Market Wrap

If pullbacks couldn’t extend because a new high remained likely… then Tuesday’s new high allows pullbacks to extend. July 3’s holiday high could not qualify as a trend extreme, which required its eventual retest. Tuesday fulfilled the objective. Now begins the real test, of whether the retest held, or a new rally leg is underway.

Pattern points… (Setups and technicals)[pay]
Regardless of the resolution to this fresh high, one thing is known. It is that buyers gained no traction for their efforts. Gapping up to prior highs and extending higher still traded no higher during the afternoon than at any point during the morning. In fact, the 1980.50 afternoon high was printed during the noon hour, and hardly even attacked any later.

While Tuesday’s high may be a breakout from its recent range, it hardly qualifies otherwise. So, Wednesday can’t really offer a second consecutive confirming close. Back above 1979.75-1979.50 would start to signal the rally extending anyway — to 1982.00, 1984.75 and 1997.75. But no above attraction is in-play.

Meanwhile, a hold-short almost triggered under 1977.50 by being probed before getting to within 3 minutes of the cash session close. It may have been too productive already, spiking down through the close to 1973.50, and satisfying the minimum objective of the pattern described here previously. But the reversal down remains intact so long as 1978.50 isn’t recovered.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The only attractions are below, and the only momentum is up. Not maintaining the uptrend would have plenty of motivation to put in another downleg. The more that a downleg resembles one from the past two weeks — sudden, steep and substantial — the less likely that it recovers. Shallow pullbacks won’t suffice to reverse the trend down… RECORDINGS UPDATE: It looks like the recording problem has been resolved. Today’s Market Wrap is already available on the blog. Let me know if you experience any difficulty, and thank you for your patience![/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 geopolitical surprises can hibernate for a day… then a probe of fresh highs could be done before leaving for lunch. And its reversal could be done before returning.

Pattern points… (Setups and technicals)[pay]
RECORDINGS UPDATE: I’m now told the recording facility remains backlogged. Had I not been assured of its resolution over the weekend, I would have used that time to secure an alternative. I’ll try to have something in place tonight that will make recordings available again for Tuesday’s Market Tour.

Not that fresh highs must be rejected. That’s still likely, but two weeks of absorbing dips might deserve a bigger reward than only a temporary probe above 1978.25. Regardless of the resolution, 1982.00 should be tested.

There is room up to 1985.00 while still being vulnerable to reversing down. Closing any higher would start to signal that only a retest is unlikely, while a new rally leg is probably underway.

That’s if selling doesn’t resume Tuesday. And selling need not resume before extending the rally, no deeper than 1965.50, or perhaps a test of 1964.00. Dipping any deeper could simply extend. Defenses are pretty much depleted. Monday was spent entirely in negative territory, and more than half of that was buying pressure expended without even touching positive territory.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Monday was an “inside day,” and so was Friday. But their range’s aren’t exactly subdued. The setup tends to break falsely initially in one direction, before reversing more substantially in the opposite direction. Oversold RSIs at Monday’s low want to be retested, but shouldn’t be retested at all to keep alive potential to fresh highs. And since Monday’s buyers failed to gain traction, extending higher without delay must gap up Tuesday.[/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 inverted bearish WedEX influenced Friday afternoon… then will it also influence Monday morning? And, how?

Pattern points… (Setups and technicals)[pay]
Friday’s rally proved the bearish WedEX, in fact, had inverted due to Thursday afternoon’s plunge. The bearish posturing noticed by the signal at Wednesday’s close was accelerated into Thursday afternoon.

Not all of it. Some was simply inhibited by the falling valuations. Now those valuations have returned, since Friday’s rally ended back at the origin of Thursday afternoon’s plunge.

But expiration has ended — at least, for the purpose of rolling and hedging. WedEX is still influential, and having rallied Friday afternoon, so should Monday morning. Only one of the two timing windows tends to be aggressive, and Friday afternoon was already. So, if Monday were to extend the rally, then it should be less aggressively.

A gap back to Thursday’s close was left outstanding below, so sustaining fresh highs would be difficult. The extra time spent absorbing dips was probably related more to expiration, and less to accumulation. Ignoring any bullish bias Monday in order to dip again would be more bullish than trying to extend higher without delay.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Saturday’s Strategy Session will begin at 9:30am ET. We’ll end a little before one hour. So, be sure to have your stock requests ready… And be sure to attend, since I’m not being told the delayed recordings may not be available until Monday — which I would assume will include the Strategy Session.[/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 prior high’s retest is complete… then how quickly should the downleg develop? Very. The pattern in-play did not require a new high close before reversing down. Not actually probing new highs is only a little problematic since the high close has been retested. But reversing down still isn’t optimal, not without reversing down aggressively.

Pattern points… (Setups and technicals)[pay]
See if you can spot the pattern. First, sellers gained traction Thursday afternoon. The bias environment was exited under the noon hour’s high despite having probed above it. The final hour was entered under the bias environment’s low. And the 3:10-3:20 timing window trended down through the noon hour’s low. Meanwhile, the break under the noon hour’s low extended down more than 10 points.

Second, there is Wednesday’s bearish WedEx. It identifies which way big money is starting to lean into and out of expiration. It’s not unusual for events like Thursday’s airliner downing to accelerate those plans. Thursday’s second downleg measured 21 points, and may represent the repositioning and rolling that WedEX expected — just a little early.

The pattern is that both setups may already have largely played out their downside. The premature repricing may also be inhibiting further selling, while also attracting buyers. Their bearish signals are valid, but their time table may have inverted them to being bullish. We’ll know that before Friday’s open by an overnight rally recovering the 1960.00 area.

Otherwise, the trend remains down. This was not the first probe under 1958.00-1961.50, but it was the first lower close. It was a big drop for a Thursday, and a not recovering Friday could be very, very bearish Monday. Not reversing overnight would likely extend down into the weekend. Slightly lower lows are likely down to 1947.50, and below there would target 1931.75.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Thursday’s reaction up from 1949.75-1950.50 support exceeded its bounce limit up to the 1954.00 area, so quick that it was barely violated. A hold-short was considered being so near to the stop, with 1947.50 being the next major attraction below. Opening near there would begin targeting 1931.75. [/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 WedEX were any less decisive… then it wouldn’t have triggered, at all. That can be rectified by Thursday’s open gapping up or down sufficiently. Otherwise, there is still an influence expected on expiration.

Pattern points… (Setups and technicals)[pay]
Wednesday’s retest of July 2’s high was higher than Tuesday’s test. But it still qualified as stopping pessimistically short of an actual high, despite having come so close. This is the basis for a passively bearish WedEX. To be actively bearish, the WedEX setup would have also closed negative, especially after probing a new high intraday.

Thursday’s open can serve by proxy, but it must do more than was required at Wednesday’s close. So, closing Wednesday above July 2’s 1978.25 high would have been actively bullish, but now gapping up Thursday above 1981.25 would be required. Closing negative under 1968.00 would have triggered an actively bearish WedEX, but now gapping down Thursday under 1965.00 is required.

WedEX influences Friday afternoon and Monday morning price action. That leaves Thursday the opening to probe a new high, and to reject it. Trending down into and out of the weekend would leave no unfinished business above. Just ranging sideways isn’t very likely at this stage of the pattern, but trending down without first probing a new high isn’t much likelier.

[/pay]What’s Next… (Outlook and opportunities)[pay]
S&Ps already dipped after the cash session close, back down to 1971.50. That was a critical level Wednesday (the morning’s bias-up signal, and the 11:30/noon prints). A line in the sand is being dug, and attempts to trend away from it should be retraced.[/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.