Market Wrap

If last Friday’s high isn’t going to demand a retest… then the next big downleg may be underway already. A second consecutive lower close Friday would confirm. No lower close might not be enough.

Pattern points… (Setups and technicals)[pay]
Like Tuesday’s gap up, extending Thursday’s gap up to retest last Friday’s highs would have been vulnerable to reversing down sharply intraday. Like Tuesday’s gap up, Thursday’s gap up failed. While Tuesday did eventually trend down intraday, Thursday morning’s steep, deep reversal traced out the pattern that would have been expected from retesting last Friday’s high.

Which raises the question: Was Friday’s 1880.50 pre-open high retested already by proxy? Since it was produce by trending before the open, it is a “new Globex trend extreme” that requires retest intraday.

There are a couple of not-great possibilities for having satisfied the attraction. And there are a couple of compelling reasons to suspect the attraction has been neutralized, regardless. The mirror image behavior is one reason — immediately reversing the gap up back into negative territory.

The other reason is that neutralizing the new Globex trend extreme was expected to satisfy all available buying pressure. Closing any higher would have suggested otherwise, putting into play 1901.00. The alternative need not form a durable top, but most of the alternatives do. And the steep, deep reaction down to 1834.50 trended down through relevant window to entrench sellers.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Thursday’s 3:10-3:20 timing window trended down to new lows at 1834.50, all but ensuring at least its retest, at least overnight. Or its intraday break by gargantuan margins. Regardless, reversing up any earlier might be premature, and likelier to fail. But this 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 afternoon’s buyers still have a reward coming… then Thursday doesn’t have time to delay delivering it. Wednesday’s last-minute surge back to the morning’s high still seems a little shallow for having prevented the entire afternoon from breaking afternoon lows.

Pattern points… (Setups and technicals)[pay]
Despite rallying nearly 15 points off session lows and back to the morning’s 1868.50 high, buyers gained no traction for their efforts Wednesday. The bias environment and noon hour both ranged sideways under the morning’s high. Probing above them was delayed until well after the final hour had begun. So, avoiding another dip Thursday would require gapping up, and extending higher.

Having rallied into Wednesday’s close, gapping down under the afternoon’s 1862.50 lows would trigger a session-long decline.

A hold-long was not considered, since the morning’s low was touched and not exceeded through Wednesday’s close. That creates potential for a dip. That’s the only reason why a hold-long wasn’t considered. But rallying overnight would be credible for extending higher intraday.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The front-month rolls forward to June at Thursday’s open. It’s still March overnight. The discount is approximately 7 points.[/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 afternoon’s drop had come Tuesday morning… then Tuesday morning’s buyers would have been capable of absorbing it and recovering. But Tuesday morning’s buyers weren’t patient. The open’s gap up failed, as did the late-morning recovery. So, the question now is whether patient sellers have been rewarded.

Pattern points… (Setups and technicals)[pay]
The minimum reward for Tuesday’s sellers was to retest Monday’s 1865.75 low. It was tested by almost 3 points, and recovered by 2 into the close. The might have been the end of that, except that Tuesday afternoon’s drop gained traction.

The afternoon’s drop entered the final hour under the bias environment’s low which was exited under the noon hour’s range. Sellers’ new reward is some sort of complexity or trending under Tuesday’s low. Turnabout is fair play, like inverting the setup by gapping up above at least the bias environment’s 1873.25 high, would be confirmed above the noon hour’s 1875.00 high.

Otherwise, fresh lows are likely to visit 1856.50-1858.00. Any lower through a relevant timing window would undermine whether this is only a detour — from retesting Friday’s 1887.50 pre-open “new Globex trend extreme” and now also Tuesday’s overbought RSIs at 1882.25.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Hold-short wasn’t considered since the target was met and hold. The decline having gained traction does make selling an overnight break under 1864.25 compelling. But even if that were triggered, a corrective bounce remains possible, with room up to 1871.00. [/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 morning’s reversal intended to extend… then should it have done so by now? That afternoon only ranged sideways. And now Sunday night and Monday morning’s lower and lower lows have been recovered. Momentum hasn’t yet reversed up, so the vulnerability to a drop remains open — by default.

Pattern points… (Setups and technicals)[pay]
Monday’s sellers gained no traction for the efforts. Not for lack of trying. But the morning’s 11-point drop to 1865.75 was recovered back above the signals that had put it into play. That probed 2 points under the overnight low, which had itself probed under Friday’s lows, so not extending down makes the drop “ineffectual pessimism.”

Closing back above prior lows after probing under them isn’t the only factor for being labeled ineffectual pessimism. Monday’s open gapped down, and the entire session was spent in negative territory. Almost no more selling pressure could be expended and absorbed.

The afternoon upleg’s minimum objective was also its maximum objective, retesting the open’s 1877.25 high. It was tested as the position-squaring window began lapsing, and held. Any higher would have been likely to dip back 1873.00-1874.00, even in the most bullish scenario of recovering back to Friday’s 1887.50 pre-open high.

[/pay]What’s Next… (Outlook and opportunities)[pay]
A pullback still has room down to 1873.00-1874.00 to keep its pessimism “ineffectual.” Opening any lower would be difficult to attract new sponsorship to resume the rally, risking a gap down under Monday afternoon’s 1870.00 low that would form a “session-long decline” setup. Opening much higher would leave the gap back to Monday’s close to attract price back 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 three days leading up to Friday stretched the rubber band tightly… then can Friday’s dip back their low be considered a snap-back? There should be some offset. But Friday’s lows held tests of those lows, and bounced into the close. Hardly punative.

Pattern points… (Setups and technicals)[pay]
Like each of the three preceding sessions, Friday’s buyers cannot be considered to have gained traction for their efforts. Reversing the probe of new highs isn’t even the deciding factor. Buyers gained no traction because the close was not positive. It was unchanged from Thursday’s 1877.00 close. Which didn’t prevent trending higher after the close to 1878.50.

Friday’s pre-open high was the knee-jerk reaction to the Employment Situation report. That’s the definition of weak-handed, and not requiring retest intraday. Of course, then a dip was retraced to a fresh high. That introduced complexity. Consequently, the 1887.50 pre-open high is a “new Globex trend extreme” requiring retest intraday.

But not within any particular time frame.

Perhaps Monday’s open will retest Friday’s pre-open high. Still, be on guard though the open for the extreme sentiment to become a sentiment extreme. And don’t be too complacent that the highs will be tested next, instead of launching a new downleg.

[/pay]What’s Next… (Outlook and opportunities)[pay]
This weekend’s Saturday Strategy Session begins at 9:30am ET, and we’ll discuss the bigger picture along with any stock requests. [/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.