Market Wrap

If Wednesday’s dip had begun any earlier… then Wednesday’s close would have been well into negative territory. An interesting determinant between strong-handed and weak-handed timing.

Pattern points… (Setups and technicals)[pay]
Wednesday morning’s bias timing window outlasted a break under support, which qualified its later sellers as being weak-handed. At least, that label correctly predicted the bias-up signal would support the bias environment’s low.

Perhaps being labeled correctly as weak-handed, the selling was unable to close in negative territory. Not for lack of trying, since the noon hour’s and the afternoon’s lower low did probe negative territory.

But the burden of proof wasn’t on sellers, so they could afford to be patient. Buyers didn’t reject the selling. Closing unchanged wasn’t the issue. Not retracing back above at least 61.8% of the afternoon’s range does keep control with sellers. And the late bounce peaked upon retracing exactly 61.8% of the afternoon’s downleg.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Traction, or not, closing unchanged does keep the door open to Wednesday’s selling being “ineffectual pessimism.” But the open must gap up in that scenario to avoid probing under Wednesday’s lows. And despite leaving outstanding Tuesday night’s “new Globex trend extreme” that requires an intraday retest, this is a dangerous place for the rally to start challenging support.[/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 Tuesday’s post-open sellers had been any more productive… then Tuesday afternoon’s buyers couldn’t have left the session unchanged on the day. And a new downleg would be underway already.

Pattern points… (Setups and technicals)[pay]
Tuesday was the real Labor Day, referring to the afternoon’s effort at retracing 61.8% of the decline from overnight highs. Being common for a correction. retracing 61.8% is as much energy as could have been expended without gaining traction for the effort.

The overnight retest of Friday’s 2003.75 pre-open high had been probed up to 2006.25. Its 13-1/2 point reaction down through the noon hour expended a lot of selling pressure. In fact, it held two tests of the bias-down signal without triggering it. So, sellers expended as much energy as possible without gaining traction for the effort — like the afternoon’s 8-point recovery that retraced 61.8% of the decline.

And that left Tuesday’s close essentially unchanged from Friday’s close.

All of which suggests the session was just a lot of noise. The 2006.25 overnight high doesn’t require being retested. But its retest is likely if sellers try and fail to reverse the trend down. Its retest is likely to visit 2013.50.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Tuesday’s bias environment was exited above the noon hour’s high, and the final hour was entered higher. Unless Wednesday’s open is already in decline, the afternoon’s bounce is likely to extend. Not necessarily for the entire session, or even through the noon hour, as anxiousness ahead of the afternoon’s Beige Book release inhibits trending.[/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 rally could have left breadcrumbs before the weekend… then why did it ignore several opportunities? It’s not necessarily bearish, except for missing an opportunity to behave bullishly.

Pattern points… (Setups and technicals)[pay]
Pre-holiday volatility seemed to evaporate into the afternoon. Dropping quickly from noon’s 2001.75 session high fell into a narrow range around 1998.75, which had been the session’s opening print. The position-squaring window surged back up to 2001.75, before retracing entirely to close back at 1998.75.

That late surge’s failure was just one more missed opportunity to entrench the rally. Closing higher could have created a “holiday high,” or a new trend high close on a Friday, neither one tending to be a durable trend extreme. Reversing down immediately would have been likely to recover.

Similarly, no complexity to the 2003.75 overnight high prevented it from being a “new Globex trend extreme.” Its retest intraday would have been required, eventually if not the same day. Even gapping up from Thursday’s flat close to indicate new sponsorship, indicated the new sponsorship wasn’t strong hands since it couldn’t extend above the open.

Durable rallies tend to employ those tactics as a self-preservation technique. Not doing so isn’t bearish. Except that ignoring multiple opportunities despite being so well-positioned does make it difficult to extend higher without first dipping deeper. And difficult to avoid dipping deeper if first extending higher.

[/pay]What’s Next… (Outlook and opportunities)[pay]
This being a holiday weekend, there is no Saturday Strategy Session. The chartroom will be open Sunday night for the 6pm Globex open, which ends at 1pm ET Monday before re-opening at 6pm Monday. Please have a safe and happy holiday weekend![/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 low volume helps to retrace a sell-off… then will it hurt or further help a rally? New trending is difficult to start, and the prevailing trend is already up. Throw into the mix that three-day weekends often behave bullishly. The path of least resistance is up. Which tells us something about a drop…

Pattern points… (Setups and technicals)[pay]
That’s not to say another downdraft can be avoided. Recovering 1997.00 was the minimum requirement to consider a hold-long, but it held as resistance — first at the noon hour’s high, and then at the post-close surge. There’s also no attraction outstanding above, especially since Thursday’s recovery filled the gap above back to Wednesday’s 1996.75 close without closing above it.

Thursday’s last action was a 2-1/2 point drop to a fresh afternoon low at 1994.00 support. Its test earlier would have launched a new recovery leg. Testing it so late — that’s where the cash session closed — did react up sharply to 1997.25. But that was post-close, so it can’t be considered as reversing momentum up.

Rallying Friday must begin as a surprise. Thursday afternoon’s timing windows ranged too narrowly to create any urgency for resuming the post-open recovery. The 7-tick wide bias environment developed entirely within the noon hour’s range, and it contained the final hour’s entry. Buyers gained no traction for their efforts, so the only credible rally Friday morning would begin by gapping up.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Just drifting higher Friday morning would be vulnerable to another downdraft. Gapping up that is maintained through the morning can become a slow drift higher through the close. Another downdraft can’t be prevented, but it will have to be immediate and sustained to be productive at all before the weekend. [/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 strong hands want to reduce exposure into the weekend… then they’ll force Wednesday’s close to close under relevant support. Wednesday morning’s sell-off probably wasn’t sponsored by strong hands, since it stopped short of even touching the bias-down signal. The afternoon’s sell-off probably wasn’t sponsored by strong hands, either, since it was retraced entirely.

Pattern points… (Setups and technicals)[pay]
None of which prevents probing lower lows intraday Thursday or Friday. After all, while sellers have failed to break under a relevant support, buyers have so far failed to exploit that. One more dip wouldn’t be surprising, but one more dip should be the last.

One more dip isn’t necessary before recovering to retest Tuesday’s 2002.75 high. Regardless, one more dip within the context of trapping shorts should develop at Thursday’s open, if at all. Not recovering through Thursday’s open — or probing Wednesday’s 1994.25 support on Friday — would be less recoverable.

Oversold RSIs at Wednesday’s 1993.50 low require an eventual retest. The optimal pattern in keeping with these inputs and influences would retest it overnight and greet Thursday’s open in recovery mode, rallying sharply through the morning. The optimal pattern for launching a downleg despite being so late would simply trigger Thursday’s bias-down.

[/pay]What’s Next… (Outlook and opportunities)[pay]
One reason strong hands tends to express itself by Wednesday’s close is that volume starts evaporating much earlier ahead of a three-day weekend. Similarly, if you’re trading options, beware of accelerated premium decay. Meanwhile, econ reports aren’t slowing down, so they’ll have greater impact on price action. [/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.