Market Wrap

If Friday morning’s dip were done Thursday… then Friday’s session could have been probing new highs into the weekend.

Pattern points… (Setups and technicals)[pay]
Friday morning’s dip essentially did what Thursday morning’s buyers should have allowed. Consolidating within Wednesday afternoon’s 1864.00-1870.00 range helped to compensate for Wednesday’s late breakout being a little too late.

At least, that’s the bullish premise.

The bearish premise is that Thursday morning’s rally to 1885.00 made it too late for consolidating  Wednesday’s late breakout. Now that only represents weakness, hesitation before extending down much further.

We’ll see. And probably soon.

The past three weeks have formed an Ascending Triangle. So has NDX, which some confuse for being Head & Shoulders’ right shoulder. Each of the pattern’s dips has been accumulative. The Dow made a new record close, albeit not a new intraday high (again). A sudden downdraft probably wouldn’t get very far before recovering.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Saturday’s Strategy Session starts at 9:30am ET, linked from the blog’s sidebar. See you there![/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 Pivot Reversals reverse up immediately… then they had better keep the reversal going. Or else.

Pattern points… (Setups and technicals)[pay]
The Pivot Reversal setup can be huge. Its follow-through can be immediate, and it can be impressive. And it can be quite the opposite sometimes when not followed-through immediately.

Wednesday’s Pivot Reversal at 1876.00 actually needed not to follow-through immediately in order to follow-through impressively. A dip back under 1871.50 would have helped to form a more durable base. Overnight did refrain from extending and eventually dipped to 1868.00 before the open.

But the pivot’s reversal was back underway soon after Thursday’s open. The follow-through was impressive, extending up to 1884.75. But it was launched from an unstable base. And the morning’s rally was retraced entirely, more so, down to 1865.00.

That would have been helpful about six hours earlier, when it could have been absorbed in time for the balance of the session to rally. Now, Friday must recover Thursday’s high to signal the Pivot Reversal is back in-play, not to mention new highs.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The weekend is fast-approaching. Being a Friday, the morning’s bias is likely to persist through the noon hour.[/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 intraday recovery can’t be converted into a rally… then Wednesday’s intraday dip only chipped away at support. The afternoon’s rally disappointed the morning’s sellers. Reversing down would disappoint the rally’s sponsorship, which would find little or no support remains.

Pattern points… (Setups and technicals)[pay]
After multiple sessions of trending down, Wednesday’s gap up was reversed deep into negative territory. Recovering to close above the morning’s 1871.50 high formed a Pivot Reversal setup.

Pivot Reversals tend to be very productive, very quickly. At least, the setup establishes a base to launch a new rally leg. Occasionally, a bigger sell-off invalidates the Pivot Reversal and resumes the morning’s downtrend.

This pivot might not continue its reversal very quickly. Closing above the morning’s high at 1876.00 was valid, but it was due to a surge that did not develop until Wednesday’s last half hour. A pullback into the base should still recover, but extending higher immediately would be suspicious.

Nevertheless, the premise is to resolve up, until disproved.

Resolving down tends to be obvious immediately. It might follow a firm open that reverses down relentlessly. Regardless, not trending down during Thursday’s opening 15 minutes of volatility would be unlikely to trend down, at all.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Wednesday’s late surge has been retraced overnight back down to the morning’s 1871.50 high, and then back up to 1876.00. No signs, yet, of a deeper dip, other than not yet extending 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.

If Tuesday’s decline produces another on Wednesday… then the optetial for one more market high would start to evaporate. But it hasn’t yet.

Pattern points… (Setups and technicals)[pay]
Let that be a lesson, that it pays to be generous. We were generous to Monday’s sellers, giving them credibility for having controlled the bounce into Monday’s cash session close, despite futures then plunging. That enabled Tuesday’s open to trigger a “session-long decline” setup by gapping down under Monday afternoon’s low.

The session-long decline setup was fulfilled. Every intraday timing window probed a fresh low, with the one acceptable lone exception. Not required, but likely, was to trend down into the close.

Whether or not the session-long decline setup was valid, the market performed as if it were. Now the setup’s validity is irrelevant, and trending down throughout Tuesday has made Wednesday morning likely to trend down, too. Fresh lows are likely already simply because Tuesday afternoon’s lows hovered optimistically just above Monday morning’s lows.

This doesn’t yet change the potential for recovering to new highs. Tuesday’s drop was, after all, only an “inside day.” By the same token, new highs, would still be part of an ongoing topping process we’ve been tracking.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Probing lower lows down to 1853.00 overnight and recovering before Wednesday’s open would be credible for reversing momentum up already. Compartmentalizing lower lows to only Wednesday’s opening 15 minutes of volatility could end the pullback, too. Otherwise, even a shallow opening bounce would be likely to probe under Tuesday’s lows.[/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 Monday’s bullish scenario was to gap up and trend higher… then was the gap down that reversed back up bearish? Possibly. Closing action left things undecided. But it also left a setup that can be decidedly bullish.

Pattern points… (Setups and technicals)[pay]
Recovering from Monday’s gap down either averted disaster, or else it was a warning shot across the rally’s bow. Testing 1861.00 during the open leaves outstanding a gap that must be filled, eventually. Meanwhile, the intraday recovery back into positive territory still could extend sharply higher if the open goes its way.

The final hour was entered above the  bias environment’s high, but never extended higher. The close was above the  bias environment’s high, too. But that doesn’t mean buyers gained traction, not without entering the bias environment above the noon hour’s high. The only way to extend higher without another downdraft is to gap up.

Gapping up above 1800.00 Monday would have trended up sharply intraday. Monday afternoon’s high touched 1800.00 and closed back under it, so not gapping up to it or through it Tuesday would essentially be bearish. Just breaking under 1873.00-1874.00 would signal momentum already reversing down.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Monday’s post-close action slid 3 points, which is a lot for that window. This tends to create a vacuum from the cash session close that helps to resume the rally the following  day. And it tends to extend down considerably otherwise. So, not rallying at Tuesday’s open could be very bearish.[/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.