Market Wrap

If not for the ECB stimulus news… then Thursday afternoon would have been perfectly content to range narrowly. If not for the morning”s press conference disavowing a near-term stimulus, then the afternoon news might have been greeted from a better position to actually trend higher.

Pattern points… (Setups and technicals)
Thursday”s dry cleaners setup almost triggered, but for a last-minute break lower as the first hour was ending. Still, the origin wasn”t optimal, so 7-9 point dive was retraced entirely into the noon hour.

All of which IS a dry cleaners setup, which is where the afternoon was headed. At least, until news of an ECB stimulus hit. Spiking up 7 points couldn”t change its origin being a dry cleaners setup, so it was retraced entirely, too. And then some, trending back down to and through the spike”s origin.

Friday”s impending Employment Situation report was one culprit for inhibiting trending. Thursday”s choppiness ahead of it — intended, or not — has loosened the joint to allow more play or actual trending after the report.

What”s Next… (Outlook and opportunities)
Overbought 1-minute and 3-minute RSIs at Thursday”s 2077.25 new high do not require a retest. They were the product of a knee-jerk reaction to news, and not to strong-handed buying pressure. And there being no complexity to the spike up to 2077.25 also frees it from any requirement to be retested. But its retest is likelier than not, so long as price hasn”t trended away. Meanwhile, oversold RSIs at Thursday”s 2061.25 low do require a retest.

If you knew in 1929 what was coming around the bend… then would one of your clues have been the string of new high closes? FT.com reports that Wednesday was the year”s 48th record, tying 1929 (while still far short of 1995”s 77 string). .

Pattern points… (Setups and technicals)
Wednesday”s new high probed last week”s 2073.25 intraday highs. That fulfilled expectations for the pattern from Monday”s gap down. Last week”s 2076.25 overnight high was retested, too. Wednesday”s new high close did not close above prior intraday highs, and its probe to fresh highs wasn”t complex, so it did not qualify as a breakout. And Wednesday afternoon”s bias-up didn”t trigger, so its target was never in-play.

So, no higher targets or attractions are in-play.

That”s not necessarily bearish. Wednesday”s rally did gain traction for its efforts… again. The bias environment was exited above the noon hour”s high, and the 3:10-3:20 window (proxy for the final hour”s entry) trended to fresh session highs. Like Tuesday”s traction had indicated for Wednesday, fresh highs Thursday would be undermined only by gapping down sharply.

Beware a gap down, but also beware a reversal from probing new highs. This recovery from Monday”s gap down was expected, and now its minimum objective to retest last week”s highs has been fulfilled. More so, it began impatiently Tuesday without first retesting Monday”s low. That may soon be sorely missed just when it is needed most — trying to extend into a breakout above prior highs.

What”s Next… (Outlook and opportunities)
Mario Draghi”s press conference following Thursday”s ECB policy statement is reliable for keeping the market lively. An afternoon slowdown ahead of Friday”s Employment Situation report (NFP) is likely. Note that the ADP report”s big miss Wednesday doesn”t discount a strong NFP on Friday — its reaction would likely be very bearish.

If Tuesday”s rally had first probed under Monday”s lows… then a probe above last week”s highs would have been likely to last several days. Instead, the rally that began optimistically Tuesday by gapping up may soon miss that optimism when it is needed most — probing above last week”s highs.

Pattern points… (Setups and technicals)
Tuesday”s open gapped up a little and trended up a lot. All timing windows except the noon hour probed a fresh session high. Buyers gained traction for their efforts by exiting the bias environment above the noon hour”s high and then entering the final hour even higher.

Sounds bullish. A little gap up or a shallow opening dip would be likely to resume Tuesday”s rally. A retest of last week”s 2073.25-2075.25 highs would be likely, probably by 3-5 points. Not much higher, since buyers didn”t refuel before Tuesday”s rally by first probing under Monday”s lows.

Reversing down Wednesday is still an option. But since Tuesday”s buyers gained traction, that would require gapping down substantially — probably under 2057.50. The objective would be to probe under Monday”s 2048.25 low by 2-3 points.

What”s Next… (Outlook and opportunities)
Wednesday”s calendar is busy, and more high-profile influential events are still coming Thursday and Friday. Narrow ranging should be difficult.

If Monday”s sellers hadn”t been so impatient… then their repeated probes under “lower prior highs” could have extended the decline intraday. It could still extend down Tuesday. Until recovering all of the tests” interim highs — the earliest remains outstanding, up to 2059.00 — it”s possible that Monday”s sellers succeeded at chipping away at support. But without already breaking lower at Tuesday”s open, Monday”s sellers become less and less relevant.

Pattern points… (Setups and technicals)
In between those sellers chipping away at support, interim bounces were chipping away at resistance. Two afternoon tests of the 2058.00 area weren”t rejected so deeply that sellers gained traction. A recovery Tuesday isn”t precluded.

Sellers didn”t gain traction either. The bias environment”s exit and the noon hour”s entry both were within the noon hour”s range.

None of which precludes probing lower lows overnight. But if Tuesday”s open isn”t already extending down, then it”s probably because the open is already recovering.

Any recovery would likely be designed only to test last week”s highs. They peaked at an Ascending Triangle, whose first reversal down rarely is fatal. Probably, the question is whether the first reversal ended at Monday”s 2048.25 low, or whether 2030.00 or 2022.25 is in-play.

What”s Next… (Outlook and opportunities)
Monday”s close trended down, and the afternoon”s 2058.50 high printed during the bias environment. I had planned to dismiss this potential setup since the afternoon”s range had only narrowed. But post-close action immediately extended down to fresh lows. So, gapping back up above 2058.50 Tuesday would form a “session-long rally” setup. I would still like that recovery to include the morning”s 2059.00 high to deserve greater confidence. Otherwise, any shallower opening strength would remain vulnerable to probing under Monday”s lows.

If low volume trending is the work of weak hands… then Friday”s drop through the noon hour makes at least a temporary probe of fresh highs likely.

Pattern points… (Setups and technicals)
Friday”s session was identical to Wednesday, in every possible way. But one.

Overnight weakness had essentially greeted the cash session with a test of the bias-down signal. Holding its test triggered no-bias, and put into play an offsetting test of the bias-up signal. After finally fulfilling the upside objective, a more concerted trending effort began.

This is where things got a little different… Wednesday”s next trending effort had extended the rally. Friday”s trending retraced and reversed the morning”s recovery. The 2074.00 bias-up signal had been tested to within 3 ticks before reversing down 10 points to test 2063.50.

I”m giving a benefit of the doubt to Wednesday”s post-close high at 2075.25 being a “new Globex trend extreme.” It was printed right after Wednesday”s close, and it was almost a single surge, not very complex. Still, it”s likely to be retested intraday, if not required.

Meanwhile, Friday”s 2063.50 low is likely to be retested. It stopped just short of actually touching its prior low, its RSIs were oversold. Holding its retest through Monday”s opening 15 minutes of volatility would likely launch a retest of 2075.25. Alternatively, rallying first to 2075.25 would likely reverse back down to 2063.50 — and lower.

What”s Next… (Outlook and opportunities)
There is no Saturday Review on holiday weekends. Chartroom will be available Sunday night for the Globex open. See you Monday!