Market Wrap

If Monday’s late dip to support really held… then why did its reaction up only test session highs? The afternoon’s earlier bounce had only touched the morning’s high before reversing down. That reversal only touched the noon hour’s low before recovering. That recovery speaks volumes.

Pattern points… (Setups and technicals)[pay]
It is in that recovery from the afternoon dip that we get a glimpse of the character of buyers. That late bounce returned to highs that had been tested twice already. Either their resistance was chipped away, or it is solid resistance.

And the bounce originated from touching a relevant low. Either the low could launch a break above resistance, or it wasn’t finished being tested. Strong-handed buyers would have exploited the late fresh high to trigger a squeeze. Weak-handed sellers would have been squeezed.

Instead the close settled back into the range. And although the morning’s recovery wasn’t retraced, neither was it exploited. All of that energy was expended, only to close back at Friday’s highs.

The overnight “new Globex trend extreme” at 1924.25 wasn’t complex, so it doesn’t require intraday retest, but its retest isn’t forbidden. Meanwhile, oversold RSIs at Monday’s 1913.75 low does require a retest. Hopefully, the dueling attractions will inject volatility into Tuesday’s action — Monday’s last three consecutive timing windows almost all overlapped each other, so have some errands in mind if Tuesday’s open suggests that will be repeated.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Friday’s new high close required at least one more higher close. Monday’s 1923.00 close qualifies, being above even Friday’s 1922.25 last-minute high. It is not optimal, because its leg — each of Monday afternoon’s legs — was overlapping Friday’s high. But any hesitation extending higher Tuesday remains vulnerable to beginning a multi-session decline… A decline that leaves no unfinished business above.[/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 new trend high close on Fridays can’t end a trend… then does that require new highs on Monday? Not necessarily. The trend is always likelier than not to extend. But not immediately extending a Friday’s new high close is likely to detour for several days.

Pattern points… (Setups and technicals)[pay]
Friday was a new high close, which on a Friday preserves the uptrend. It doesn’t require the rally to extend higher without delay, but an immediate decline would be likely to recover — usually after several counter-trend sessions, but recover nonetheless.

And the rally is vulnerable to an immediate decline, because Friday afternoon’s buyers didn’t gain traction. Not only because buyers gained no traction, but also because the rally extended higher anyway. Rather than compensate for not gaining traction, that only stretches the rubber band.

Some of the same factors that facilitated Friday’s rally could facilitate its immediate reaction down. It was the last day of the month, and now it is the first day of the month. New highs were being greeted into the weekend, and now the weekend is done. Sellers weren’t gaining traction, buyers gained no traction.

An immediate pullback would target 1897.50. Extending higher without a pullback is not well-defined. Each of Friday’s legs overlapped the relevant 1918.00, so there has yet to be a breakout or a new target put into play.

[/pay]What’s Next… (Outlook and opportunities)[pay]
REMINDER OF EARLY START TIME: This weekend’s Saturday Strategy Session begins a half-hour early at 9:00 AM ET.[/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 an immediate dip next week would be only temporary before resuming the rally. An immediate reversal down doesn’t have much hope of extending, though.

Pattern points… (Setups and technicals)[pay]
Thursday’s new high close at 1918.00 makes a new durable downleg unlikely to begin this week. And if attempted already Friday, then a downleg would likely recover at least to retest Thursday’s high.

But a top can start forming anyway. Thursday afternoon’s buyers gained traction (exiting the bias environment above the noon hour’s high, and entering the final hour even higher), so some fresh high is likely. Rejecting the morning’s fresh highs and reversing down into the weekend would make the high’s retest likely to hold.

Buyers gaining traction the prior afternoon also makes an opening dip likely to recover. But not too deep of a gap down. Thursday’s closing action trended up, so gapping down under the bias environment’s 1911.00 low would form a “session-long decline” setup.

