Market Wrap

If buyers are weak hands… then does it follow that weak hands are buyers? If so, then a weak-handed environment wouldn’t necessarily be bearish. That’s what marginalized sellers Monday. Except for one very interesting window Monday afternoon.

Pattern points… (Setups and technicals)[pay]
That interesting window Monday afternoon was the late retest of the morning’s 1950.50 low. It was produced by a leg already underway from 1956.00, which was no-bias trending above the 1954.50 bias-up signal. Its rejection triggered a sell signal under 1953.50 that eventually fulfilled the low’s retest.

What’s interesting is that the last segment was triggered after the 3:10-3:20 window had closed, and after the 3:37 position-squaring window had opened. That was weak hands. In a weak-handed environment. It was the weakest of weak hands.

Rather than preventing the market from fulfilling its objective, the weak-handed drop trapped shorts.

That would have been a very bullish story to tell for Tuesday’s open, but it didn’t stop there. Instead of leaving the pent-up buying pressure to jump start the rally, the rally already resumed into Monday’s close by surging to 1954.50.

That’s still not a new trend high close, which remains outstanding. But buyers also failed to gain traction. Despite not leaving pent-up buying pressure, fresh highs Tuesday remain possible. But they’re not in-play, so an opening dip is likelier to recover than opening strength is likely to extend.

[/pay]What’s Next… (Outlook and opportunities)[pay]
It’s a holiday-shortened week, so economic reports start stacking up. And a less liquid environment is trying to absorb them. A new high close remains outstanding, and trend extremes into a holiday tend to extend afterward. So Tuesday may be the last opportunity to produce a fresh high close in time to begin reversing down before 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 the rally wanted to entrench itself… then a new high close on Friday would have been smart. Instead, now a new high close would neutralize the outstanding requirement without creating a new one to take its place.

Pattern points… (Setups and technicals)[pay]
Friday’s choppiness was certainly in-line with the session’s characteristics for not trending, while also reflecting the wide disparity of opinion.Once again, not until the final half-hour were fresh highs probed. That’s not the stuff of strong handed buyers. But a short requires either breaking under support or else a failed probe above prior highs.

There isn’t much time for the latter scenario, so breaking under support is the likelier path down, if there is a path down this week at all. Participation and volume will begin evaporating Wednesday morning or sooner. That leaves insufficient time to both probe a fresh high and also to reject it. Start trending down at or near Monday’s open, or else the ranging will persist.

That ranging would likely probe fresh highs, which would be vulnerable to extending higher as participation evaporates ahead of the three-day holiday weekend. Perhaps for being somewhat of a subset of each other, trend extremes tend not to appear on Fridays, expirations and holidays. So, not trending down early Monday could give the rally free reign into the following week.

Still, Thursday and Friday both had opportunities to probe fresh highs. And did not. If for no other reason, the potential for a downleg Monday remains very much alive. And there are other reasons, as well.

[/pay]What’s Next… (Outlook and opportunities)[pay]
There is no Saturday Strategy Session this weekend. We’ll do a bigger picture Monday morning after getting through the open. As always, don’t hesitate to request a chart analysis of any stock of interest.[/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 Friday’s close is a new trend high… then the rally will have bought itself some time. What would that say about the rally if it didn’t exploit being in such close proximity? It’s a rhetorical question.

Pattern points… (Setups and technicals)[pay]
Okay, I’ll ask it again. Since Wednesday’s rally proved that Tuesday’s drop was a one-off, was Wednesday’s rally also a stand alone effort? Here it is, after Thursday’s close, and that is still a question.

Thursday’s position squaring window didn’t rally, and that is telling. It opened at 3:37, and only extended the narrow ranging that had begun 30 minutes earlier. Whether there weren’t many shorts still stuck from earlier, or not many will to enter short at session highs, that’s not pessimism. And that’s not bullish from a contrarian perspective. So, Friday session is being entered at 1949.50 without a safety net of shorts to be squeezed.

And there’s no pressing requirement to retest the highs. The outstanding requirement for an eventual new high close can barely offset an attraction down to oversold RSIs at Thursday’s 1936.25 low. A topping market would avoid a new high close on Friday, since it entrenches the rally.

