Market Wrap

If Friday’s lows had printed Wednesday… then the recent bearish trend change signal would have been reinstated. So, the sponsorship behind pushing price lower missed an opportunity. They could have leveraged their selling pressure into a big downside requirement. They didn’t… or they couldn’t.

Pattern points… (Setups and technicals)[pay]
Wednesday’s reaction down from Tuesday’s rally was shallow. Had it extended down a little deeper, not even as deep as Friday’s drop, then it could have reinstated the bearish trend change signal.

Sellers would have regained control Wednesday by dropping an additional 6-7 points to close under 1860.00-1861.00. Friday’s lows were deeper at 1855.00 and 1853.00. Friday settled between 1860.00-1861.00.

Too little, too late.

Not that this current effort can’t gain traction and produce its own trend change. Usually the delay means otherwise. But this is the situation we’re monitoring now, potentially weak-handed selling that is taking the market to the brink anyway.

[/pay]What’s Next… (Outlook and opportunities)[pay]
It has been three weeks since our last Saturday Strategy Session, so I imagine there are a lot of questions pent-up. Meet me at this link at 9:30am ET to talk.[/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 not for headlines coming from Moscow… then would Thursday’s open have rallied 18 points, instead of dropping? Warnings to Ukraine peppering the tape coincided with the open, triggering a retracement of the overnight rally, plunging back under Wednesday’s lows.

Pattern points… (Setups and technicals)[pay]
Every past flare-up in the Russia-Ukraine conflict has had no lasting effect on the market. I don’t mean that in the same way that the market ultimately rallied after World War II ended. I’m saying that every reaction has proved to be knee-jerk, and quickly recovered.

The weekend invasion of Crimea triggered a drop that Sunday night, which was recovered to greet Monday well into positive territory. The two-week old Sunday night dip was recovered, too, albeit less forcefully. There have been other similar brief dips intraday. It’s nothing personal, Vlad, but market multiples and earnings growth aren’t that into you.

Now comes Thursday morning’s plunge.

To be sure, the plunge didn’t extend. But for its size, the session was a duplicate of Wednesday — trending down sharply at the open and then consolidating under prior highs. Sellers still appear to be weak-handed. But it’s interesting that stronger buyers didn’t exploit the headline driven drop.

[/pay]What’s Next… (Outlook and opportunities)[pay]
If they don’t compensate for the delay by surging Friday, then the Russia-Ukraine conflict may be starting to cause real damage. [/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 gapping down a little and ranging sideways all day is bearish… then actually trending down must be considered the end of the world. Maybe it would be, to some. Wednesday’s downward biased “inside day” did avoid confirming Tuesday’s trend change invalidation. But it was 7-8 points too high to reinstate the bearish trend change. And while new highs are no longer a required consequence, they’re still likely. Unless…

Pattern points… (Setups and technicals)[pay]
…Unless, a new sell signal were to trigger. Not confirming Tuesday’s rally leaves that door open. This shouldn’t be confused with Wednesday’s opportunity to reinstate the bearish trend change. That’s a much more substantial resolution. But just triggering a sell signal would at least reverse near-term momentum down.

Back to reality…

By that, I mean, while Wednesday’s dip was annoying, it was not predictive. The only traceable purpose it served was to absorb the selling pressure unleashed by Tuesday’s late drop. Not extending any lower past the open suggests what Tuesday’s late drop suggested, that sellers are weak-handed.

Not extending higher Wednesday means that new highs are no longer required. But I would be surprise if they weren’t produced anyway.

=== premature end ===

I had spent the afternoon repeating the above points about sellers still being weak-handed, which firming 4 points to 1873.00 after the close seemed to confirm. Then AAPL beat estimates and announced a 7-1 stock split. The post-close firming became surging to 1879.00 and higher. That’s above Tuesday’s highs.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The question is whether the post-close surge and indicated gap up will have stolen Wednesday’s pent-up buying pressure. A new high probe is likely. A new high close is not required. Gapping up and trending isn’t impossible, but let’s see where the open is.[/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 trend change signal can be rendered moot… then can new highs be avoided? Actually, that’s the consequence, or reward. Unless the trend change invalidation isn’t confirmed.

Pattern points… (Setups and technicals)[pay]
Last week’s rally from about 1808.00 retraced much of the prior week’s final two-day drop from 1866.75. Tuesday retraced the rest, and then some, up to 1878.75.

That two-day drop had closed under prior lows to trigger a trend change. The signal calls for at least one more lower close, before closing back above the trend change’s origin. The consequence of a failed signal is to retrace the trend change origin’s prior high.

No lower close preceded Tuesday’s fresh highs. The trend change signal is moot. A second consecutive higher close would confirm the signal was invalidated, but the trend change signal wouldn’t be reinstated otherwise. Only closing back under a prior low Wednesday would reinstate the trend change signal. The last prior highs was the highs, so new highs are now in play.

The last relative low was Monday morning at 1856.50, but closing under 1860.00-1861.00 would suffice to reinstate the trend change

[/pay]What’s Next… (Outlook and opportunities)[pay]
Tuedsay’s price action since exiting the bias environment left the door open to reversing down. Actually, it was more like a transom window. A very small one. The afternoon timing windows did not advance,  and the 1874.00 close was at or under the noon hour’s low. It wasn’t a strong rejection, so extending higher should be very aggressive if valid.[/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 fresh high isn’t rejected without much delay… then the consequences could be new highs. Not directly, but either the recent trend change has been corrected, or it is being invalidated.

Pattern points… (Setups and technicals)[pay]
Monday’s bias-up environment offered two lessons. First, bias-up means bias, if not also up. Triggering bias-up, avoiding a grace period, and not being invalidated don’t prevent detouring down to fresh lows. But the bias requires absorbing that detour, and reversing it.

Monday morning’s did just that, and not in a small way. The outcome was recovered to fresh highs.

About that recovery…

Fresh highs were probed, but not broken. The open’s 1864.50 high was pierced by a couple of ticks during the afternoon’s bias environment,  and the bias environment was exited above the noon hour’s high. But the final hour was entered no higher.

That stopped the recovery dead as the balance of the session ranged sideways. Closing above 1860.00-1861.00 does create potential for fresh highs, if confirmed by a second consecutive higher close Tuesday. Monday morning’s 1867.25 bias-up target is unfinished business above, so its test must be rejected quickly to avoid targeting new highs.

Regardless of the intraday action, closing Tuesday back under 1852.00-1853.00 is the only setup that would signal momentum actually reversing down.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The recent trend change signal that was triggered by two consecutive closes under support is being threatened. The setup triggered on April 10 and 11. Two consecutive closes above April 10’s 1866.50 high would invalidate the setup. There would be no specific consequence, but presumably new highs would be in-play.[/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.