Market Wrap

If the pullback intended to launch a durable recovery… then why aren’t buyers gaining any traction from the closing bounces? Even if Wednesday’s open were to gap up, it would leave a gap back to Tuesday’s close wanting to be filled.

Pattern points… (Setups and technicals)[pay]
Monday afternoon’s low printed just inside of the last 60-90 minutes, and just outside of its bias environment. So, gapping down under it Tuesday, after having trended up into Monday’s close, might have qualified as a “session long decline.” And it might not.

Every timing window Tuesday but one should have printed a fresh session low. The afternoon bias environment did not, but neither did its last 60-90 minutes. Often that delay is compensated by trending lower the next day — not piercing or probing, and not necessarily by gapping down.

Closing at 1958.50 Tuesday is similar to closing at 1971.25 Monday, expending all available buying pressure without gaining traction for the effort. Gapping up Wednesday above the 1965.50 area could kick-start buyers. Anything more shallow is likely to extend the decline.

Closing back above 1958.50-1961.75 could launch a new upleg — trending higher, and not just retesting last week’s high. Closing under Tuesday’s ~1953.25 low would signal a much more substantial downleg underway.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Did fear of Tuesday afternoon’s Fed speakers keep the session under pressure? Then lookout for Wednesday’s FOMC Minutes, which should have a bearish impact, if not discounted sufficiently ahead of the release. [/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 retracing Thursday’s session could correct last week’s rally… then would resuming it be likely to extend much higher? Not yet. Thursday’s session was retraced back down to Thursday’s low at Monday’s open. And it was retraced back down to Wednesday’s close by midday. If the market wants to produce more than fresh highs, then it will need to extend the pullback deeper.

Pattern points… (Setups and technicals)[pay]
That deeper pullback would target 1958.50-1961.75. Back under 1968.50 would start to signal its test underway. Testing it overnight could suffice, and already be in recovery mode before Tuesday’s open. Testing it Tuesday morning must exit the noon hour in recovery to be assured of not extending down.

One template emerged at Monday’s close which was recovering back up to Thursday morning’s 1971.25 low. To it, and not through it. Being the minimum objective to retracing Thursday’s rally, closing there does neutralize any downward momentum. It doesn’t reverse momentum up — but back above 1972.50 would.

I’m not sure whether extending the dip to 1958.50-1961.75 would refuel buyers to do more than retest last week’s high. Already rallying at or soon after Tuesday’s open would likely be done at a steep slope, but not a durable one.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The econ calendar starts to get interesting… Tuesday afternoon. Price action is otherwise still free to fluctuate without needing to respond to economic health. That was tough to navigate 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 Thursday’s session weren’t abbreviated… then would the 10-point rally have been much higher? Or, would there have been more time to reverse the early rally? Neither. The session, and the week, ended right where it wanted to.

Pattern points… (Setups and technicals)[pay]
Thursday’s reaction to its pre-open economic events essentially fulfilled the 1974.00 bias-up target. That held through the bias environment’s normal lapsing at 11:30, and then extended higher to 1978.00.

Despite this being the week’s end, it is not a Friday, so the new trend high close does not require another. But trends don’t peak into holidays anyway, so at least  a probe of higher highs remains likely — not simply to pierce or print a fresh high, but to actually trend with complexity above Thursday’s high.

Dipping immediately Monday is often the resolution to trending aggressively into the weekend. That resolution tends to persist for several sessions following an abbreviated session, filling the gap back down to Wednesday’s 1967.75 cash session close or lower to 1958.50, before returning to the trend extreme. Extending higher without delay would target at least 1982.00, and potentially 2003.50.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Sell in May and go away only sounds more foolish as each day passes. But there is a reason behind the rhyme, which is the summer’s shrinking volume and participation. Coming out of the Independence Day holiday isn’t much more liquid than going in, so beware getting caught on the wrong side of a sudden swing.[/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 is bullish… then is high-volume necessarily bearish? Not necessarily, but high-volume and volume surges has been more vulnerable to dips, even if only temporary. Interesting, perhaps also timely, since Thursday morning’s econ calendar has quite a few high-profile items scheduled.

Pattern points… (Setups and technicals)[pay]
Quite a few high-profile items scheduled for Thursday morning, and a market that has no “unfinished business above.” What the market does have is an incentive to trend down. Tuesday fulfilled its obligation for one more new high close, and Wednesday’s narrow ranging session could not confirm.

Extending higher without a refueling dip would likely be at a steep slope. And a retest of Tuesday’s 1971.75 high would be likely to hold, either at 1972.00 or 1974.25. Not reacting down sharply would be vulnerable to floating higher into the early close.

Several high-profile influential pre-open events are scheduled (BOE and ECB interest rate decisions, ECB press conference, Employment Situation report). Gapping down in reaction to any of them could extend, but that would also run into the early close restraints. The big line in the sand is 1958.50, and its test would become likely if an early or pre-open test of Tuesday’s high were rejected.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Being a Friday, the morning’s bias tends to persist through the noon hour. Being an early close, there is no afternoon bias parameter. Often, the persistence of the morning’s signal is accentuated into 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 Wednesday closes higher… then we could be in for another six more days of pretending it’s not summer. You know, that whole “sell in May and go away” maxim. It’s already July, and that strategy couldn’t be less appropriate. If Wednesday doesn’t close down, aggressively, the rally may yet extend anyway.

Pattern points… (Setups and technicals)[pay]
Tuesday’s buyers gained no traction. Perhaps that seems odd, considering the substantial rally to sharply higher highs. But those highs fully rewarded buyers for their efforts. Otherwise, new buyers would have pushed price higher at appropriate afternoon timing windows. Which they did not.

The rally was relentless, but it attracted no new sponsorship. The entire post-open upleg never violated a pullback limit that needed reinstatement. That’s a lot of buying pressure to expend without refueling — not just in terms of price, but in terms of timing windows.

In the same vein, Tuesday afternoon’s dip is interesting. The relatively controlled pullback into the bias environment’s exit reflected essentially longs taking profits. There was no sudden short-squeeze surge, which would have meant the rally had climbed a proverbial Wall of Worry. Such pessimism would be bullish from a contrarian perspective.

So, the only way to extend the rally immediately Wednesday is to gap up above Tuesday’s high. It’s possible. The high’s retest is likely, but not required since its overbought RSIs were waning by the time of its most recent bar. Also possible is just to test Tuesday’s high, and then reverse down.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Econ reports have begun stacking up ahead of the three-day holiday weekend. Wednesday brings the ADP report, which helps to fine-tune the market’s likely reaction to Thursday’s Employment Situation report.[/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.