Thursday’s session was likely to probe fresh highs since Wednesday left sellers satisfied with no “unfinished business below.” But Thursday’s session left unfinished business below” at 1903.75. And there is no attraction above, like Thursday had the 1914.00 “new Globex trend extreme.”

There isn’t even untested room for noise above 1907.50, since the first session to actually trend above it already touched and held its 1918.00 room for noise. Closing above it would have established higher targets, and reacting down might have refueled. But the close held it, while RSIs diverged negatively.

Extending higher isn’t required, and it’s no longer likelier than at least a temporary dip. But trending higher isn’t invalidated, and there is no requirement to reverse down.

[/pay]What’s Next… (Outlook and opportunities)[pay]
This being a Friday, the morning’s bias is likely to persist through the noon hour. That can cut either way at new highs.[/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’s second test of resistance couldn’t break higher… then why should a third test Thursday have any better chance? Actually, it’s chances would be worse. A pullback without delay would be more bullish.

Pattern points… (Setups and technicals)[pay]
Wednesday’s close was at 1907.50. This was the target for retesting the two-week old high. The two-week old high’s retest did extend to 1907.50, on Tuesday, and every intraday leg overlapped it. Closing right at 1907.50 is irrelevant and coincidental, but it makes a neat story. It is only relevant that the 1907.50 target was being overlapped for a second consecutive session.

That undermines the upside momentum. But it’s not a sell signal.

Having held 1907.50 through two consecutive sessions, the vulnerability to a pullback is higher. That pullback would likely target 1897.50.

By the same token, having held 1907.50 through two consecutive sessions, extending higher prior to a pullback would be vulnerable to reversing down sharply. Picture Wyle E. Coyote chasing Bugs Bunny off of a cliff, and then suddenly noticing his spinning legs doing nothing while he slowly realizes there is no ground under them.

Now, picture that animated suspension after rallying intraday to test Tuesday’s 1914.00 “new Globex trend extreme.” There is no time frame required to retest it, and its retest need not reverse down. We won’t be skeptical of being able to extend higher, just suspicious that it won’t.

[/pay]What’s Next… (Outlook and opportunities)[pay]
There is one path to retesting the “new Globex trend extreme” that might escape the vulnerability to reversing down. That would be to gap up above Wednesday’s 1912.50 high. That high printed during the afternoon’s bias environment, and Wednesday’s closing action trended down. So, gapping up to and through 1912.50 would trigger a session-long rally setup. It would be at risk of inverting back down, but otherwise may be the only opportunity to resume the rally.[/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 none of the multiple sell setups trigger Wednesday… then the rally must intend to extend sharply higher. And the sell setups essentially depend upon gapping down, so not gapping down could be very bullish.

Pattern points… (Setups and technicals)[pay]
Tuesday’s gap up is not a breakout, per se. Neither was Friday’s new high close, do Tuesday’s higher close is not confirmation. None of which prevents extending higher without delay.

And none of which requires it.

Retesting prior highs remained likely despite its delay during the past couple of weeks. And its retest was likely also to visit 1907.50. Now having fulfilled the long-standing target,  it is interesting that each of Tuesday’s legs overlapped 1907.50. There was no signal that momentum is extending higher.

Meanwhile, while buyers were productive, that doesn’t mean they attracted more buyers to gain traction for their earlier efforts. The afternoon bias environment was exited at the noon hour’s high, which is where the final hour was entered.

Although no sell signal would trigger while trending up into the close, a short-entry would be more sensible than holding long overnight. The target was met, without gaining traction, during a gap up that may have formed an Island. And keep in mind, this is all within the bigger picture context of a failed Ascending Triangle likely to resolve down.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Of course, we did not short the close — nor would we ever consider shorting a new high close — but that doesn’t preclude monitoring overnight action for reversing under 1905.50 or so. Having trended up into the close, a “session-long decline” setup would be triggered by gapping down Wednesday under Tuesday afternoon’s low that lies in the bias environment. All that said, there being multiple opportunities to trend back down, NOT trending down would suggest the rally is extending much higher. [/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.