Market Wrap

If money bias into expiration is most obvious by Wednesday’s close… then perhaps that’s what prevented Wednesday’s rally from extending. Thursday’s open must still confirm, but this cycle’s WedEX indicator is interesting nevertheless.

Pattern points… (Setups and technicals)[pay]
Wednesday afternoon’s 1994.00 bias-up signal was likely to define the bias environment’s upper-end. Not necessarily on FOMC days. But the level is still relevant, and closing above or below it still would have had significance. So, it’s interesting that 1994.00 defined the close.

It’s really interesting not to have signaled whether the uptrend’s sponsorship was influential through the close, or done, when that session included a test of prior highs. All prior highs — the 2001.75 high, and the 2002.75 “new Globex trend extreme. Only the room for noise above it to 2005.50 remained outstanding.

Testing 2005.50 from a close above 1994.00 would have been likelier to probe it than to hold it. But having tested the range’s 2001.75 high without closing above the trend’s own 1994.50 high does suggest the WedEX is passively bearish. Gapping up Thursday above Wednesday’s 2003.25 high would serve by proxy to form an actively bearish WedEX. Otherwise, recent lows may be revisited soon.

[/pay]What’s Next… (Outlook and opportunities)[pay]
All trending triggered by FOMC news is retraced eventually. Usually it’s about a week later. But Wednesday’s close at 1994.o0 robbed us of that setup, since that’s where the news was greeted. Perhaps we should be suspicious of the next trending attempt getting too far before returning to 1994.00.[/pay]

Look for at least one update overnight or ahead of the Morning Market Tour… My thoughts on the day’s econ calendar are linked here.

If the sell-off had extended another day… then Tuesday’s close could have been at new highs. Not really, but the point is that the past week’s sellers weren’t gaining any traction, and only creating more and more pent-up buying pressure.

Pattern points… (Setups and technicals)[pay]
Four of the eight days prior to Tuesday closed down. Six of those days probed lower lows. The last of those days was the first not to overlap the first. That’s a long time for selling pressure to finally be productive. Even then, 2-3 probes under Friday’s low were recovered back into the range. Not very productive.

Along the way at least two intraday sell-offs were absorbed, last Wednesday and Thursday mornings. Either one was sufficient to reward buyers with a retest a prior high. Absorbing both sell-offs increased that reward to include another prior highs. And that was before Monday’s failed probes of fresh lows.

So, there was a lot of pent-up buying pressure before Tuesday’s 1972.25 open (which gapped down, more selling absorbed). Its intraday rally to 1994.50 satisfied both original rewards, but none of the others.

Presumably, that’s coming, at least to 1997.00 (Tuesday afternoon’s 1996.25 bias-up target is “unfinished business above”), and potentially back to the 2001.50 intraday high and the 2002.75 “new Globex trend extreme.” Rather than stop there precisely, the high’s retest should visit 2005.50.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Only Tuesday’s bias environment exit exceeded its prior timing window high, so buyers gained no traction for their intraday effort. A pullback Wednesday morning ahead of the afternoon’s FOMC news would have room down to 1984.75-1986.25. Probing fresh highs Wednesday morning without first gapping up probably wouldn’t react well to the news.[/pay]

Look for at least one update overnight or ahead of the Morning Market Tour… My thoughts on the day’s econ calendar are linked here.

If two opening selloffs can’t attract bottom-fishers… then surely a late short-squeeze will do the trick. Right? Not exactly. Monday’s narrowing trading range surged to fresh session highs when more than an hour remained until the close. But the balance of the session only dipped nonchalantly back down to unchanged.

Pattern points… (Setups and technicals)[pay]
On-again, on-again, off-again, on-again… Until Friday’s last half-hour ranged narrowly where it did, the ongoing premise has been that the past week’s decline was refueling buyers. Friday’s last half-hour had ranged narrowly at the bias environment’s 1977.75 high, instead of extending the prior half-hour’s rally from Friday’s low back up to the bias environment’s 1977.75 high.

That action, or lack thereof, suggested sellers were just toying with buyers, that they were slow-playing the decline’s resumption until after the weekend. In fact, Sunday night’s open spiked down 8 points. It’s complete recovery into the open quickly reversed back down 8-1/2 points.

Sunday night’s spike down was abnormally large, but not unusual, and neither was its post-open copycat. What is unusual is that there is usually a consequence. Whether punishing the failed sell-offs, or fulfilling them, the same session should close above a relevant resistance or under a relevant support. Monday did neither.

