Market Wrap

If Thursday’s decline wanted to be substantial… then why wasn’t it? Does not extending under the open’s lows make the drop bullish? Not necessarily. Certainly, everyone knows it wouldn’t take much Friday to push price off the precipice, with two days of illiquidity and 100,000 troops approaching. But it’s not about not extending down. Rather, the attempt to extend down was absorbed, but that wasn’t extended up. The burden of proof is on buyers.

Pattern points… (Setups and technicals)[pay]
Buyers gained no traction for their efforts Thursday. No entry into the final hour above the bias environment’s high, both of which were under the noon hour’s high. Gapping up Friday is the only credible path higher that doesn’t first probe new lows, or that isn’t rejected substantially before the close.

No unfinished business was left unfinished below. So, probing lower lows must be recovered before a relevant timing window to avoid gaining traction.

Only gapping up to Thursday morning’s highs, and not through them, would still be vulnerable to resuming the decline intraday. Gapping down to or through Thursday’s lows would likely to extend down — and the potential for recovery would diminish the longer that it was delayed.

[/pay]What’s Next… (Outlook and opportunities)[pay]
This being a Friday, the morning’s bias is likely to persist through the noon hour. Whether up, or down, initially gapping beyond any relevant support or resistance would have the weekend’s impending illiquidity to motivate extending in that direction.[/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 sellers were weak hands… then strong hands must be super patient. And if the rally intends to compensate for the delay, then it must intend to rally sharply.

Pattern points… (Setups and technicals)[pay]
Another day, another gap up. Another gap up, another failure. Have we been dead-on about the ongoing distribution up here (now more like “up there”), but got caught looking for one more new high that isn’t coming? That’s possible, but not yet indicated. And until that happens, there remains potential for one more new high.

Potential for new highs is kept alive by the drops not signaling trend reversals, but the drops certainly don’t make new highs any likelier. Reactions down from 1867.00-1874.00 create more room to absorb buying pressure without it gaining traction. By the same token, reacting down 27 points intraday from almost 1869.00, but not breaking the range’s lower-end, expends a lot of energy without sellers gaining traction for the effort.

Extending down immediately would target fresh lows — filling the gap back to the pre-Crimea invasion, back to the Sunday night low’s knee-jerk reaction, and lower to 1814.00. But gapping up Thursday above 1846.00 would help to confirm that Wednesday’s sellers were weak hands, ready to be retraced entirely.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Gapping up above 1846.00 would be allowed only the briefest dip to 1844.00 before extending higher. That could be accomplished overnight, and gapping up above the last hour’s 1856.00 high would target Wednesday afternoon’s 1860.50 1:20 bias timing window print. Only 2-3 more dominoes would need to fall for new highs. Otherwise, not rejecting Wednesday’s drop would trend down.[/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 gap up’s rejection ever closes back under a prior low… then that will probably be the end of that. “That,” being the ongoing and increasing distribution in this range. But the market still doesn’t seem ready to begin a downleg.

Pattern points… (Setups and technicals)[pay]
Tuesday’s gap up was entirely in-line with expectations for probing new highs. It was entirely in-line with the path higher needing to gap since Monday’s buyers gained on traction. But it was also entirely in-line with the recent rejections of gaps up.

This one came lower than others over the past 2-1/2 weeks, reaching only 1864.50 instead of the 1866.75-1874.00 range where others were rejected. This one came later, making it through the 10:15 bias timing window instead of already reacting down by then. And this one increased the frequency, being a third consecutive gap up, and rejection.

But this one also avoided negative territory, but for twice piercing Monday’s ~1850.00 close momentarily during the noon hour. And this one recovered through the afternoon, not to new session highs but back to the 1859.00 gap up. Extending higher immediately still requires gapping up Wednesday. But sellers failed again to gain traction.

[/pay]What’s Next… (Outlook and opportunities)[pay]
An overnight dip could test 1855.50 and recover back above Tuesday afternoon’s 1861.00 highs to already suggest another gap up is likely. A deeper dip could test 1844.00-1846.00 and still not signal a bigger downleg underway.[/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 another gap up reverses down sharply into negative territory… then it won’t be dismissed as expiration related And retesting the highs would be off the table.

Pattern points… (Setups and technicals)[pay]
Monday’s gap up  that reversed down into negative territory duplicated Friday’s pattern. Both duplicated a pattern we’ve observed and discussed during the past couple of weeks. It is distributive, and its ongoing occurrence keeps the door open to revisiting last Sunday night’s 1823.50 low.

If the door down isn’t actually open, then at least it isn’t locked. Failing to recover from a probe under Friday’s 1841.50-1843.00 lows would kick in that door.

Otherwise, the path up remains available, too. Monday’s sellers gained little traction for their effort, closing back above the morning’s bias environment low. The noon hour’s bobble didn’t extend when it could have. And no new downleg exploited the afternoon’s recovery not gaining traction.

Monday’s pattern was a form of “ineffectual pessimism.” Gapping up Tuesday could extend back to and through Friday’s 1876.75 high. Gapping up is the only credible path higher Tuesday since the afternoon’s buyers gained no traction for their efforts.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The week began with extreme sentiment that proved to be a sentiment extreme. That doesn’t tend to repeat on Tuesdays, so gapping up would get be extra credible for extending higher. But we’ll still reiterate being cautious since this is a very distributive area.[/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 highs are ever attacked without reversing down sharply… then that would be a first for this area. It might be an important “last,” too.

Pattern points… (Setups and technicals)[pay]
Now we know why WedEX wasn’t a decisive signal — because expiration wasn’t decisive. Actually, the morning’s buyers were pretty decisive, and extended overnight trending through the 1873.75 bias-up target.  They didn’t maintain its probe in time to renew the bias-up. And that only made sellers more intent upon reversing the rally. Which they did, well into negative territory at 1855.50 — decisively.

It’s interesting that the downleg didn’t wait until Monday. The two-week old 1871.00 prior high close was probed decisively, and thoroughly. In other words, it wasn’t barely touched for a few moments. Since a new high close on a Friday helps to preserve a rally’s trend, not exploiting the opportunity can be bearish.

Meanwhile, being in proximity of the two-week old 1880.00 pre-open high once again resulted in reversing sharply from positive territory into negative. Friday was the third such session — fourth, if counting the high’s reaction, itself. This is distribution. A big dip has been retraced, so distribution clearly doesn’t equate to a trend change. And it wouldn’t prevent probing fresh highs. But it’s not bullish.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Join us for the Saturday Strategy Session where we’ll discuss the bigger picture more broadly and precisely, with likely scenarios for next week’s open. We’ll also leave plenty of time for instant analysis of charts on-demand from subscribers.[/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.