Market Wrap

If not for Monday morning’s rally… then Monday afternoon’s decline would have seriously damaged the topping process.

Pattern points… (Setups and technicals)[pay]
Friday’s new trend extreme close created the requirement for at least one more. Friday afternoon’s buyers didn’t gain traction, so trying to produce the new high close Monday morning was doomed to failure. And after retracing Monday morning’s new highs — without yet deeply probing negative territory —  rallying into the close was doomed to failure, too.

I should say, IS doomed to failure. Monday’s bounce out of the afternoon bias environment’s low has yet to fail. It did hold its 1951.00 objective, which was a 61.8% retracement of the afternoon’s decline. Coincidentally, that was also Friday’s close.

A durable downleg is unlikely while a new high close is still required. But that doesn’t prevent a multi-session pullback. And a multi-session pullback isn’t likely to be shallow.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The market has gotten very heavy on top, making a new high close much more difficult. Last Monday morning’s reversal attempt to reverse down failed and recovered substantially, making the next reversal attempt likelier to succeed.[/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 this rally were a shark… then it would drown if it ever stopped swimming. Many sharks must keep moving and force water through their gills to get oxygen. The market’s current upleg has extended higher without each session’s buyers gaining traction for their morning efforts. Recovering from opening dips has led to flat afternoons, leading either to another opening dip or else gapping up. This pattern produces two possible paths down. Two and a half.

Pattern points… (Setups and technicals)[pay]
Not gaining traction for morning recoveries means that those buyers were already rewarded by the recovery, itself. Their flat afternoons belie this. Extending higher without delay from a standing stop requires new sponsorship, which is easily identified by having a different character than the prior afternoon’s ranging. That means gapping up.

Shallow opening weakness that tries to recover intraday won’t, because the next day’s shallowness is still part of the prior day’s narrow ranging. A deeper dip is required to replace the prior afternoon’s complacency with new sponsorship.

The first possible path down from the prior afternoon’s ranging would fail to maintain a gap up through the opening 15 minutes of volatility. The gap’s sponsorship would be weak-handed, and the prior afternoon’s narrow ranging could offer only temporary support. The second possible path down would open shallowly lower from the prior afternoon’s ranging.

That second possible path down has two branches. The first would recover back into positive territory and try trending. Big mistake, without dropping deeply enough to trap enough shorts to refuel. The second branch would simply continue extending the slightly weaker open down and down, turning the weak open into a magnet for pent-up selling.

Friday’s last-minute rally originated from a late dip. Its new high close wasn’t quite the “short-squeeze of the century” I had noted as possible for the day. But it was still weak-handed for originating after the final hour had begun.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Trends don’t tend to end with new extreme closes on Fridays, but they do become vulnerable to near-term reactions down. Last week did, and although that didn’t extend past the morning, it did require the shark to keep swimming[/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 rally didn’t already discount any enthusiasm possible from Friday’s NFP, … then the short-squeeze of the century could be unfolding. An momentary, doomed short-squeeze would appear similar at its open.

Pattern points… (Setups and technicals)[pay]
I noted earlier Thursday that the rally had taken to fulfilling new objectives almost as quickly as it was creating them. This followed the rally having tested higher attractions that weren’t actually objectives requiring a test. The market is quite literally pulling out all the stops to extend the rally.

This tends to be late-stage action. The tactic keeps alive the trend, but it doesn’t refuel. Refueling is more constructive. Recall that Monday’s steep sell-off from its opening sentiment extreme was recovered intraday. That would have helped the rally to endure.

Not that the rally can’t extend. Thursday’s new high close is not a sell signal. But the buyers didn’t gain traction for their efforts, despite the afternoon bias environment’s fresh high. Maintaining a gap up through Friday’s open would likely trend up safely into the weekend. The only other potentially bullish scenario would bounce from gapping down.

[/pay]What’s Next… (Outlook and opportunities)[pay]
What might trigger a gap down Friday? The same thing that paralyzed Thursday afternoon with anxiousness. The pre-open Employment Situation report, which appears solo for the day. A centrist Fed speaker does have a pre-open talk overseas.[/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 afternoon had ranged any more narrowly… then it might have been confused with a Saturday. Even the Beige Book news didn’t shake out the attraction to a new high. By the same token, a new high didn’t shake out a Beige Book reaction. Pins, and needles.

Pattern points… (Setups and technicals)[pay]
First of all, my continued thanks for the patience with my limited schedule right now. Thursday will have one hole in it, but not the pre-open Market Tour or post-close Market Wrap. Friday afternoon and Monday afternoon will miss their Market Wraps, but we’ll be live and focused during Friday’s Employment Situation report.

My thanks to the market, too. As soon as I became unavailable at the 1:20 bias timing window, a narrow trading range took over. Even the Beige Book data didn’t dislodge it. The morning’s recovery from 1916.00 persisted through the noon hour, attacking the afternoon’s 1927.75 bias-up signal to within 3 ticks.

The bias environment exit was at the noon hour’s upper-end, and the final hour’s entry was at the noon hour’s lower-end. Buyers gained no traction for yet another heroic feat, only another slightly higher new high close. This, despite neutralizing any semblance of an attraction above.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Thursday brings BOE and ECB interest rate policy statements, and a typically gaffe-prone Draghi press conference. Afternoon paralysis ahead of Friday’s Employment Situation report might be skipped if things heat up Thursday morning.[/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 this were expiration week… then this setup would be capable of  triggering either a bullish or bearish WedEX. I would be more concerned with today having potential for a Wreversal Wednesday, especially after Tuesday’s inside day.

Pattern points… (Setups and technicals)[pay]
Tuesday morning’s absorption of the overnight dive had put into play a test of 1923.75. It was met to within 1 tick after the close. Monday’s cash session close equated to 1923.00, relatively unchanged. That’s another version of Monday’s buyers not gaining traction, which I described in yesterday’s Trading Plan.

Despite the new high close, buyers gained no traction for their efforts. The bias environment exit was bullish, above the noon hour’s high, but the final hour entry fell back within the noon hour’s range. And the 3:10-3:20 timing window didn’t compensate.

Neither side is passive; each side is arguing its point. It’s like divorcing parents fighting over who gets custody of the kid (“You take him,” “No, you take him”). Something — anticipation for something — is holding the market aloft. But there is no “unfinished business above,” the BOE and ECB policy decisions are coming Thursday, and then Friday’s Employment Situation Report.

[/pay]What’s Next… (Outlook and opportunities)[pay]
REMINDERs: I am not in front of screens this morning and through the noon hour. Not regularly. So, there is no Morning Market Tour. But I will try to add comments whenever possible, and I hope that subscribers will help each other out. Thank you!.[/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.