Market Wrap

If this is Thursday prior to quarterly expiration… then the ES futures front month rolls forward at the open from Sep to Dec. Prices quoted below are identified respectively. Bias parameters are basis Dec.

Pattern points… (Setups and technicals)[pay]
Wednesday afternoon’s 1997.50 bias-up target was attacked to within 5 ticks. That doesn’t neutralize its attraction. Several opportunities during the afternoon could have surged to neutralize the attraction. But it was left outstanding. Why?

Was it terrorism fears ahead of Thursday’s 9/11/2001 anniversary that inhibited extending higher? Was it constructive pessimism, keeping alive the attraction to help resume the rally Thursday? A little of both?

Buyers gained no traction through the afternoon timing windows, so gapping up is likely if the rally extends. And extending higher would be well-rewarded, probably to probe prior highs up to 2011.00-2013.50.

Not gapping up won’t be likely to extend the rally. And regardless of 1997.50‘s test being outstanding, not extending the rally Thursday would become more attracted to revisiting Wednesday’s range round 1984.00 and lower.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The market shouldn’t be on defense at Thursday’s open if buyers are regaining control. A dip has room down to 1992.00 without jeopardizing the rally’s momentum. But the timing would make recovery from there difficult.[/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 recent highs still intend to be tested… then Tuesday’s drop can’t extend any deeper for any longer. The afternoon’s lows attacked critical support that defines the uptrend. No prior close is near enough to be broken and to confirm the trend is reversing down. But two-week old intraday lows were probed, and closing any lower would force the market to look much lower for new buyers.

Pattern points… (Setups and technicals)[pay]
Aug 28 gapped down to test the 1987.00 area. That was a test of the prior week’s “lower prior highs” down to 1985.00. Its test resolved in fresh highs. The 1987.00 area held another test at Friday’s open. But that did not resolve in new highs before being revisited Tuesday, so the redundancy isn’t necessarily bearish.

That is, not if rejected without delay. And there is already a delay.

1987.00‘s test could have been rejected Tuesday by recovering its prior resistance at 1992.00 during the same timing window that had probed under it. Too late for that. Wednesday’s open can compensate for the delay by immediately recovering the next higher resistance above 1995.75. At least that is Tuesday’s noon hour high, and Tuesday morning’s bias-down signal. It’s also a 61.8% retracement of Tuesday afternoon’s first downleg that reversed its earlier no-bias trending.

The area of Tuesday’s close is likelier to repel price than to attract it, so Wednesday’s close should either trend deeper into negative territory, or else retrace much of the recent decline.Recovering early wouldn’t be bullish without also extending higher through the bias environment and/or noon hour. Early strength that hesitates to extend higher would be vulnerable not only to retracing, but to reversing down into a new downleg.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Sellers already have control, and need only prevent buyers from regaining it. Whether rejecting a bounce or simply extending the decline, selling should accelerate its pace if buyers aren’t regaining control of Wednesday’s open. A recovery leg need not be aggressive  once it has recovered back above Monday’s late 2002.00 close. [/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 Friday’s new trend high close were not under two prior intraday highs… then the traction it gained could have prevented Monday’s downdraft. Or, it would have let the downdraft take more room and more time to extend down. But by being only a little of both — retracing much of its dip, during much of the bias environment and into the close — weak-handed buyers are still being sucked in, and sellers haven’t yet applied pressure.

Pattern points… (Setups and technicals)[pay]
Friday’s recovery from probing fresh lows reversed back into positive territory. Monday’s post-open surge touched the 2006.25 target from Friday afternoon’s rally, and then reversed down sharply. The two really aren’t very different at that point.

But then RSIs became overbought at Monday afternoon’s 2001.75 high. RSIs did diverge negatively on its retest, but its retest was so near the close as to be considered irrelevant. Counter-trend sponsorship just doesn’t start a new job that late in the day. Although the overbought RSIs don’t require a retest, its 2001.75 high should be retested anyway.

Friday’s recovery never took RSIs overbought at all. So, its buyers never entrenched themselves. At least Monday’s buyers laid the groundwork for absorbing a dip.

And Monday recovery stopped pessimistically short of fulfilling its potential to 2002.25. Not Friday’s recovery, which managed a last-minute surge to fulfill its afternoon target. That wasn’t very self-preserving. But Monday’s recovery has reason to extend. Meanwhile, attractions to retest last week’s highs remain intact.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Sellers didn’t gain traction for the effort Monday. But probing overnight above Monday afternoon’s highs — presumably including 2002.25 — would be vulnerable to trending down through Tuesday’s open. Otherwise, not already trending down would be likely to probe fresh highs 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 Friday’s new high close were above at least one prior high… then it might be credible for protecting the rally against an immediate durable downdraft. But Friday’s new high close was under two prior intraday highs. That’s not momentum.

Pattern points… (Setups and technicals)[pay]
Friday afternoon’s bias environment was exited above the noon hour’s range, but the final hour was entered lower. And the 3:10-3:20 wild card window didn’t compensate for the final hour’s lower entry. None of which is bearish, but the buyers that took price there weren’t gaining any traction for their efforts.

That didn’t prevent fulfilling the 2006.25 bias-up target, which had been left outstanding as “unfinished business above. The 3:37-3:52 position-squaring window surged until touching it. Not closing above it prevented putting into play any higher attraction. Which also isn’t bearish.

None of it is bearish, but it isn’t as bullish as a new high close might seem. An outstanding bias-up target would have helped to attract price higher later, but Friday’s attraction was neutralized. There’s still a “new Globex trend extreme” outstanding at 2011.00, and the likelihood of probing it up to 2013.50.

But Friday’s new high close was under the two prior sessions’ highs. Again, not bearish, but not necessarily bullish. Its momentum won’t be leveraged by starting the week optimistically, and it won’t help to defend against a pessimistic decline.

[/pay]What’s Next… (Outlook and opportunities)[pay]
This weekend’s Saturday Strategy Session begins at 9:30 ET, linked here or in the blog’s sidebar. In addition to discussing the market’s bigger picture and your stocks chart requests, we’ll look at our new home on Marketfy.[/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’s drop was pessimism… then Thursday’s drop could have been pessimism, too. Wednesday’s drop would have been defensive posturing ahead of the BOE and ECB policy statements. So, was Thursday’s drop more of the same hunkering down ahead of Friday’s Employment Situation report?

Pattern points… (Setups and technicals)[pay]
Thursday’s line in the sand was the same as Wednesday, 1997.50. Wednesday’s late-afternoon recovery barely recovered back above 1997.50, but from only 1996.25. Thursday’s recovery came from 1990.75. And it didn’t touch 1997.50 until after the cash session close.

That recovery leg extended higher after the futures close, touching 2000.50. But what earlier could have been considered pessimism was suddenly behaving pretty optimistically. The 10-point bounce was nearly as steep as the 14-point drop that had preceded it.

I’m skeptical that the late bounce ended the afternoon’s drop. It did recover back above Tuesday’s low, which the afternoon’s drop didn’t begin probing until the afternoon. Containing the probe to within a single timing window does suggest its sponsorship was weak-handed, the sort of sponsorship that appears at the end of a drop. But not quit recovering 1997.50 before the cash session close was 3 minutes away — let alone already closed — does suggest sellers were stronger-handed.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The reaction to Friday morning’s Employment Situation report should either test Tuesday’s 1994.25 lows, or else higher prior lows at 2005.50. Maintaining an open beyond either would be likely to trend in that direction. Being a Friday, the morning’s bias is likely to persist through the noon hour. And being a Friday, closing at a new high is predictive — as is not closing at a new high when it is in such close proximity.[/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.