Market Wrap

If I can update the blog mid-morning… then I will. But it won”t be in the Chartroom. And the odds are against it. First Trade may be Friday”s only communication. Of course, this is shaping up to be a very interesting day.

Pattern points… (Setups and technicals)
Thursday morning”s surprisingly gargantuan rally was contained to the bias environment. Its interim peaks and ultimate peak were extended measurements of the likelier setup, which was to gap up only shallowly before reversing down sharply.

Declining 25-26 points from the post-open high wasn”t inappropriate for the setup going into Thursday. Just not from such a high post-open high. 

Now the question is whether the sizable morning rally created room to absorb sellers so they couldn”t damage the chart that afternoon. I don”t think that”s the case, because they left outstanding a gap back down to Wednesday”s close that must be filled eventually. And the afternoon”s selling prevented Wednesday”s trend change signal from being invalidated.

Also, sellers gained traction for their efforts Thursday afternoon. The bias environment was exited under the noon hour”s low, and the final hour was entered under the bias environment”s low. Wednesday”s sellers gained traction similarly for their effort, so take that with a quarry of salt. Nevertheless, that”s two consecutive sessions of distribution.

The session gapped up, probed relative highs, and traded exclusively in positive territory (even after dropping 25 points from the high). But the morning”s high wasn”t extended, suggesting the session was “ineffectual optimism.”

All of those reasons to be bearish. All of those doors opens to reversing down. If the market can”t be bothered with a single one of them through Friday”s open, that might be because it intends to rally sharply into the weekend.

What”s Next… (Outlook and opportunities)
Don”t forget about the Saturday Review at 9:30am ET Saturday. Thanks for your indulgence during this travel day. We”ll catch up Saturday morning. Two consecutive afternoons of distribution, I envy you…

If the target triggered Tuesday weren”t tested so closely Wednesday… then Thursday would be sure to resume the decline, if not also extend it. Not that a bottom is any likelier to form in this area, but the near-term timing for extending down could have been clearer.

Pattern points… (Setups and technicals)
Like last week”s Euro setup, it”s fun to see several unrelated predictive influences play-out so quickly. The market”s setup formed faster and was fulfilled entirely the next day.Traversing a 38-point price range in that time is impressive, too.

So, Tuesday afternoon”s weak-handed buyers suffered the consequence of not only retracing their productivity, but also reversing it back through its prior low. The punitive damages, as it were.

The question is two-fold. First, were the punitive damages enough, probing under 10 points under 2033.25, avoiding 2022.25 by 4 ticks? And second, would that equate to being a bottom?

In either case, a third question is how high of a bounce could still be only a temporary bounce that still resolves down. That answer is 2041.50 or 2045.00. Which is a lot of room for a bounce.

Wednesday”s decline did gain traction for its efforts — the bias environment was exited under the noon hour”s low, and the final hour was entered still lower. Unless Thursday”s open were to gap up above a prior high, fresh lows should be probed intraday regardless of the answers to my first two questions.

What”s Next… (Outlook and opportunities)
Wednesday”s close under Tuesday”s low accomplished what Tuesday”s drop did not — triggering a trend change signal by closing under last Monday”s 2048.00 low. Now, just not recovering it Thursday would confirm the signal. So would already extending the decline.

If Tuesday”s open had gapped down only to test its target… then would sellers have controlled the balance of the day? Probably not — timing windows do what they”re going to do. But the morning would have been more vulnerable to trending down, so the afternoon”s bounce would have been less likely to retrace all of the morning”s drop. And now buyers have expended all available energy just to test resistance.

Pattern points… (Setups and technicals)
Tuesday afternoon”s recovery filled the gap back to Monday”s 2060.50 close, and held. By not closing above it, the next higher target wasn”t put into play. We already knew the last leg up was sponsored by weak hands, since it began after the 3:10-3:20 timing window, and from under the bias environment”s highs.

The gap to Tuesday”s 2039.00 open is a different story. The morning overlapped it multiple times. Rallying out of that range didn”t begin until halfway through the noon hour — also a product of weak hands.

Obviously, weak-handed sponsorship doesn”t preclude trending. It just makes trending vulnerable to failing spectacularly if it trends anyway. And this weak-handed trending has extended.

What”s Next… (Outlook and opportunities)
Room for noise above Tuesday”s high to 2064.00 could be tested overnight and already react down before Wednesday”s open. But exiting Wednesday”s open above 2064.00 would be likely to extend higher Wednesday morning regardless of the downside vulnerability

If not for the noon hour”s plunge… then the upside objective would have been fulfilled. And then the afternoon”s expected plunge wouldn”t have left “unfinished business above.” That won”t be a deal killer in case a trend change is signaled. But it makes a trend change less likely.

Pattern points… (Setups and technicals)
Friday”s sellers had gained traction for their efforts, which is why Monday morning”s recovery attempt was likely to fail, regardless. But, what the he.. was that? An offsetting test of the morning”s bias-up signal was prevented by a sudden 8-point plunge to fresh lows. That already seemed large, but a another drop fell 14 points. And headlines didn”t match.

Trending without a news item or other development to quantify makes it difficult to end the trending. Identifying a scapegoat at least allows market participants to quantify the trend”s sponsorship, to know when it is discounted.

Regardless, relevant support or resistance isn”t going to break without a reason. So, last Monday”s “lower prior highs” wasn”t likely to break lower when tested. Not the first time.

A recovery attempt expended all available buying pressure to test 2062.50. But it had reacted down too deeply before entering the final hour, and only ranged sideways between 2058.00-2062.00. A break maintained either way would be likely to trend considerably — either 2051.50 and 2046.00 below, or to 2070.75 and 2077.75 above.

What”s Next… (Outlook and opportunities)
Trend change is signaled by retracing a new high close back under the prior high”s interim low. Thanks to recent shallow ranging, that”s not very difficult now. In fact, the minimum signal at 2051.50 may be in-play already thanks to a “Complex Descending Triangle” that formed during Monday”s last hour. A lot of selling pressure would be fulfilled there — so, not rallying sharply would signal new sponsorship had arrived to extend the break.

If you missed not having Saturday Review last weekend… then you”re going to love this weekend. Join us at 9:30am ET by clicking this link. We”ll review the market”s bigger picture projections and some of the prior week”s relevant setups. Then attendees may request instant chart analysis of any stock or market. See you here.

Pattern points… (Setups and technicals)
This rally is walking the tightrope without a safety net. But it”s not very Wallenda-like. Maybe it”s like a Wallenda crossing a tightrope in a heavy wind.

Friday”s new high close was under two prior intraday highs, despite Friday also having probed another new high. This setup stretches the rubber band without any new traction being gained for the effort. In fact, a last-minute surge is single-handedly responsible for Friday”s new high close.

Coincidentally, Friday afternoon”s sellers gained traction for their efforts by exiting the bias environment under the noon hour”s low, and then entering the final hour under both. Lower lows were probed before the close, but an obligatory bounce off of 2069.75 became a last-minute surge. 

Holding a test of 2075.75 triggered Friday morning”s no-bias environment, and put into play an offsetting test of the 2063.25 bias-down signal. It became “unfinished business below” when the bias environment began lapsing at or under 2075.75. The afternoon”s probe well under the morning”s lows, and closing under 2075.75, both help to reaffirm the 2063.25 objective.

What”s Next… (Outlook and opportunities)
None of which precludes probing higher intraday Monday. And none of which requires gapping down to extend durably. Possibly overbought RSIs left outstanding at Friday”s 2079.00 high may still be retested, regardless of the resolution.