Market Wrap

If Yellen’s testimony weren’t delayed… then would Wednesday’s session have trended up in anticipation of her repeating the bullish comments from Tuesday’s appearance?

Pattern points… (Setups and technicals)[pay]
Wednesday morning’s probe of fresh highs fulfilled outstanding objectives from Tuesday afternoon. Closing above 1818.00-1819.00 resistance would have created a new objective above. But Wednesday’s retest of resistance held.

Not that sellers exploited it. At least, not fully.

The retest up to 1823.25 was retraced back down to 1812.00, which is essentially a prior low following Tuesday’s close. It was tested and retested, chipping away at its support. Interim bounces, meanwhile, chipped away at 1818.00-1819.00 resistance.

Breaking either way Wednesday afternoon would have been likely to trend in that direction. Outlasting the close now allows again for a false break either way. Regardless, not closing again above 1818.00-1819.00 resistance wouldn’t have any bearish implication, which requires actually closing under a prior low.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Thursday’s second part of the Fed chairman’s Congressional testimony has been cancelled due to the blizzard bearing down on the East coast. That’s right. One snow job cancelled another. I’ll be interested in the effect on reactions to Yellen’s eventual appearance, as there is often a predictable price pattern. But any effect of the delay should be discounted already.[/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 high were any higher or held on any longer… then it would have extended the past week’s rally too high to be only a correction. It may, yet. But the verdict is still out.

Pattern points… (Setups and technicals)[pay]
Similar to Monday’s open, not already trending down at Tuesday’s open made the morning likelier to probe fresh highs. The bias-up target was already being fulfilled when the bias timing window put it into play. That’s optimism.

Then the bias-up environment extended higher, through its target. That’s rare. And optimistic. Extending higher by 10:15 would have signaled strong-handed reinforcements had arrived. The delay doesn’t reflect patience.

All but the final timing window Tuesday trended higher, and without once probing back under a prior low to refuel buyers. Optimism, and optimism.

There’s more, but none of it matters in the bigger picture. Not unless expending buying pressure has fulfilled a target. And held it. Like 1818.00-1819.00. The highest calculable level for the past week’s rally to still prove it is only a corrective bounce. Closing any higher would target new highs. Otherwise…

[/pay]What’s Next… (Outlook and opportunities)[pay]
Tuesday’s last signal was a sell triggered under 1817.25 and targeting at least 1814.00. Its target was met, and probed by several ticks a couple of times. It held the prior low, which was tested too late anyway for breaking under it to have been predictive. If anything, it refueled buyers for trying to resume the rally. Gapping down further would leave unfinished business above, likely eventually to retest Tuesday’s high.[/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 corrective bounce from last week’s lows is peaking… then we won’t know it for awhile. At least, not without almost literally plunging throughout Tuesday. Otherwise, even the most bearish pattern could still probe higher before the next decline. And even the most bullish pattern could still dip before resuming the rally.

Pattern points… (Setups and technicals)[pay]
Friday afternoon’s portion of the rally was not rejected at Monday’s open. That immediately gave the rally off last week’s lows some protection against reversing down. The morning’s probe under its bias-down signal was likely to recover after fulfilling a signal’s selling pressure, which it did.

Interestingly, the morning’s dip under the bias-down signal during its no-bias environment was “no-bias trending” that should have refueled buyers. Indeed, it was recovered pierce prior highs at 1795.50.

But that’s all it did, barely pierce prior highs. While retracing the no-bias trending and probing prior highs don’t require anything more substantial, trending higher would be normal. Either buyers are anxious ahead of Tuesday’s Yellen testimony, or the recovery genuinely has a problem.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The embargo on Yellen’s opening remarks will be lifted before the market’s open. That’s a fairly new practice. It used to be released simultaneously with the chairman reading the remarks at 10:00am. [/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’s rally had stopped trending up… then the pattern’s alternative was to plunge. This stage of the pattern is like the shark metaphor, which supposedly must maintain its forward motion to avoid rolling over. While that can extend indefinitely, it is not accumulation.

Pattern points… (Setups and technicals)[pay]
Friday’s rally retraced too much of the prior Monday’s plunge to 1732.00 to be its correction. Exceeding 1780.00 still allows the bounce to be corrective, but a correction from prior highs. That’s not optimal for resuming the decline, but it’s still possible.

That, or Monday’s open can gap down, and reject all of Friday afternoon’s probe above its afternoon 1784.75 bias-up signal. Even that would not suffice, with the gap down needing to extend back under Friday afternoon’s 1777.75 bias-down signal for confirmation. Forming another distribution pattern without extending higher or reversing down would still be bearish, but possibly only to attack last week’s lows.

Potential for reversing down is suggested by Friday’s last hour. Although it probed higher and higher highs, each leg overlapped the afternoon’s 1791.00 bias-up target. Extra buying pressure was expended without gaining extra traction for the effort. But not gapping down or immediately rejecting opening strength would be unlikely to reverse down before the afternoon.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Quite a week, and quite a big question mark left at the end of it. Join us for this weekend’s Saturday Strategy Session to discuss the bigger picture. It begins at 9:30am, and we’ll discuss any other chart that interests you.[/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 Thursday’s rally included optimism ahead of Friday’s report… then did it leave any room for a “positive” surprise?

Pattern points… (Setups and technicals)[pay]
If Thursday’s rally was inspired by expectations for Japan to continue spending on QE, then we can assume that is pretty fully discounted. The session trended up throughout the day. Substantially.

No doubt, some of that inspiration was for a positive reaction to Friday’s Employment Situation report. The actual data matter not. Its comparison to expectations — and whether that will affect policy — is more influential.

Surely, the latter part of Thursday’s rally that came late in the day was inspired by not already reversing the morning’s gain. The assumption being that optimism and momentum would combine for extending the rally in reaction to the Employment report.

The thing about wishful thinking is that sometimes wishes do come true. Monday’s plunge could be retraced another 10 points higher up to 1780.00, and still be considered a correction. So, a bearish resolution need not behave pessimistically right away in order to resolve down later.

[/pay]What’s Next… (Outlook and opportunities)[pay]
This being a Friday, the morning’s bias signal tends to persist through the noon hour. And countertrending sponsorship tends not to appear in the afternoon. Triggering bias-up can marginalize sellers for the day.[/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.