Market Wrap

If Wednesday night’s drop were done intraday… then Thursday would have extended down considerably. Just retesting its lows Thursday morning would have been bearish. We knew all week that testing that level at any other time would be bearish, so we knew after Thursday’s open to be bullish.

Pattern points… (Setups and technicals)[pay]
Now we get to see just how bullish. The bearish WedEX says that any remaining upward momentum should be expended before Friday afternoon. That doesn’t require extending above Thursday’s highs Friday morning, only not beginning to drop that early.

A lot can be done in that otherwise limited time frame. Consider what Thursday morning’s bias environment accomplished, bouncing from 1822.00 to its 1832.75 objective, and higher. Testing the 1856.50 objective is a little more demanding —  okay, a lot more demanding — but it’s an attraction.

Overbought RSIs at Wednesday’s 1844.50 high are an attraction, and likely to be tested if Friday morning were to probe at all above Thursday’s 1840.25 high. Regardless, any buying pressure not expended before the noon hour’s end probably won’t be expended until Monday afternoon.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Being expiration, trending through the opening 15 minutes would be likely to extend in that direction through the day. This influence will have to fail if a fresh high in the morning is going to be sold-off into the close. That, or a fresh high will have to come along grudgingly, and not immediately, which would be unlikely to probe much higher before bearish influences take hold.[/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 the Fed speak triggering a sell-off… then Wednesday’s session could have been very bearish. Not bullish, but bearish. That’s because the noon hour’s comments triggered a steep sell-off that greeted the FOMC Minutes defensively, instead of allowing an optimistic blow-off. There’s other reasons, too.

Pattern points… (Setups and technicals)[pay]
In place of an optimistic blow-off, Wednesday afternoon was pessimistic. The 1830.00 overnight low had been attacked to within 2 ticks, retracing an interim 14-point rally. The 9-point reaction up was retraced to within a couple of ticks of its prior low. The next bounce was shallow before finally fizzling.

Now the attraction below at Friday’s 1829.00 noon hour low (the bottom of a Complex Ascending Triangle) is neutralized. As is potential for more thoroughly testing lower prior highs closer to 1826.25 — down to 1823.25. Decreasing the impediments to a rally is bullish, even if that requires trending down first.

None of which is a buy signal. Any lower would threaten extending down to 1818.00-1819.00, which would be bearish if not tested during an irrelevant timing window. But meanwhile, overbought RSIs at Wednesday’s 1844.50 high require an eventual retest, and 1856.50 remains outstanding.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Wednesday’s pattern was bearish. Gapping down in an uptrend, later probing the morning’s low despite printing fresh trend highs intraday. This is more relevant to triggering a bearish WedEX. It doesn’t prevent bouncing Thursday, but extending down too far into Friday morning could invert the signal for rallying into and out of the weekend. [/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 open hadn’t duplicated Globex volatility… then perhaps the balance of the session would have not been so scared of its own shadow. But multiple attempts to break beyond a narrow range were reversed back to the range’s other end, for a similar resolution.

Pattern points… (Setups and technicals)[pay]
Friday afternoon’s trending that made fresh highs likely was technically satisfied Sunday night, and again Monday. Trending above Friday’s 1838.75 high never developed, but probes above it did. Tuesday satisfied the setup with a similar technicality, essentially spending the entire post-open session ranging at or above Friday’s high.

All of should have the effect of chipping away at resistance. Spending so much time at a relevant level without reacting away from it should be obligated to probe beyond it. At least temporarily. That’s why we call it “obligatory.”

And that’s why we suspect an obligatory probe of fresh highs would not be durable. The back-and-forth isn’t back-and-filling, not with so long a delay since recovering the reaction back down to Friday afternoon’s 1832.00 breakout. And neither is the action sawing through prior highs, since there is none.But another setup has already made at least one more higher close likely. Almost any initial strength Wednesday would assume a delayed reaction. A quick double-digit rally — if not also measuring another 20 points —  would  be in-play.

[/pay]What’s Next… (Outlook and opportunities)[pay]
But another setup has already made at least one more higher close likely. Almost any initial strength Wednesday would assume a delayed reaction. A quick double-digit rally — if not also measuring another 20 points —  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.

If a pullback appears now… then it’s probably only a temporary correction on the way to new highs. The past week’s rally already had retraced too much of the decline to be only a correction. Now Friday’s follow-through has confirmed.

Pattern points… (Setups and technicals)[pay]
The Friday factor kept the path clear for extending higher into the three-day holiday weekend. A second consecutive higher close confirmed Thursday’s break above the 1818.00-1819.00 maximum correction level. The last hour’s 5-point reaction down from 1838.75 held a 61.8% retracement of the afternoon’s upleg.

It all sounds pretty bullish, which it is, but not necessarily without first dipping to refuel buyers. Friday’s final hour was entered above the bias environment’s high, and both were above the noon hour’s high, which all but requires at least probing higher highs.Greeting the new week by gapping on extreme sentiment to test 1842.00 could prove to be a sentiment extreme that reverses back down intraday.

Gapping down would have room down to 1828.00 or 1823.50 while still needing to eventually fill the gap back to Friday’s 1835.00 close. Recovering to resume the rally would be required under any specific timeframe.

[/pay]What’s Next… (Outlook and opportunities)[pay]
This being a holiday weekend, there is no Saturday Strategy Session. Friday’s Market Wrap was extended to include a discussion of the bigger picture.[/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 current rally is only temporary… then it should not have closed above Tuesday and Wednesday’s highs. Probing intraday would have been allowable, if reversed before the close. Perhaps it was a function of weather inhibiting participation, and Friday’s open will reject it by proxy. Otherwise, new highs are likely.

Pattern points… (Setups and technicals)[pay]
Thursday’s rally was not arbitrary. It was the reaction to gapping down to test targets of Wednesday’s distributive patterns. Then, it was the consequence to recovering soon enough from probing under the morning’s bias-down parameters. Ultimately, it was the momentum of being an object in motion without encountering an equal and opposing sponsorship.

They were snowed in.

Closing above 1818.00-1819.00 goes beyond the highest calculation for correcting the largest downleg. So, the rally hasn’t been only a correction, and new highs would be likely. That wouldn’t require trending straight up, but pullbacks would be considered the correction.

A second consecutive higher close Friday must confirm. Meanwhile, there is time for sellers to retake control, and to prove that closing above 1818.00-1819.00 was based on unusual circumstances. But now at least the last relative low under 1812.00 must be rejected, and preferably Thursday’s 1803.00 low.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Thursday afternoon’s 1827.75 was met within 3 ticks, which qualifies as fulfilling it. But it remains attractive so long as price is within its orbit. And Thursday’s close was still within its orbit, holding the first reaction down as support. Opening in this range would be vulnerable to 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.