Market Wrap

If fulfilling AND rejecting the next higher target isn”t bullish… then it might as well be bearish after several day”s of buying pressure have been expended already. Putting into play the next higher target and delaying its test would have helped to absorb the reaction down. But now the reaction down must be defended to avoid a much bigger downleg…P.S. Here”s the link to the recording of Wednesday”s post-close Market Wrap.

Pattern points… (Setups and technicals)
Two bearish paths for Wednesday”s session were discussed here yesterday. Both formed. Overnight action followed the sequence of a Pivot Reversal setup, and post-open action produced the momentary blips-up to test 1941.00 and 1943.00.

When the morning”s bias-up environment lapsed and the bearish consequences developed , the balance of the session trended down. Relentlessly.All the way to the 1920.50-1921.25 level recovered Tuesday.

And recovering 1920.50-1921.25 was relevant. Spending an entire timing window above it had put into play the 1941.00-1943.00 area. Fulfilling that buying pressure and the retracing the entire rally leg does suggest buying pressure is done.

What”s Next… (Outlook and opportunities)
1920.50-1921.25 was still being tested as support through the close. That”s not bullish unless Thursday”s open were to gap up above 1931.50, which would form a session-long rally setup. Otherwise, at least a deeper correction of the recent bounce is underway, if not its complete reversal.

If Wednesday”s open doesn”t gap down… then this rally will no longer be considered just a temporary corrective bounce. And not just any gap down. Rejecting an opening surge might work, too, but would depend on multiple consecutive timing windows extending down, too.

Pattern points… (Setups and technicals)
None of which precludes a pullback from beginning at some point Wednesday. But probably not until probing fresh highs since its buyers gained traction. That is, Tuesday afternoon”s bias environment was exited above the noon hour”s high, and the 3:10-3:20 timing window trended to fresh highs after the final hour”s entry was muted.

Reversing down from fresh highs Wednesday morning no higher than 1941.00 could start to reinstate the corrective bounce label. That would require extending down into the afternoon and not recovering, so the close would have to confirm.

Otherwise, this is no longer a just a temporary corrective bounce. It might only retest the 2012.75 high by proxy, not actually recovering all the way to it. But that”s still much higher at 1984.50.

What”s Next… (Outlook and opportunities)
Tuesday”s cash session close equated to 1934.75. Futures extended to 1939.75 before the Globex open. The difference isn”t so astonishing as the recent frequency of these wide spreads between the cash and futures close… This allows gapping down under 1927.25 and extending under 1921.25 to form a credible session-long decline setup. Alternatively, a Pivot Reversal could from after a shallower gap down recovers to momentarily test 1941.00 before reversing down more substantially. Outlasting the open without beginning to develop either bearish setup would likely marginalize sellers through the noon hour.

If Monday”s pattern were accumulative… then one or two individual moves would have retraced intraday and extended higher. Monday”s price action was a series of swings that happened to be biased-upward, with no meaningful selling pressure to stop its advance.

Pattern points… (Setups and technicals)
Monday afternoon”s sequence of higher highs and higher lows looked a lot like trending. Sunday night”s gap up that extended to probe Friday”s highs appeared to be intent, too. But each was just a different version of noise in the range. 

Only one intraday buy signal (and there were plenty) extended higher than its first 3 minutes, so no new sponsorship was attracted. The rally was fueled by a myriad of itty bitty accumulative patterns that aren”t really accumulative patterns individually, but behave that way collectively, kept the upside pressure going.

Extending higher grudgingly and not from any accumulation can persist indefinitely. Rallying on repetitive minor swings is an unstable base to launch trending. And each interim dip (circled red on chart) was neutralizing the support of another “lower prior high” (highlighted green). Their support will be sorely missed if/when this phase of the recovery attempt ends.

Meanwhile, buyers did manage to gain traction for their efforts. The bias environment was exited above the noon hour”s high, and the final hour was entered above both. Fresh highs are likely Tuesday morning, presumably up to 1901.50 or 1906.50. Higher highs than that are possible if not rejected through the open.

What”s Next… (Outlook and opportunities)
Only gapping down under Monday”s 1888.25 bias environment low would prevent extending higher. There is plenty of “unfinished business below” to attract price down — from the no-bias trending above Monday afternoon”s 1890.00 bias-up signal, to the morning”s offsetting test of its 1874.00 bias-down signal.

If the new Ebola Czar has no medical background… then he won”t have to spend much time focusing on that aspect of the crisis. Does he have a military background? No? Great! He can be the Isis Czar, too!

Pattern points… (Setups and technicals)
Friday”s session remained in positive territory throughout the day. In that regard, the “session-long rally” setup succeeded. But its actual requirement is that each timing window probe the prior timing window”s high, with only one exception. Friday had two exceptions, the noon hour and the afternoon bias environment.

The bearish WedEX certainly took control by noon Friday. Rallying to 1891.75 began a reversal into noon that extended down to 1870.25 at the bias-environment”s low. Bouncing tested the afternoon drop”s 61.8% retracement, closing at or under its 38.2% retracement. Buyers gained no traction for the effort, so the bounce was absorbed. Also a success.

So, two contradictory signals found a way to co-exist. It”s not exactly harmony, but it”s also not over. Whether Monday opens flat, or if it were to gap up or down, the bearish WedEX should trigger a morning-long downtrend.

What”s Next… (Outlook and opportunities)
Here”s the link for to weekend”s Saturday Review, which begins at 9:30 ET. There is no transcript this weekend, so I hope to see you there!

If not for Bullard”s bullish comments… then Thursday morning”s bounce could have been the session”s last bounce. It was in the process of being retraced — neigh, rejected — when his taper suspension idea triggered a surge to fresh highs. It also cooled sellers for the day.

Pattern points… (Setups and technicals)
So, how did the market do, with sellers cooled. It did well, for awhile. The upper-end of Wednesday”s range and the lower-end of Tuesday”s range were probed. Tuesday morning”s high was probed like it was Tuesday afternoon. Both were probed Wednesday afternoon. 

But buyers weren”t any warmer than that. Probing prior highs was no more productive Wednesday than Tuesday. They didn”t extend, they didn”t gain traction, and they didn”t prevent the close from dipping. Were Bullard”s comments just a delay of game?

Perhaps the afternoon would have recovered more if not inhibited ahead of GOOGL”s earnings — especially after the reaction to NFLX. That”s irrelevant now that GOOGL is out, and the market hasn”t rallied.

Expending a lot of selling pressure Thursday would have made the bearish WedEX more vulnerable to inverting. Whether supported after Bullard, or inhibited ahead of GOOGL, the market avoided new lows and that avoids a durable bottom The question is for how long.

What”s Next… (Outlook and opportunities)
Buyers didn”t gain traction for their efforts Thursday afternoon, so only maintaining a gap up can rally Friday. Being a Friday, especially expiration, the morning”s bias is likely to persist through the noon hour. And being expiration, the opening 15 minutes might define the day”s trend.