Market Wrap

If “S&Ps” were a household word… then hitting 2000 would relevant. But the round number influences are a function of the Dow, and irrelevant for other indexes that are less popular among retail investors. Any perception of this week’s price pattern flirting with 2000 is an optical illusion — the same pattern can be seen at other random price levels.

Pattern points… (Setups and technicals)[pay]
Now, 2003.50 — that’s relevant. It was Monday morning’s renewed bias-up target, and Tuesday morning’s bias-up target. It was met to within 3 ticks at Tuesday’s high. And that’s close enough to satisfy its buying pressure.

Just how the target was met is important, too. Rather than being a longstanding target, or left outstanding for several days, 2003.50 was met almost as quickly as it was put into play. The shorter cycle between creating and fulfilling a target tends to appear near a top.

Not that sellers exploited the satisfied buyers, not much. The reaction down tested the morning’s congestion, as was expected. And that was within the Double Top at Monday’s high, which is just less congested congestion. But the probe above Monday’s highs was prevented from extending, so Tuesday’s new high close was under prior highs.

Again, this behavior tends to appear near a top.

Not closing above the target prevented putting into play a higher target. And Tuesday afternoon’s timing windows remained within the same range as each other, so there is no upward momentum. That’s quite different from the superficial picture of gapping up, probing new highs, spending the entire session in positive territory and producing a new high close.

This “ineffectual pessimism” can persist indefinitely. Not infinitely, but indefinitely. Stepping in front of it can be dangerous. But not already reversing down at Wednesday’s open would have potential to probe even higher highs intraday.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Actually, any decline underway this week will need to have probed its last high by Wednesday morning. Otherwise, the seasonal bullish influence of a three-day holiday weekend could marginalize sellers through 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 not for another geopolitical headline… then — but, wait, there was no such news. Actually, there was a headline in the Ukraine-Russia conflict, but the market ignored it. At least, it didn’t react down. Perhaps the news was effective, anyway, in preventing the morning’s rally from extending. Is that what prevented the rally from extending?

Pattern points… (Setups and technicals)[pay]
Monday’s 1995.75 opening gap up was above all prior highs. That’s also where the cash session closed. There was no net gain, despite gapping up and probing higher highs. It wouldn’t very optimistic, except that the entire session was spent in positive territory.

This pattern can form an Island Reversal. but it requires the next session to gap down under prior highs. Maintaining a gap down under 1990.00 would trigger multiple consecutive sessions trending down. An eventual recovery would be likely.

Not gapping down would at least target a retest of Monday’s 1999.75 highs which formed a Double Top, presumably visiting 2003.50 in the process. The pattern is often retested, although that’s not required

[/pay]What’s Next… (Outlook and opportunities)[pay]
Tuesday’s econ calendar is the week’s busiest, but not necessarily its most dangerous. Keep in mind that with the impending three-day weekend, a trend reversal will need to be obvious by Wednesday’s close or else sellers may be marginalized until next week.[/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 not for another Ukraine-Russia headline… then Friday morning would have probed new highs. The open’s high was being retested minutes earlier. The bias parameters had put into play an objective above Thursday’s high. Whether new highs would have stuck through the close, that’s a different question. And much more important.

Pattern points… (Setups and technicals)[pay]
Probing a new high Friday would have been very vulnerable to reversing back down through the close. We discussed that potential soon after Friday’s open, because it would have formed a very bearish pattern I call a “Pivot Reversal.”

Bearish, not simply for rejecting a fresh high. More important is that Friday’s open gapped down. Gapping down in an uptrend, and then rejecting an intraday recovery, can mark a durable high. Was that the market’s intent before the Ukraine-Russia headline derailed it?

1984.75 held repeated tests as support. On any other day, that would be considered bullish. On Fridays, that’s not necessarily strong-handed buyers absorbing sellers. Still, that could have produced new highs, and didn’t. Is the market’s intent to probe new highs when enough time remains to close back in negative territory?

“Unfinished business above” remains outstanding at 1993.25. A deep enough break at Monday’s open could get away from that attraction. Otherwise, fresh highs Monday should neutralize its attraction, where behavior will help to reveal the next trending leg.

[/pay]What’s Next… (Outlook and opportunities)[pay]
This weekend’s Saturday Strategy Session will cover the market’s bigger picture and then address any stock chart analysis requests. We may also review the new location on Marketfy. And we’ll wish Happy Anniversary to the 1987 market peak that preceded October’s “Black Monday.” [/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 is sponsored by strong hands… then it should employ any tactic to preserve its momentum. Closing Fridays at a new trend extreme is the most obvious when greeting the session in such close proximity. So, NOT closing higher Friday…

Pattern points… (Setups and technicals)[pay]
It’s a fine line between weak hands and less strong hands. Both are overpowered by stronger hands. But while overpowering weak hands can produce an extended trend, overpowering strong hands can be short-lived. And the volatility can be substantial, as each side reasserts itself.

That seems to have been the case Thursday. The morning’s 1987.00 bias-up signal was probed overnight. It was probed during the opening half-hour. There was no probe at 10:15, signaling that sellers had absorbed buyers. But buyers still weren’t pinned, and they tried again at 10:30. Even that late effort only overlapped 1987.00 instead of recovering it.

At 11:30 when the bias environment began lapsing, 1987.00 had been probed even higher. And it maintained its recovery. Strong hands were overcome by stronger hands. But ultimately, despite probing both lower and higher intraday, the close was still overlapping the open’s high.

There is wide divergence of opinion in this area. Thursday afternoon’s 1993.25 bias-up target was left outstanding above. The morning’s no-bias trending hasn’t yet been retraced entirely back down to its 1987.00 bias-up signal, making its 1984.75 10:15 print likely to be tested, too. Either attraction can be neutralized overnight.

[/pay]What’s Next… (Outlook and opportunities)[pay]
New trend extreme closes on Fridays are rarely the trend’s ultimate extreme. So, not closing at a new trend extreme this Friday — especially coming off of Thursday’s trend extreme — would suggest this rally is peaking. A bigger concern would be probing fresh highs early, and then quickly reversing down, which is a difficult pattern to recover ahead of 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 this is where the last downleg began… then can this week’s retest of prior highs extend much higher in the near-term? A lot of buying pressure has been expended in a brief time — gapping up, and extending higher relentlessly intraday. The momentum can carry through prior highs, but can it prevent at least another corrective dip?

Pattern points… (Setups and technicals)[pay]
Wednesday afternoon’s rally produced a new high print, piercing July’s prior high by a single tick. An errant tick, up to 1986.00. It was certainly a new high for the two-week old rally. Corrective, or not, a probe of fresh highs is all but assured.

Fresh highs became likelier upon recovering 1951.00 and then 1968.00, and inescapable above 1973.00. Now, higher highs are all but assured due to Wednesday afternoon’s “unfinished business above” at its 1987.00 bias-up target. The path there is not at all assured, nor is the purpose of new highs — whether to briefly retest, or to extend in a new rally leg.

Briefly retest of extend, either way, new highs should test 1993.00. And briefly retest, or extend, a dip back into Wednesday’s range would be likely, since trending inspired by FOMC news is always retraced entirely. Peaking or already reacting down Thursday would help to prevent a new high close on Friday. A new high close on Friday would be bullish, but closing back under 1973.00 and 1968.00 would seal a top.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Thursday morning’s econ reports are a virtual minefield of volatility catalysts. Jobless Claims will relate to Wednesday’s FOMC news for any glimpse it offers into employment, which the Minutes suggested as gaining importance. LEI’s inflation perspective speaks to another thread discussed in the Minutes.[/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.