Market Wrap

If the highs intend to be retested… then they’ll need to reject Tuesday’s decline before noon Wednesday, or at least be well on the way.

Pattern points… (Setups and technicals)[pay]
Monday night’s dive was in reaction to warnings from the EU over sanctions coming against Russia. That was recovered to probe fresh highs. Impressive. But extending higher through Tuesday’s open failed to improve RSIs. Actually announcing the sanctions drove price down sharply, more than 12 points to 1965.25.

Which isn’t very surprising, since the cash session crowd had yet to react. Surprising was the intraday drop’s recovery also failing, falling 12 points to 1963.25.

Actually, the morning’s drop had already fallen too far for a recovery attempt to succeed. Its lows required a retest — not just for being accompanied by oversold RSIs, but for having retested Friday’s 1968.00 pivotal low, which made a retest of Monday’s 1960.75 actual low only a formality.

RSIs weren’t oversold at Tuesday’s eventual low, but that was the only reason not to consider a hold-short. Otherwise, the bias environment exit and the final hour’s entry each were at or under their prior timing window’s low. Since Monday’s actual low wasn’t actually touched, the hold-short is suggesting Wednesday’s open will gap down.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The paths higher to retest last week’s highs require dispensing with the downside quickly Wednesday, or else dismissing it altogether. That means either probing fresh lows early and reversing up through the opening 15 minutes, or else actually satisfying the bias-down and then recovering through the bias environment exit. Alternatively, and more succinctly, gapping up to and through 1971.50 or 1976.00 would leave Tuesday’s drop behind.[/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 high’s retest intends to become a new upleg… then the dip probably should have bee deeper and more protracted dip than just through Monday’s open. At least the recovery wasn’t overly-optimistic, which would have left Tuesday’s open (if not Monday night) vulnerable to retracing the bounce.

Pattern points… (Setups and technicals)[pay]
Friday’s pattern had created two likely targets below, which Monday morning tested and held. The rally’s pre-open tactic of bouncing worked to to absorb selling pressure, which confirms the rally is still in control. That was a major takeaway from this weekend’s Strategy Session.

That takeaway was based in no small part on the relative performances among SPX, Dow and NDX. The latter-most was still reflecting a speculative risk-on mentality into the weekend, despite Friday’s drop. Now we’ll be watching for outperformance by the more consistent Dow to suggest the rally is ending — especially if NDX were to probe under prior lows.

Regardless, Monday’s pattern doesn’t require extending higher, let alone extending higher without delay. That’s likely, but inserting another corrective dip to any degree would tell us a bigger rally was underway. Just extending higher without delay would be considered part of the topping pattern.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Wednesday’s FOMC policy statement probably won’t impact Tuesday’s price action, but Monday volatility tends not to dissipate too quickly. Whether retesting last week’s highs or Monday’s low, new sponsorship is likely to be attracted.[/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 “accident waiting to happen” is happening… then Friday’s drop should not delay extending down Monday — aggressively. There is no unfinished business above, but Fridays don’t tend to start new trends, any more so than they end them.

Pattern points… (Setups and technicals)[pay]
Immediately trending from the 1982.00-1984.75 area wasn’t going to be credible. Thursday’s close was testing that range’s lower-end, and not yet breaking under it. Friday’s open overcame it by gapping beyond prior lows. That doesn’t require extending down, but it doesn’t require being recovered.

Reversing a consolidation range from one end to the other wasn’t likely. Friday’s prior three session had overlapped each other. Gapping down to Tuesday’s lower-end of the three-session range leap-frogged over the range’s 61.8% internal retracement that would otherwise try to prevent a reversal.

Despite developing entirely above July 3’s holiday high, Thursday’s session was unable to close above Wednesday’s highs. After two prior sessions had probed fresh highs while still overlapping July 3’s range, Thursday’s “ineffectual optimism” earned the warning of being an accident waiting to happen.

The question is whether the accident is actually happening.

Fridays aren’t very reliable for signals since their participation is thinner. The morning’s drop might have been recovered if not for Friday factors, which is unusual behavior due to the impending weekend’s illiquidity. That cuts both ways, and the factors could be attributed to delaying fresh lows. Regardless, the delayed outcome should be compensated Monday by gapping up or down substantially.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Friday’s Market Wrap (recording linked in the blog’s sidebar) depicts a possible Ascending Triangle that has formed, and which may be failing. An intraday “uptrending pivotal trendline” break that should still test 1968.00 could resume Friday’s decline to continue developing the failed Ascending Triangle. Its minimum objective would be 1963.25, probably to 1960.25. Failing to recover from either would open the door to 1931.75. Any delay in extending down would be likely to retest the 1982.00-1984.75 range before a durable decline would be credible.[/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 sellers aren’t retaking control early Friday… then the impending weekend’s illiquidity might have different plans in mind for the day. Quite different.

Pattern points… (Setups and technicals)[pay]
Thursday’s session tested all of the relevant levels, while fluctuating around Wednesday’s ~1983.00 high. It was the first session to range exclusively above July 3’s range — at least, intraday.

The session also tested all relevant levels. The room for noise above 1982.00 to 1984.75 contained the opening surge. The morning’s 1985.75 high was a retest of the overnight high’s “new Globex trend extreme.” And the afternoon’s relatively wide swing closed back at 1982.00.

A last-minute sell signal triggered, and extended through the close to 1978.00. And lower. So much for avoiding July 3’s upper-end, which the late dip pierced.

Even before returning to July 3’s range, the pattern doesn’t reflect accumulation. There are no technical or structural objectives outstanding above. Nothing is attracting price higher, except by default since nothing is attracting price down.

[/pay]What’s Next… (Outlook and opportunities)[pay]
That may seem like an accident waiting to happen. That’s only because it is. But the situation can persist indefinitely. In fact, the weekend’s impending illiquidity can cause Fridays to be explosive. So, especially with this being a Friday, the alternative to triggering bias-down in the morning could easily be significantly higher 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 the holiday high’s retest is forming a top… then its rejection should be obvious by Thursday afternoon. So should the opposite.

Pattern points… (Setups and technicals)[pay]
Did the impending post-close Facebook (FB) earnings inhibit Wednesday afternoon from ranging? The likelihood of July 3’s retest also visiting 1982.00 was fulfilled in the morning. Its noon hour reaction was largely retraced during the bias environment. But then a narrow 1981.00-1982.50 range strangled price action through the close.

None of which is either bullish or bearish. But some of it is predictive. For example, we do know that 1982.00 is influential — more as a magnet than as a repellant or accelerator, but influential, nonetheless. Immediately trending down would be likely to recover to fresh highs, even if only to touch 1984.75. Similarly, testing 1984.75 and THEN trending down would be credible for extending.

That is juxtaposed by another predictive example. Wednesday’s last three or even four timing windows overlapped each other at relevant time points (e.g. the bias environment’s exit, the final hour’s entry). So, unless trending is established at Thursday’s open, its entire morning will be vulnerable to resuming a relatively narrow directionless range. This is regardless of gapping up or down — in fact, the two days tend to be interrupted by a gap. Trending through the open would break this grip.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Regardless of these influences an others, the pattern remains vulnerable to extending higher. The only sell signal is a break back under a prior low, which even Wednesday’s noon hour drop avoided.[/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.