Market Wrap

If not for Turkey’s interest rate surprise… then Wednesday afternoon’s sellers might have been absorbed. Morning probes of resistance would have created more room to absorb afternoon selling pressure. But the morning didn’t bounce very much. So holding its low only suggests too much optimism, and not that sellers have been absorbed.

Pattern points… (Setups and technicals)[pay]
The 1765.50 objective was tested in reaction to the FOMC news. Its reaction up retraced all the way back to its prior high at 1777.75. That’s not an arbitrary bounce. So, not extending that higher was itself bearish. But reversing all the way back down to 1765.50 — which was already tested, and already influential — suggests that buyers are weak-handed.

In fact, the morning’s test of 1765.50 stopped short of touching Monday’s low. That is optimism, which is inappropriate at a bottom. The afternoon’s drop stopped optimistically short of touching the morning’s low. This is all potentially bearish from a contrarian perspective.

All of which is developing back at December’s last relative low, which formed into and out of another FOMC announcement. I’ll leave it to others to tell us what that might mean fundamentally. Its technical relevance is only coincidental. But that is a prior low, nonetheless. There is no bullish reason to revisit it after the interim rally. After a fourth session probed lows of the prior three-day ru, not rejecting immediately Wednesday’s drop would all but confirm a new downleg underway.

[/pay]What’s Next… (Outlook and opportunities)[pay]
While 1765.50 is the relevant support, and breaking lower is now just a formality, one more intervening bounce is possible. Not likely, but possible. And it would begin by gapping up. So, not gapping up would be bearish.[/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 valid bias signal isn’t rejected decisively… then it doesn’t matter how lethargic it was — it’s valid. And its bias target becomes “unfinished business” that requires being tested eventually. Which is why sellers never earned credibility Tuesday afternoon.

Pattern points… (Setups and technicals)[pay]
The burden of proof was always going to be greater for buyers Tuesday. Monday’s last-hour dive had retraced all of the bias environment’s gain, preventing its buyers from gaining traction for their effort. Without gapping up Tuesday, trending higher would be next to impossible.

The overnight rally from 1771.00 to 1786.50 expended as much buying pressure as possible without gaining traction for the effort. Its 11-point reaction down was recovered back up to Monday’s 1788.50 high before being knocked down again. A lot of buying pressure expended, but still no traction for the effort.

Buyers could have spent the time prior to Wednesday’s FOMC meeting more productively. Probing fresh lows and then recovering through the close to trap shorts, for example. But continually recovering to prior highs only expended buying pressure when it wasn’t going to gain traction for its effort. Again.

Wednesday afternoon’s bias-up signal did leave “unfinished business above” at a fresh high at 1791.00. Not that the bias environment was very productive, or at all. But its 1785.00 signal wasn’t rejected. Its target should be met at some point. Fulfilling it would be vulnerable to launching a new downleg, unless the target were exceeded through a relevant timing window that might protect it from the FOMC reaction.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Despite the close firming to fresh highs at 188.75, Tuesday’s buyers gained no traction for their effort. That’s because very similar to Monday, a late drop retraced the bias environment gains back into the noon hour’s range. A 3-1/2 point dip fell under the bias environment’s 1786.75 high — shallower than Monday’s 17-point plunge — but every bit as relevant. Probing above Tuesday’s highs Wednesday must being by gapping up, or else be likely to reverse back down later. Not gapping up could probe higher anyway, but only temporarily. Which would make sense ahead of the afternoon’s FOMC announcement. [/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 doesn’t reject Monday’s last-hour drop… then the three-day old decline may be entering a very dangerous phase.

Pattern points… (Setups and technicals)[pay]
Monday was a third consecutive session of probing sharply lower lows. More important is that last week’s bearishness persisted through the weekend. Weekends, like time, can heal all wounds. But last week’s pessimism survived through the weekend.

Monday’s drop wasn’t just residual momentum, but productive selling. The morning and afternoon each probed fresh lows. Neither low was arbitrary noise, but targets created by selling pressure. And despite bouncing sharply off of the afternoon’s low — avoiding a bias-down trigger despite testing both bias-down parameters — the bias environment’s rally was retraced entirely back down to its origin.

Extending just a little higher into Monday’s close would have formed a bullish Pivot Reversal. Failing to trigger it suggests that buyers are weak-handed.

All of which can be undone at Tuesday’s open, for another chance at recovery. Monday afternoon’s 1788.50 high printed before the final hour, which is a little late to optimal, but gapping up above it would still trap a lot of sellers.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Oversold RSIs at Monday’s low want to be retested. The attraction can be neutralized overnight, or delayed for awhile if the open were to launch a rally. Launching a rally would be likely to recover Friday’s downleg and probe back into Thursday’s range. Extending the decline through Tuesday morning could be substantial, too.[/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 target were met before the final 3 minutes… then holding its last-minute test would have been relevant to the hold-short setup. But there are multiple bearish influences in-play.

Pattern points… (Setups and technicals)[pay]
Friday’s session-long decline fulfilled its normal traits: gapping down under prior lows to reject the prior session’s closing rally, printing a fresh session low during all but one intraday timing window, and even ticking down into the close. Here’s something else a session-long decline tends to do:

Extend down the following morning. Not probe fresh lows, and not momentarily, but trend, with some sort of complexity. Weekends can mitigate that momentum. A lot of Friday setups don’t survive into Monday, because they’re formed by artificial buying or selling pressure that skittishly reverses when the week begins.

This one seems more real. The beat-the-weekend crowd probably expended themselves Thursday and Friday morning, and that didn’t stop price from falling further. A two-day plunge through support into the weekend often reflects sponsorship intent upon extending. The only reason not to be positioned too bearishly is that not already dropping substantially at Monday’s open would likely be due to an equally substantial gap up underway.

[/pay]What’s Next… (Outlook and opportunities)[pay]
We’re back this weekend for the Saturday Strategy Session. It begins at 9:30am, and its entry point is linked from the blog’s sidebar. The recording will be available later, but attendees will be able to discuss the bigger picture, and to request instant analysis of any chart.[/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 drop isn’t duplicated Friday… then potential to new highs would remain very much alive. Otherwise, look out below.

Pattern points… (Setups and technicals)[pay]
The consolidation underway into Wednesday was going to break one way or the other before the close, or else by proxy at Thursday’s open. Breaking higher was likelier since the range’s upper-end was much nearer. Breaking lower would have required too much time for complex trending to develop. Gapping down below the range would have worked, but… that rarely happens.

Anyway, it happened. The template being tracked remained intact, where extending the range would have been problematic. Now the question is whether Thursday’s sell-off expended enough selling pressure for a recovery to new highs. The 1813.75 low did fulfill a lot of selling pressure, although that did bottom 2-3 ticks too optimistically to be confident.

Not being ready to recover doesn’t preclude a Friday morning bounce to refuel sellers. “Higher prior lows” at 1834.00 are the minimum resistance to suggest a bigger rally underway. Even probing several points higher could still reverse down. Meanwhile, having rallied into Thursday’s close, gapping down Friday under Thursday afternoon’s 1813.75 low could form a “session-long decline,” no refueling needed — just crash helmets.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Thursday’s cash session close was still testing 1821.50, and the late probe above it was too late to be its recovery. Almost any dip back under it overnight would be credible for extending down into the open. This being a Friday, that may be the only path to new lows for the week, since trending rarely waits until the afternoon to begin. Rarely. Like consolidations rarely gap down from their upper-end to below their lower-end. [/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.