At this stage, I’m considering Sunday/Monday’s two opening drops to be the slow-played reward for Friday afternoon’s sellers. Monday afternoon’s probe of fresh highs may very well be setting up for more of the same — another reward Tuesday for Monday’s sellers slow-playing the decline. Not resuming the decline at Tuesday’s open would reinstate the premise that the past week’s decline was refueling buyers.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Monday’s bias environment exit and final hour entry were above the noon hour’s high, but not successively higher. Rallying at all Tuesday probably requires gapping up. Overbought RSIs at Monday’s 1979.00 require a retest. Gapping up or simply retesting 1979.00 without remaining above Friday afternoon’s 1977.75 high would likely reverse down through the morning. Fresh highs would otherwise be credible for extending higher intraday.  [/pay]

Look for at least one update overnight or ahead of the Morning Market Tour… My thoughts on the day’s econ calendar are linked here.

If buyers aren’t rewarded for absorbing sellers, twice… then really it’s buyers who are being absorbed. It’s all relative, too. The week’s buyers absorbed one or two sell-offs that almost pushed the market off the ledge. That’s a lot of disappointed buyers if they’re not rewarded soon for their efforts.

Pattern points… (Setups and technicals)[pay]
Make, or break. Wednesday morning’s sell-off had developed entirely under the prior week’s two “higher prior lows.” Exiting that timing window back above the higher prior lows suggested sellers were absorbed. Buyers tend to be rewarded for that, usually with a recovery back above that downleg’s origin.

Despite absorbing another round of weak-handed selling Thursday morning, bounces have been relatively shallow. Then Friday’s sell-off extended into the afternoon, probing under Wednesday’s lows.

Trending down to fresh lows and remaining in negative territory sounds pretty bearish. AnD yet, signals are mixed:

Despite twice probing lower intraday, Friday’s close was back above Wednesday’s lows — but not back above their consolidations. The morning’s 1976.50 bias-down target that attracted price down held its probes as support — but was still being tested at the close instead of recovered. And a fresh session low didn’t extend down despite an entire hour remaining in the session — but that final hour’s bounce couldn’t exceed the bias environment’s high, and held there for a half-hour.

Either buyers are racking up points for a huge reward, or else much stronger selling pressure is absorbing buyers. Either way, the next leg should be substantial. The final hour’s action suggests that sellers slow-played the decline, saving their energy for Monday. But if they’re not obviously in control coming out of the open, then it’s probably because the open is gapping up sharply.

[/pay]What’s Next… (Outlook and opportunities)[pay]
This weekend’s Saturday Strategy Session begins at 9:30 ET, linked here, or found in the blog’s sidebar. We’ll review the bigger picture, and any stock chart requests.[/pay]

Look for at least one update overnight or ahead of the Morning Market Tour… My thoughts on the day’s econ calendar are linked here.

If Wednesday morning’s trapped shorts was already bullish… then you can imagine the added upside potential from adding Thursday’s trapped shorts into the mix. But the session’s late surge touched and held an outstanding target, so extending higher Friday probably needs to gap up. And if Friday is likely to extend higher, then it is likely to gap up. Which is why a hold-long was noted at Thursday’s close.

Pattern points… (Setups and technicals)[pay]
Thursday morning’s round trip was a great example of the significance of bias timing windows. The setup was Wednesday night’s dip being rejected through Thursday’s open at 9:45 and through the bias timing window at 10:15. The 1982.00 bias-down signal was recovered in time to avoid triggering it, despite having probed considerably under it.

The significance is two-fold. First, that clear signal didn’t prevent the opening bounce’s complete retracement from 1985.75 back down to the 1977.25 pre-open low. This one developed in time to invalidate the bias signal. But even a later drop could have been proved valid, the product of strong-handed sponsorship.

The retracement is significant for itself being recovered. Stronger hands can retake control from the strong hands that trigger the bias signal. But that’s a rarity. Two reasons to give the counter-bias efforts respect: even weak-handed sponsorship can be productive before failing, and strong-handed sponsorship overcoming the bias signal must be motivated by something truly extraordinary.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Thursday’s late high fulfilled the 1989.75 (basis Dec, 1997.50 basis Sep) unfinished business above left outstanding from Wednesday afternoon’s bias-up target. That was Thursday’s last-minute high. Afternoon buyers gained no traction for their earlier efforts, so extending higher immediately Friday requires gapping up. Extending higher after fulfilling a target is even more difficult. But a gap up would get every benefit of the doubt for extending higher intraday. Only gapping down back under Thursday afternoon’s 1981.25 low would be credible for reversing the trend down. [/pay]

Look for at least one update overnight or ahead of the Morning Market Tour… My thoughts on the day’s econ calendar are linked here.