter-trend sponsorship for short-squeeze. Was the decline just trying to squeeze out remaining weak-handed sellers?

Pattern points… (Setups and technicals)
Last week”s three-day decline stretched to four days on Monday. And not by just a little. 

Friday”s test of 2040.00 support had retraced 38.2% of the two week-long 1964.00-2089.00 rally from Dec 16. The retracement extended to 61.8% when Monday”s low tested 2011.50. 

But the 1-2 punch of reacting to both 38.2% AND 61.8% retracements should be only temporary — if at all. A corrective bounce would likely peak at either 2022.50 or 2029.00 (probably the higher, since Monday”s late bounce came within 2 ticks of its 2020.25 bounce potential).

Reversing down from there, or simply extending down without delay, would next target 1994.00 and potentially also 1983.50.

The decline from last week”s highs is still likely just temporary. So, after extending down — or by somehow extending an immediate bounce above 2029.00 to avoid extending down altogether — there remains potential to fresh highs.

What”s Next… (Outlook and opportunities)
The weekend was book-ended by two potential short-squeeze setups. Neither fully materialized. That doesn”t preclude the morning crowd from trying what the afternoon crowd can”t do. Overnight gains that aren”t retraced through the opening 15 minutes of volatility should improve through the morning. But not rallying at the open would more likely extend the decline.

If Friday”s bias environment were exited just a little higher… then a substantial short-squeeze would have been triggered. More so, a bullish Pivot Reversal setup could have formed. And new highs could have been probed by Wednesday, or earlier.

Pattern points… (Setups and technicals)
Not that the alternative is bearish. Friday afternoon”s low has the same characteristics, no matter its resolution. 

It fulfilled the decline”s 2040.00 objective, and the afternoon”s bias-down target 1 point lower. Its probe originated from above prior lows after the bias environment had begun, and the prior lows were recovered before the bias environment had ended.

But the only short-squeeze was a 7-point position-squaring window exercise triggered above 2048.75 that touched 2055.75 at the position-squaring window”s end 15 minutes later. Its 10-point reaction down into the futures close ended that charade.

Oversold RSIs at Friday”s 2038.75 low require an eventual retest. That could be done Sunday night down to 2036.00 and reversed into Monday”s open. Another short-squeeze setup would be underway. Otherwise, opening under Friday”s low at all would be likely to open under it a lot, like under 2030.00 or deeper.

What”s Next… (Outlook and opportunities)
Don”t forget that there is no Saturday Review this weekend due to the holiday. We took a little extra time in the post-close Market Wrap to review the bigger picture. Please don”t hesitate to ask any questions in its Activity Feed post.

If not for Thursday”s holiday… then Wednesday afternoon wouldn”t have behaved like a Friday — making counter-trend sponsorship difficult to attract. .

Pattern points… (Setups and technicals)
Wednesday”s New Year”s Eve session was well-positioned simply to gravitate back up to “higher prior lows” at 2084.00. That”s the underbelly of Friday and Monday”s ranging. Retracing the overnight rally into the open didn”t extend down, and the morning”s bias environment ranged sideways.

Then the noon hour approached, and everything changed.

Last Friday and last Tuesday”s bearish setups had already reflected the rally losing traction. Wednesday afternoon”s drop was more about that. The decline gained traction for its efforts by exiting the bias environment under the noon hour”s low, and entering the final hour lower still.

Despite fulfilling the first of two targets at 2050.00 and 2040.00, that came too late to launch any retracement that might gain traction. Both 3-minute and 1-minute RSIs diverged positively, but their interim highs haven”t been recovered. Momentum is pointed down.

What”s Next… (Outlook and opportunities)
Momentum is pointed down, but that can be neutralized by gapping up enough. Like, above Wednesday”s 2072.00 bias environment high, which is 20 points above Wednesday”s close. That would form a “session-long rally” setup. Just gapping up above Wednesday”s 2064.50 last relative high could be very productive, albeit temporary. Perhaps the easiest path up is down, to fulfill 2040.00”s objective.

If Tuesday”s session was a glimpse of year-end bias… then Wednesday should be interesting. That bias need not be directional. It could also have revealed that there is a lot of room for play.

Pattern points… (Setups and technicals)
There”s not a lot that either buyers or sellers can accomplish when volume is on the verge of evaporating. Trending at all shouldn”t be taken lightly. Either the market is clearing a path for lower lows, or clearing out weak-handed sellers at lower levels. Either way, Tuesday”s price action was relevant — and predictive.

Predictive of what, I have no — well, I do have a couple of ideas. 

It”s likely that Tuesday”s selling was chipping away at support. But another bounce might be needed to launch the downleg that breaks lower. At least the morning will be vulnerable to that gravitational pull from above, which I discussed earlier Tuesday.

That is, if Wednesday”s open isn”t already trending down, under at least 2070.50, if not also under 2068.00. Almost nothing can marginalize sellers for the day.

What”s Next… (Outlook and opportunities)
Don”t forget that volume evaporates ahead of a holiday. Be careful not to force a trade.

If overnight selling is retraced entirely… then does that qualify as accumulation? It depends, both on how that retracement is resolved, and on the volume accompanying it. So, no and no. Lacking sponsorship, dipping into recent opens hasn”t extended down. And lacking sponsorship, retracements haven”t extended higher.

Pattern points… (Setups and technicals)
So, intraday action isn”t being very predictive. Monday”s opening surge quickly extended 6 points to fulfill its objective. That objective held. Its reaction down only dipped and didn”t launch a downleg. Noise in the range.

Nevertheless, a couple of items are important to note. 

First, the open was greeted at the precarious position of testing the support of its bias-down signal. Post-open action had no choice but to surge immediately, unless it was willing to plunge. The latter effort of plunging under support requires sponsorship, while the surge was simply the product of no sponsorship.

Second, surging immediately reflects impatient buyers. Probing overnight lows and recovering from the test could have trapped impatient sellers. While an intraday probe of new highs is possible, launching from this base would be doomed to failure, perhaps in the same session.

What”s Next… (Outlook and opportunities)
Low-volume ranging makes trending more difficult to launch in either direction. It”s as responsible for promoting the reaction of of the open”s support, as it is for preventing extending above the morning”s resistance. It”s almost the same drill as last week, except this Wednesday”s session doesn”t end early.