Market Wrap

If the multi-session decline influenced Monday morning… then the afternoon ranging suggests that a rally is waiting for one more flush. Not that another sell-off attempt need be substantial, or lengthy, before its recovery can be considered bullish. Just an opening dip would suffice, preferably neutralizing unfinished business below and suddenly reversing up.

Pattern points… (Setups and technicals)[pay]
Unfinished business below is limited to the oversold RSIs at 1922.75 where Monday morning’s bias environment was exited. With enough wind at its back, last week’s 1917.50 low could be tested, too. Gapping down just deeply enough and THEN probing fresh lows would help to expend buying pressure without leaving unfinished business below.

Leaving unfinished business below wouldn’t necessarily prevent a rally back to prior highs. It would require the rally back to prior highs to be relentless so that the unfinished business doesn’t attract price down.

Since buyers gained no traction Monday, gapping up to and/or through Monday’s highs is probably the only way to avoid fresh lows at all. Back above 1931.00 and extending through 1933.50 would leave behind oversold RSIs and a gap, but their relevance would still help the high’s retest to hold.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Wednesday’s FOMC decision shouldn’t be very influential Tuesday, at least not Tuesday morning, and not directly. Since it is likely to influence Wednesday morning’s price action, the period before then can accelerate breakouts and reactions ahead of the inhibition. So, steep legs are likely.[/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 market is concerned with possible weekend developments… then that only served to repress a recovery Friday. The session otherwise only ranged sideways around Thursday’s highs. But it also avoided probing under Thursday’s lows, so its optimism seems somewhat ineffectual.

Pattern points… (Setups and technicals)[pay]
When Thursday’s slide extended down that afternoon instead of recovering, it suggested that the decline would extend through Monday morning. That didn’t preclude there being an interim bounce on Friday. Was there?

Friday’s open plunged toward Thursday’s low, but stopped short of touching it. Optimistically short. A more substantial surge began prior to testing support, rising substantially at a steep slope, probing the bias-up signal during a no-bias environment. That was pretty optimistic, too. Ineffectually optimistic.

And sell-off into the close was anticipated, but its fresh afternoon lows were still shallow. Unfinished business was left outstanding just below the afternoon low, within the session’s range, with fresh lows being the likely compensation for its delay.

[/pay]What’s Next… (Outlook and opportunities)[pay]
This weeken’s Saturday Strategy Session begins at the usual 9:30am ET. Its link is in the blog’s sidebar, or 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 surging energy prices can’t shake trigger a correction… then count me in for buy-and-hold. Meanwhile, I tend to believe that earnings and economic forecasts must still recognize the higher costs that must be absorbed.

Pattern points… (Setups and technicals)[pay]
The market headed fearfully into Friday the 13th, and its full moon. No doubt, events in Iraq were more influential. In either case, the selling has been expended. The question is whether it attracted reinforcements.

Thursday’s 1917.50 low printed just before the Position-squaring window opened at 3:37 ET.  And that low was a retest of a low that had been recovered through the 3:10-3:20 timing window. The two lows are not as relevant as the timing of their recoveries.

Dipping to 1917.50 would have been credible for extending down. So, not extending down, and also recovering back above 1922.50, suggests that sellers may have gotten ahead of themselves. Perhaps it was too much fear over the 13th, the full moon, or Iraq. Regardless, not immediately extending down Friday would allow at least the morning to bounce.

It cuts both ways. Not immediately bouncing Friday would be likely to extend the decline. Not recovering into or out of Thursday’s noon hour already suggests the decline will extend through Monday morning. So, rallying Friday morning would still be vulnerable to selling-off into the close.

[/pay]What’s Next… (Outlook and opportunities)[pay]
I don’t usually mention the weekend’s Saturday Strategy Session until after Friday’s close. But since we didn’t have one last week, I want to be sure you’re well aware that we’ll be meeting at 9:30am ET, at the link available in the blog’s sidebar. And I’ll be reminding you again after Friday’s close.[/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 a falling tree doesn’t hit the ground… then does it make a sound? Wednesday’s session-long decline requires that almost every timing window probe a fresh low. Wednesday’s last timing window didn’t comply. To the contrary, it rallied 6-1/2 points from the 1938.50 fresh session low back to the session highs. Will that leave a mark?

Pattern points… (Setups and technicals)[pay]
Reversing from session low to high might not seem like “ineffectual optimism.” But Wednesday afternoon’s 6-1/2 point rally stopped short of gaining traction. The bias environment was exited under the noon hour’s low, and the final hour’s entry was within the bias environment’s range. Wrong buyers, wrong time.

So, were sellers weak, or were they conserving energy to compensate for the delay on Thursday? Not only is the answer one or the other, but it should be one or the other on steroids. Gapping up sharply or gapping down sharply is likely. Gapping up is necessary to rallying after buyers gained no traction. Gapping down could extend down if the opening print were not too deep to attract new sellers.

Not already recovering into the noon hour from a morning drop would be likely to extend down into Monday morning. Maintaining a gap up through the noon hour could marginalize sellers through the weekend, but probably not with a new high close on Friday.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The front-month for S&P futures including the ES rolls forward at Thursday’s open from Jun (M) to Sep (U), and trades at about a 7.25 point discount. [/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 late surge had surged earlier… then the session might have produced the one outstanding new high close the pattern requires.

Pattern points… (Setups and technicals)[pay]
Tuesday’s gap down held 1946.00 to avoid forming a “session-long decline” setup. That didn’t prevent the morning from probing lower to 1943.00. But gapping down, and spending the entire session in negative territory, avoided trending down. It was almost “ineffectual pessimism.” Almost

Ineffectual pessimism also would have probed fresh lows during the afternoon. Recovering was easier, since sellers didn’t expend much more energy. Regardless, selling pressure was absorbed, but only for returning to unchanged, and not to produce a recovery.

That’s pretty close to being ineffectual pessimism. And that makes rallying likelier, at least to retest the origin of the drop — Monday’s 1954.75 mid-day high. Having rallied into Tuesday’s close, gapping down under the afternoon’s 1945.25 low would trigger a session-long decline. Only teasing it could be bullish.

[/pay]What’s Next… (Outlook and opportunities)[pay]
This market has a “Wednesday Wreversal” written all over it. That happens when trending in the morning seems pretty productive, but reverses more substantially in the opposite direction into the afternoon. That’s tough to square with Friday’s new trend extreme close still requiring a new trend extreme close, unless a reversal down were recovered after several days.[/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.