Market Wrap

If Tuesday”s unconfirmed breakout isn”t resumed on Thursday… then it could be quite awhile before another rally attempt develops.

Pattern points… (Setups and technicals)
Tuesday”s breakout was not confirmed. It was the first trending away from the ongoing consolidation range, but Wednesday did not close higher. Thats not a sell signal, but not resuming the rally Thursday would start to form a top.

The trend change warning was followed by an entire session in negative territory. That”s not a sell signal, but rallying would have invalidated the warning.

Correcting Tuesday”s late drop — which extended Wednesday morning — was completed to within 3 ticks of 2051.00. That”s not a sell signal, but it expended as much buying pressure as possible without gaining traction for the effort. 

Also not a sell signal: Closing ABOVE pre-breakout highs. Wednesday”s selling pressure tested the prior range”s upper-end as support, what I call “lower prior highs” — and they held. That”s not a buy signal. But retesting Wednesday”s 2041.50 low during a relevant timing window would be… wait for it… a sell signal.

What”s Next… (Outlook and opportunities)
Thursday”s econ calendar is busy. That”s just early morning, and there”s only one irrelevant report Friday. Trending into or out of Thursday”s noon hour would be credible for extending in that direction through the weekend.

If one trend change warning only pauses the rally… then must the next warning have a different resolution? Only if the setups are similarly formed. But Tuesday and last Monday”s setups are different. Last Monday”s last three timing windows ranged narrowly sideways, while Tuesday”s tried to trend.

Pattern points… (Setups and technicals)
Tuesday”s buyers gained no traction for their efforts. The bias environment”s exit was above the noon hour”s high, but the final hour”s entry was flat. Surging from the open and trending higher through the entire day, without gaining traction. This means that buyers were fully satisfied, and that no new sponsorship was attracted. 

Meanwhile, three consecutive timing windows developed above all prior highs. This setup warns of a trend change. The warning might be left at that, especially if Wednesday were to extend higher. It probably won”t impose a week-long narrow range like last Monday”s similar warning. So, not extending higher Wednesday could be very bearish.

Tuesday”s rally was a breakout, the first to close above what had become a relatively narrow trading range. Closing higher Wednesday would confirm. Closing higher would also not be in-line with expectations for only a momentary failed breakout attempt.

What”s Next… (Outlook and opportunities)
There is no unfinished business above — Tuesday”s 2054.25 bias-up target was met within 1 tick, where 3 ticks would have sufficed, and RSIs were not overbought at the high. Extending higher anyway would suggest the rally is unstoppable. Not just a retracing the last timing window”s 6-point drop back to 2048.00, and not just probing the high”s Double Top at 2054.00 — but recovering fresh highs through a relevant timing window, to invalidate Tuesday”s trend change warning.

If last week”s trend change warning hasn”t lapsed by now… then it may still be able to undermine a probe of fresh highs. Either way, a probe of fresh highs is likely next, unless sellers take immediate control Tuesday.

Pattern points… (Setups and technicals)
We”re always looking for clues to which sponsorship is strong-handed. One of the simplest characteristics is a dip that probes under support, but then recovers its test through a relevant timing window. Similarly, not maintaining a probe above resistance can be revealing.

Revealing, of what? Not necessarily near-term direction, but of sponsorship strength. 

For example, Sunday night”s probe under Friday”s low was retraced before Monday”s open. Not entirely, but at least back above the prior low that was being probed. That didn”t prevent another sell-off, and it didn”t require extending the recovery. But it did suggest another sell-off would recover, while the door was open to extending the recovery.

Monday did neither. Which is also revealing — at least, the degree to which it did nothing. A bounce back to the range”s upper-end at Friday”s high was retraced entirely back down to Friday”s low. A lot of noise? Yes, but purposeful.

Like Friday morning”s wide-ranging choppiness, the market is busting at the seams of its week-old narrow ranging. It is axiomatic not to expect ranges to last forever, so that much is obvious. But the failed attempts to break lower and the repeated attraction back to the range”s upper-end does suggest at least a temporary break higher is coming.

What”s Next… (Outlook and opportunities)
Add to the foregoing that last Monday”s trend change warning has likely been absorbed by now, especially after closing above 2035.00. The result is an even greater likelihood for resolving in the next timing window — and resolving up. Whether only to 2048.50, 2051.00 or higher, fresh highs would still be vulnerable to being only a false break that reverses down much more substantially to make the trend change warning credible.

If Friday”s participation were normal… then its intraday pattern still would be irrelevant. But It was important that resistance levels held when they did — not to suggest the next move, but to confirm the current pattern remains intact.

Pattern points… (Setups and technicals)
Friday”s choppy morning held tests of either side of the ongoing narrow range. Breaking either way as the bias environment lapsed would have trended in that direction. But the bias environment only contained a test of the morning”s 2032.25 low. So, the balance of the session trended back up to the attack the morning”s 2039.75 high.

2035.00 was still being overlapped and influential into the close. That was last Monday”s high, whose afternoon warned of a trend change. Session highs tested and held 2039.50, which is essentially the range”s upper-end.

Without a new high close, the rally missed an opportunity to preserve itself in case of an immediate downturn. And it wasn”t so far away as to be difficult if intended, but it”s really just more of the same behavior suggesting the rally”s sponsorship has left the building.

None of which is a sell signal. Not exploiting multiple opportunities to decline doesn”t speak well of sellers. At least a temporary probe of fresh highs intraday is becoming likelier.

What”s Next… (Outlook and opportunities)
Click hereto enter this weekend”s Saturday Review begins at 9:30am ET. I”ll resend the link in the morning, but don”t forget to join us for a bigger picture overview of the market, and to analyze individual stock chart requests.

If the rally persists despite no attractions above… then there are certainly no attractions below. Momentum trumps targets, but both are lacking as the weekend approaches.

Pattern points… (Setups and technicals)
Wednesday night”s surge to new highs at 2043.75 fulfilled the Wreversal Wednesday setup. It delivered the consequences to to Wednesday afternoon”s “ineffectual pessimism” at 2036.50. And it tested the 2039.50 objective.

It did create an attraction above to be retested intraday, which Thursday”s intraday action retested — to within 3 ticks, which qualifies.

There is on requirement to trend any higher. Unless the market further delays trending back down. Thursday”s reaction down probed under Wednesday”s low, touching Wednesday”s 2026.75 pre-open low. Either that trapped shorts, or it cleared the way for reversing down.

If Thursday”s intraday drop had expended all available selling pressure, then the close should have been recovered decisively. But Monday”s trend change warning is still being overlapped and not rejected. Monday”s 2035.00 high is still defining resistance for most relevant timing windows, including Thursday”s close.

What”s Next… (Outlook and opportunities)
This being a Friday, the morning”s bias is likely to persist through the noon hour. Triggering either bias could extend considerably intraday. The multi-session ranging that is centered around 2035.00 can”t last forever. But it can last indefinitely. And that has been the pattern