There’s also Wednesday’s consolidation under 1935.00 that had reacted up so substantially to the FOMC news. Tuesday and Thursday’s attacks came close, but neither fell far enough. Their sponsorship wouldn’t allow it. When/If it is tested eventually, it probably won’t be just to pierce it.

Meanwhile, giving early session surges a benefit of the doubt should also get a tight stop. Tuesday’s post-open rally failed, and so did Thursday’s pre-open surge. Those setups tend to start appearing left and right once there has been one or two. None of which requires reversing down from higher levels, but the upside may not be finished.

[/pay]What’s Next… (Outlook and opportunities)[pay]
This being a Friday, the morning’s bias tends to persist through the noon hour. That applies equally to no-bias, as it does to a directional bias… There is NO Strategy Session this weekend, SO be sure to ask for any pressing chart requests during regular trading hours.[/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 another probe above last week’s highs were attempted… then is there a reason why it should resolve any differently? Sunday’s overnight surge was retraced entirely before Monday’s open, and Tuesday’s intraday surge was reversed more substantially. Now the market is poised to try again.

Pattern points… (Setups and technicals)[pay]
Wednesday’s rally confirmed Tuesday’s drop was a one-day wonder — at least, that Tuesday’s low was the drop’s momentum low, and that its retest by lower lows Wednesday would launch a really. Wednesday’s opening probe under Tuesday’s lows was reversed immediately. The balance of the session trended upward.

Was Wednesday’s rally a one-day wonder, too? There remains no attraction above, the last objectives having been neutralized at Tuesday morning’s high. The only unfinished business above is to produce a new trend high close above 1955.50, which would relieve last Friday of holding that status.

Wednesday’s fresh low spent hardly any time probing Tuesday’s low before recovering. And the fresh low was at least 2 points shallower than the likelier objective to retrace all of last week’s FOMC reaction. Neither condition was required before rallying, but rallying so quickly does reflect optimism that can undermine the rally’s durability.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Tuesday morning’s reversal from fresh highs snuck up on the market. The actual price peak was less relevant than the pattern, which had ranged narrowly intraday for two sessions. Attempts to extend higher are vulnerable to the same sudden surprise.[/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 Tuesday’s reversal is part of a durable top… then would it be more serious to extend down through Wednesday, or to spend more time testing the highs? The latter, I think. The past week has been highly volatile since the FOMC decision, so a lot of selling pressure has been expended just to attack that pivotal price point. Sellers might need to be refueled by a bounce.

Pattern points… (Setups and technicals)[pay]
I had noted coming out of the noon hour that the only upside objective outstanding was a new trend high close, which need not be fulfilled on any particular schedule. Probing nearly 5 points above it to 1960.00 seemed capable of getting that done.

Several hour remaining in the session proved more capable at doing something entirely different. The reversal triggered a bias-down targeting 1948.75, forming a five-stage pattern whose risk was to extend the decline considerably. It did, down to 1942.50. That’s where the session closed, after dipping as low as 1939.75.

A lower low Wednesday is likely, since sellers gained traction for their efforts. The bias environment exit at 2:30 was under the noon hour’s low, and the final hour’s entry was at or sliding through the bias environment’s low. Retracing last Wednesday’s FOMC reaction back to its origin around 1935.00 would be a candidate for the lower low.

Could a fresh low Wednesday morning bring a quick end of a brief, albeit aggressive, pullback? Recovering back above a relevant high through the bias timing window or bias environment exits would be credible targeting last Friday’s 1955.50 high. But entering Wednesday’s noon hour under Tuesday’s low would get every benefit of the doubt for extending down much more substantially.

[/pay]What’s Next… (Outlook and opportunities)[pay]
What actually triggered Tuesday’s drop? Central Bank criticism is passe. I’ve been acknowledging the triple secret rehypothecation scandal that has been resurfacing. But the only simultaneous event was the 2-year auction. Wednesday brings the 5-year. Anxiousness ahead of it could discount enough fear for a favorable reaction. The morning isn’t lacking for high-profile econ reports. [/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.