Market Wrap

If you”re not making a weekend of it… then I”ll see you at Friday morning”s Market Tour. Meanwhile, I hope you have a wonderful day full of family and food!

Pattern points… (Setups and technicals)
Wednesday”s narrowly ranging session was already in-line with usual characteristics of the session prior to a mid-week holiday. These are commonly seen year-in, and year-out. “Trending” within the range isn”t unusual, not if there is some unfinished business or other attraction in-play.

Wednesday had its offsetting test of the morning”s 2070.00 bias-up signal to attract it higher. Counter-trend sponsorship doesn”t form when volume is shrinking. The session spread out a 7-point rally from 2065.25 up to 2072.25. A post-close 15-minute 3-point round trip was just another form of vulnerability to low volume.

Friday”s light volume also makes sponsorship difficult to attract, and counter-trend sponsorship almost impossible. If an attraction is created Friday, then it will likely try to fill the session with that singular goal. But rather than spread out the move or extend it, the abbreviated time would require a steeper trajectory.

What”s Next… (Outlook and opportunities)
The only question remaining is whether the open can quickly break out of the range to actually trend intraday. That was the question Wednesday, which held a test of support. Its close is in proximity to actually breaking above prior highs. And that could extend higher into the weekend

If there is no unfinished business above… then trending higher anyway is often bullish. But trending into a holiday can reflect the weaker-handed sponsorship. So, trending higher might be productive, but not necessarily bullish.

Pattern points… (Setups and technicals)
Almost any other time of year would have taken this morning”s reaction down and extended it. A lot. That”s a big Ascending Triangle forming since Friday”s gap up. And trying to extend it, but failing, tends to be bearish.

There”s also an attraction below. Even in the most bullish scenario, a dip back under Friday”s low needs to neutralize the attraction to the range that preceded it. Even in the most bearish scenario, a dip back under Friday”s low needs to recover enough to retest Friday”s opening gap before trending down.

Actually, to the latter bearish scenario… Friday”s 2071.50 opening gap is no longer the attraction from below. Two sessions later, Tuesday”s open probed above Friday”s high and closed back under it. Now, recovering from 2051.25 “lower prior highs” need only bounce to 2066.00 to neutralize the attraction above by proxy.

First things, first.

What”s Next… (Outlook and opportunities)
Pre-holiday volume is already slowing. Liquidity makes trending difficult, and difficult to stop — let alone to reverse — once begun. Noise within the range is likelier, so it is key to break out of a range early. Afternoons prior to Thanksgiving tend to range narrowly… We might have the Market Wrap during the last half-hour. Be sure to ask about any stocks needing a review, since there is no Saturday Review, and Friday is an abbreviated session.

If testing support is a way to refuel buyers… then buyers must be pretty refueled after Monday”s repeated test of support. Right? Actually, no. And in this pattern, possibly the opposite. Scroll down for more.

Pattern points… (Setups and technicals)
A sell signal finally triggered Monday. It was at the final hour”s entry under 2065.50. Not only was it the first sell signal to extend deeper than its first three minutes — it was the first sell signal to be pierced even momentarily.

And it was rejected.

2065.50 had been a pivotal level all day. Its relevance was not as an inflection point triggering follow-through. It was more predictive and contextual. Recovering its intraday tests through relevant timing windows had kept the burden of proof on sellers.

Earlier tests had trapped shorts and created unfinished business above at 2071.50. That last probe under 2065.50 wasn”t just noise, and the natural question to ask is whether repeatedly trapping shorts deserves a higher target than 2071.50.

The answer is no. At some point, repeatedly trapping shorts is as much an indictment of buying pressure needing so much refueling before finally extending higher. But the action does confirm 2065.50 to be a relevant level, which we”ll want to keep in mind if/when it is attacked after fulfilling 2071.50 and retesting Friday”s high.

What”s Next… (Outlook and opportunities)
Speaking of which, Monday”s closing action trended up, but didn”t probe a fresh afternoon high until after coming within 3 minutes of the cash session close. The action wasn”t bearish — despite 1-minute RSI diverging negatively — but it wasn”t optimal for justifying a hold-long. The market often reconciles those two factors by probing higher overnight and then rejecting the higher probe through the open. So, probing higher without being rejected would be bullish.

If WedEX had triggered this week… then it would have triggered “passively bearish.” But Wednesday”s inside day disqualified the setup. Friday”s price action would have fulfilled it. Trending down at Monday”s open would suggest the morning will fulfill the signal, too… Be sure to join us for the Saturday Review at 9:30 ET by clicking here.

Pattern points… (Setups and technicals)
Friday”s expiration session trended down 17 points from the open, and until entering the afternoon bias environment. The duration is typical of Fridays — their initial bias tends to persist at least through the noon hour. 

But we don”t often see the early bias portrayed so obviously. Even the Fridays that do trend, don”t often trend so substantially. Thursday night”s 20-point rally created a lot of space for a counter-trend drop, without requiring its sponsorship to break under support.

And that”s the moral of the story. Despite Friday”s intraday drop being sizable, it didn”t damage the uptrend. Not only did its sellers fail to break under a prior low, their efforts only came within 3 ticks of Tuesday”s high.

Of course, there is a little more to that story. Substantial and relentless downtrends that stop optimistically short of touching natural support make the uptrend difficult to extend. Recovering immediately could find that optimism sorely missed, just when it is needed most — trying to exceed Friday morning”s high. Or, the difficulty could be worked out patiently by consolidating, or by a little deeper dip that stretches Friday”s rubber band a little tighter. 

What”s Next… (Outlook and opportunities)
Regardless, Friday”s opening gap will need to be retested at some point. Either directly, or by proxy after forming a more complex pattern above prior highs. That doesn”t prevent an immediate drop, but it prevents an immediate drop from becoming a durable downleg. Friday being a new high close also prevents an immediate drop from extending into a durable downleg — an immediate drop is possible, and could be substantial, but would be only corrective.

If Friday makes a new high close… then the trend could reverse down immediately, substantially, and for awhile, and yet still be likely to recover.

Pattern points… (Setups and technicals)
There was no bullish reason for retesting Wednesday”s 2038.00 low. Not without isolating the test to some irrelevant timing window. Thursday”s opening test of 2038.00 could have been dismissed had the open already retraced it back above Wednesday afternoon”s 2041.50 low. 

The open”s gap down immediately reversed up to attack 2041.50. That”s still past the open, and that”s still not bullish. It does not form a solid base to launch fresh highs. But neither does it preclude fresh highs.

Buyers didn”t gain traction for their efforts Thursday, so probing fresh highs Friday would be vulnerable to reversing down. And at this early momentum, post-close action is behaving to optimistically to be maintained.

What”s Next… (Outlook and opportunities)
Being a Friday, the morning”s bias tends to persist through the noon hour. Being expiration, the morning”s trend remains vulnerable to reversing throughout the afternoon.