Market Wrap

If Sunday night’s surge had been at all complex… then its intraday retest would be required. And usually the same day, which would have avoided a lot of backing-and-filling Monday.

Pattern points… (Setups and technicals)[pay]
The passively bullish WedEX had no effect Monday morning. Did it even have an effect Friday afternoon? Post-open action only trended down, chipping away at 1951.00 support. Not until very late did Monday afternoon reject the support tests.

Good choice. Another chip at support after the bias environment’s exit would have surely probed lower. There isn’t much room with “lower prior highs” sitting at 1948.75-1949.50 just below. Its test could have attracted buyers to drive price back up. Even after bouncing into Monday’s close, failing to recover from probing under Monday’s low to test lower prior highs could trigger a drop that extends down into the weekend.

But we’re not expecting such a detour. It would duplicate the recent resolution to a Friday fresh trend high close. A setup that repeats consecutively — like the recent two Fridays fresh trend high closes — tend not to resolve similarly. And the last one detoured, so this one should not.

Sellers gained no traction Monday, so any weakness shallower than gapping down would likely recover. Just trending up would be credible for probing fresh highs. Although it doesn’t require a retest, Sunday night’s 1959.75 Globex high seems so lonely up there, and wasn’t rejected intraday.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Friday’s fresh trend high close still requires there to be one more fresh trend high close. Having closed flat Monday, closing higher Tuesday would not confirm Friday’s breakout. Meanwhile, Monday’s late afternoon fresh high started just late and stopped just short of qualifying for a hold-long — but it was as close as they come.[/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 influence were any less Friday afternoon… then price would have trended down. That’s an exaggeration, but only by 2 points. As it was, the afternoon bias environment touched the morning bias environment’s low, and reacted back down from an attack on the morning’s high. Highs weren’t probed, which wasn’t necessary for WedEX to qualify. But it does have implications for Monday.

Pattern points… (Setups and technicals)[pay]
Friday morning’s opening 15 minutes of volatility trended down, after gapping up to the bias-up target. This setup is rare. Much rarer is not to extend down intraday. This conflicted with a bullish WedEX, which the market resolved by ranging sideways.

That still qualifies as a bullish WedEX. And when Friday afternoon’s influence is muted, it tends to be exaggerated Monday morning. The opening print may gap up or gap down, but the post-open action should trend up through the morning.

Meanwhile, Friday’s new trend high close does what it did two weeks earlier, which is to require there be a subsequent high close. It need not be immediate on Monday, and may only assure recovering from an interim dip — as it did two weeks ago.

[/pay]What’s Next… (Outlook and opportunities)[pay]
This weekend’s Saturday Strategy Session will be out last until after the holiday. Be sure ask about any stocks your monitoring, or to discuss any of my methodology or other markets. See you at 9:30am ET, click here.[/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 failed to confirm Wednesday’s break… then can Friday still probe fresh highs, or trend up into the weekend (and out of it)? Not only is that possible, but it would provide a very reliable setup for Monday.

Pattern points… (Setups and technicals)[pay]
The market is the ultimate diplomat, satisfying multiple competing interests. Often, simultaneously. Neutralizing an interest, whether a target or a retest, can be as predictive as delaying that satisfaction. So, it is interesting that Friday’s session will be greeted with unfinished business above and below.

Outstanding above is the reward to Wednesday afternoon’s buyers for gaining traction. Thursday’s opening probe of fresh highs was in a position to reward Wednesday afternoon’s buyers, but the probe was too brief and too shallow. The afternoon’s rally was positioned to trigger a short-squeeze, but did not.

Despite owing Wednesday’s buyers the reward of probing fresh highs, and being in a position to do so, the market couldn’t muster the strength. That would have confirmed Wednesday’s breakout. Durable trends don’t miss opportunities to renew their strength and attractions.

Perhaps this rally has expiration working in its favor. The passively bullish WedEX could be influential enough. We’ll see. Thursday morning’s dip took RSIs oversold to create unfinished business below at 1944.00. Its retest has no timing element — as evidenced by Monday morning’s oversold RSIs at 1922.75 still requiring a retest. There is also the historical likelihood that the FOMC reaction will be retraced entirely within a week, as they often are.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Thursday’s close at Wednesday’s high wasn’t equilibrium, but it doesn’t qualify as trending. The late breakout and lack of follow-through suggests to me that Friday could be choppy. Only trending through the opening 15 minutes of volatility would signal otherwise.[/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 recovery has been waiting for FOMC’s news… then its sponsorship isn’t strong-handed. And the ranging since Monday morning has been distribution, not accumulation. Strong hands would not have worked so hard for so long just to avoid a fresh low, not without already having rallied. The rally’s delay in that context tells us its sponsorship is weak hands.

Pattern points… (Setups and technicals)[pay]
The FOMC reaction finally get the the market out of its quagmire. A quick sell-off to dump ballast and weak longs could have achieved the same thing. The latter would have trapped shorts and refueled buyers, suggesting more than just a retest of last Monday’s high is in-play. Instead of giving sellers more rope to hang themselves, the rally wasted the past two days by ranging sideways.

Regardless, a 16-point rally produced a new high close. Last Friday’s close was a new trend extreme, requiring a subsequent higher close, and the requirement is now neutralized. That’s not a sell signal. In fact, Wednesday afternoon’s buyers gained traction so higher highs are likely intraday Thursday — a morning dip would be likely to recover.

A second consecutive higher close would be similar to the Friday trend high close, requiring at least one additional higher close. Wednesday’s rally was likely exacerbated by this week’s expiration, so nothing can be taken for granted. Volatility and intraday directional changes seem to be alive and well.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The WedEX indicator signaled passively bullish. The new high close was clearly bullish, but originating from within a consolidation — and not already trending — is too late to be active. Regardless, the influence is on Friday afternoon and Monday morning, so a pullback through Friday morning can’t be discounted.[/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 multi-session decline ended with its Monday objective… then is the recovery already underway? Nothing about the interim price action could be construed as rallying. Yet, 61.8% of the drop has been retraced at Tuesday’s high. Is the non-rally already due for a corrective dip?

Pattern points… (Setups and technicals)[pay]
I had warned in Tuesday’s pre-open First Trade blog posts that the overnight probe above Monday’s highs was unlikely to extend, since buyers had not gained traction the prior afternoon. Its 11-point reversal down through the morning got aggressive. Largely retracing the dive didn’t make it any less vulnerable, and another dip retraced much of it.

But the pre-open probe of fresh highs did foreshadow Tuesday’s relentless optimism. Two morning dives didn’t dissuade a recovery through the afternoon. The last 60-90 minutes ranged around Tuesday’s pre-open high.

It’s still suspicious. Not just for its timing, and since its buyers once again failed to gain traction — but also because it held 1935.50 which is a 61.8% retracement of the drop from last Monday’s high to last Thursday’s low. Closing above it would have been bullish. Reacting down from could have been bullish. But closing at it makes the next trending attempt much likelier to be down. Its likely target is a retest of Monday morning’s oversold RSIs down 1921.50.

Extending higher first would target 1938.50-1940.00. A pullback from there would likely be absorbed. But extending higher first is less likely.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Wednesday afternoon’s FOMC news is among the most reliable events for triggering extremely volatile price swings. This cycle includes the quarterly Chairman’s Q&A, a relatively recent advent that has been forming reliable patterns of its own. Wednesday’s close may trigger a WedEX signal that forecasts a bias into and out of the weekend. This tends not to develop when price has been probing new trend extremes, which the current environment has not. [/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.