Market Wrap

Friday’s opening relief rally reversed down 86-1/2 points from 2710.00 to 2623.00 into the final hour. Its reaction up to 2652.00 stopped just short of 2656.00, but only fell back down to 2631.00 and closed above 2626.00. Only above 2626.00. The next lower objective at October’s 2603.00 low wasn’t put into play, but the retest of Thanksgiving’s low wasn’t rejected. No hold-short setup was triggered, but the pattern is still at risk of extending down sharply without delay.

Details and other markets coverage are discussed in the post-market Wrap recording here.
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Is it a bottom? A lot of buying energy was expended from the morning’s bias environment exit through the close, rallying from 2614.00 up to 2700.00. But positive territory wasn’t recaptured, and no traction was gained for the effort.

A couple of important levels did hold their tests — 2626.00 and 2656.00. One or both could be retested naturally to form a more durable bottom. But a credible bottom shouldn’t require any more development than a brief dip. Not recovering from early weakness could find Friday Factors exacerbating selling pressures similar to Tuesday.

Whether or not Friday is another day that lives in infamy, this week will. Getting the Employment Situation report out of the way should free the market to trend in the direction of its next leg.

Details and other markets coverage are discussed in the post-market Wrap recording here.
Monitor overnight Globex trading in the chaRTroom here.

The answer to everyone’s question is 2763. That’s what caused Tuesday’s drop. At least, that’s what turned whatever had triggered it into something far more substantial.

That’s ES 2763.00, from Tuesday’s First Trade: “Lower lows have potential to 2763.00, but probably no lower before bouncing to keep alive the rally’s momentum. Any deeper would overlap Friday’s cash session ‘lower prior highs’ when optimism needs to remain intact.“

Monday’s gap up had already held its retest of Friday’s range — a 61.8% retracement between Friday’s close and Monday’s low, which had produced the gap. The pullback could be retested, but not Friday’s range without rejecting the gap’s intent. I had said that sponsorship to get there was unlikely ahead of Wednesday’s illiquidity, to which Trump said, “Hold my beer” and sent his “tariff man” tweet.

As difficult as it would be to generate sponsorship in a less liquid environment, it would be difficult to stop it. The consequence exacerbated the pullback. It could have been shallower, and it could still be deeper. Tuesday’s low held a 61.8% retracement of the post-Thanksgiving rally 2629.00 up to Sunday night’s  2814.00 Globex high. Recovering from here would be more bullish than first extending down to the room for noise at 2656.00, but possible.

One potentially bullish factor to having so many headlines of different stories accompanying the plunge is that a lot of scapegoats can be discounted at once. Brexit drama, Yield curve inversion, China trade truce doubts… Each was already suspicious, and not a total surprise. And the break they induced under 2763.00 was exacerbated by Wednesday’s illiquidity

Also retraced was 61.8% of Fed Chair Powell’s speech surge last Wednesday, represented at Tuesday’s close. “Lower prior highs” from that morning were also tested. Tuesday night’s price action only firmed, not yet enough to suggest any particular resolution. I’ll add comments in the chaRTroom overnight.

Details and other markets coverage are discussed in the post-market Wrap recording here.
Monitor overnight Globex trading in the chaRTroom here.

REMINDER: I’M UNAVAILABLE BY NOON TUESDAY. PM BIAS PARAMETERS SHOULD BE AVAILABLE, BUT NO OTHER UPDATES UNTIL THE EVENING.

Sunday night’s gap up to 2783.50 had extended overnight to 2814.00, testing the three-week old high session’s range. Resistance there pushed back to greet the open at the 2798.00 earlier Globex low, which didn’t hold, forming a Globe-flip setup. The setup triggered Monday morning’s decline.

The decline’s minimum likely target became a 61.8% retracement between Friday’s cash session close and Monday’s opening print at 2773.50. That served as the actual morning low.

Bouncing through the noon hour’s exit up to 2790.25 trended back down through the afternoon bias environment. Avoiding a fresh session low — especially closing lower — prevents the Globex-flip from necessarily influencing Tuesday morning. Trending down Tuesday morning is possible, but not due to the Globex-flip. Lower lows have potential to 2763.00, but probably no lower before bouncing.

Closing at fresh afternoon highs would have signaled the Globex-flip had been absorbed. But its probe up to 2793.50 only reacted back down through the close. Triggering a retest of three-week old highs up to 2818.25-2823.00 must await another setup.

Details and other markets coverage are discussed in the post-market Wrap recording here.
Monitor overnight Globex trading in the chaRTroom here.

Absorbing multiple dips Friday morning had at least indicated sellers weren’t gaining traction for their efforts. And there had been many. The failed dips also established that Thursday afternoon sellers gained no traction for their efforts. But the minimum reward or consequence was to retest Thursday’s high.

And that was done Friday afternoon. Without being rejected.

Two no-bias environments could hardly wait to probe their bias-up signals. The behavior wasn’t so optimistic as to be bearish from a contrarian perspective. But it does suggest the rally is credible for extending higher.

Closing above Thursday’s high has put into play the next higher objective at 2768.00-2770.00. There’s no timing or other requirement to meeting it, so reacting down Monday can’t be discounted — especially following a weekend of headlines from the G-20 meeting.

Details and other markets coverage are discussed in the post-market Wrap recording here.
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