Market Wrap

If Wednesday’s low were any lower for any longer… then a bottom could have formed. That is, if it were then recovered. Instead, it was too shallow and too brief. Not that probing any lower for any longer would have been recovered, anyway.

Pattern points… (Setups and technicals)[pay]
Excessive optimism defined Wednesday almost as much as it defined Tuesday. But the afternoon’s retest of the morning’s high, and the failed bias-up signal, were almost irrelevant compared to the morning’s retest of Monday’s 1732.00 low.

Wednesday morning’s volatility had included wide milti-point swings up to 1747.00 and 1749.00. Neither prevented a morning drop to 1732.00. In fact, the retest of Monday’s low was already required eventually based on Monday’s own pattern. Tuesday’s pattern made it likely to happen Wednesday.

Retesting Monday’s 1732.00 low could have formed a bottom, if any time were spent probing under it. While simply touching it did neutralize its attraction, only touching it created a new requirement to retest it.

So, there is little change to the ongoing pattern. It is briefer, but otherwise similar to last week’s consolidation that broke lower Monday. The resolution is still likely to be down, a detour up should be relatively shallow before failing.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Thursday’s pre-open econ reports can encourage morning volatility. Friday’s report can discourage volatility Thursday afternoon. [/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 had probed fresh lows before rallying… then Monday’s drop probably would have become unlikely to resume. But the gap back to Monday’s close is left outstanding, and Tuesday’s buyers gained no traction for their efforts.

Pattern points… (Setups and technicals)[pay]
Monday’s cash session and futures closes were 1736.50 and 1732.75, respectively. Tuesday’s post open low was 1738.75. Leaving the gap outstanding is a reflection of impatient buyers. That optimism might not be bearish from a contrarian perspective — not if buyers gained traction.

They didn’t.

After the bias environment dropped 9 points to 1744.50, Monday’s final hour was entered at the bias environment’s 1751.50 high. Not lower reflecting patience. Not higher reflecting strength. At the bias environment’s high, reflecting that buyers expended as much energy as possible without gaining traction for the effort.

Then the last hour plunged to 1743.50. It was retraced all the way back up to 1751.50. Not lower, not higher, but expending all blah, blah, blah. These buyers are nothing if not redundant.

But are they predictable.

Currently, they’re predicted not to prevent a probe under Monday’s lows. Tuesday’s post-close plunge to 1743.50 probed under 1748.25 and 1746.00 too late to signal hold-short, but Wednesday’s open could gap down to fresh lows. If so, then maintaining the probe or not would be very predictive going forward. There is otherwise no bearish reason even to revisit Tuesday’s 1752.50 highs, let alone to probe higher.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Earnings and econ reports are batting the market around, but so are developments like Puerto Rico’s downgrade. The specific news is irrelevant, only that the market is paying attention.[/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 close were any lower… then it might have fulfilled an optimal hold-short setup. The setup still qualified, but it wasn’t optimal.

Pattern points… (Setups and technicals)[pay]
Monday’s downtrending session probed fresh lows through every timing window. Usually, trending to the final timing window either reverses or extends sharply. Monday did neither.

But Monday’s final hour did continue probing fresh lows. That doesn’t form any kind of reliable platform which might launch a durable bounce. If Tuesday’s open were to gap up, then its failure and reversal down to retest Monday’s 1733.50 cash session low would be likely — probably intraday.

Regardless of the intraday action, a second consecutive lower close would require at least a third eventually. That would be very bearish, because Monday’s probe under December’s prior lows must be rejected without delay to avoid a much deeper decline. Notice in the accompanying chart that the potential support of previous congestion is becoming scarce. The last two (circled red) signaled a trend change, and the third (circled green) is being attacked now.

Also notice in the chart how last week’s consolidation (2) was entered and exited by plunges (1 & 3). Troughing for a couple of days would be likely to rally at least back to the upper-end of last week’s range. Not troughing would be likely to extend down sharply.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Monday’s drop can be retraced immediately in a day. But there is nothing among my templates that allows a durable recovery to form without first probing fresh lows. Rallying first is still possible, so be careful if short, no matter how reliable lower lows are.[/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 bias signal were any less bearish… then the balance of the session would have been very bullish. If the open were just a bit more bearish, then the balance of the session would have been very bearish, indeed.

Pattern points… (Setups and technicals)[pay]
Friday afternoon’s bias environment probed fresh session highs. So, closing back under the noon hour’s low meant sellers gained traction for their efforts. Actually, the noon hour’s low was still being tested at the close. A hold-short was almost triggered, but for a last-minute blip-up.

Buyers already lacked credibility simply for not trending higher during the noon hour. Trending higher later only made them less credible. Dropping back down to the noon hour lows was likely no matter when it came.

But now that Friday’s noon hour lows have been tested, the question is why the break paused. Either it was because strong-handed sellers were patiently leaving selling pressure pent-up to restart the downward momentum Monday more easily. Or, sellers are weak-handed.

Retesting Friday’s 1786.00-1788.00 highs can only be bearish bullish, unless tested in order to be rejected at a bias timing window. Just resuming Friday’s late decline should have no requirement to back-and-fill, or to otherwise delay extending down.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The link to this weekend’s Saturday Strategy Session can be found in the blog’s sidebar. It starts at 9:30am ET. We’ll be discussing a very interesting bigger picture, and any stocks of interest. [/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 buyers were strong-handed… then they either would have been more patient, or more forceful. Instead, they tested resistance quickly, but failed to exceed it when it mattered. That’s impatience. No wonder futures could plunge 8 points in reaction to AMZN earnings.

Pattern points… (Setups and technicals)[pay]
Thursday’s rally extended through relevant resistance levels too late to be reliable for trending up throughout the day. Too late, but not too shallow. The morning’s 1284.25 bias-up target was tested through the open, but wasn’t exceeded when the could have put into play higher targets. The afternoon’s 1792.50 bias-up signal was attacked at the noon hour’s beginning, and tested at its tend, but also avoided triggering.

That’s a lot of buying pressure to expend, without gaining traction for the effort. And it wasn’t a matter of lacking buying pressure — the levels were exceeded, later. But not when exceeding them would have created higher attraction above.

The bias environment tried resuming the rally after dipping to 1786.50. It was retraced back to 1792.50. Resistance pushed back again, back down to 1786.50 into the close. And lower out of it, finally fulfilling potential to 1785.25.

That would have been a plausible bottom if tested during the bias environment. Instead, bouncing into the final hour trapped more longs. They ran for the exits in reaction to AMZN earnings post-close, triggering an 8-point plunge testing the pattern’s likelier objective under 1782.00.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Sellers gained no traction Thursday despite the late plunge, since it came post-close. But buyers gained no traction either, since the cash session closed under the noon hour’s lows. Gapping up Friday above the noon hour’s 1793.75 high may be the only possible path up without first probing lower. An opening test of 1788.00-1791.00 can still reverse 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.