Market Wrap

Probing fresh lows overnight at the morning’s 2711.00 bias-down target had reacted up sharply, probing above the morning’s bias-up target by an additional 6 points up to 2748.25. And, yet… Rejecting both bias-up parameters put into play a retest of the overnight low that was fulfilled. And then extended, to attack the next lower objective at 2685.00-2686.00 to within 1 tick.

Which could have been the low. Only 1-minute RSI was oversold, so it doesn’t require being retested. Its reaction up recovered the bias environment’s entry, but not until the window had already begun lapsing. So, despite bouncing to 2723.50, the two prior sessions’ “higher prior lows” launched a reaction back down to 2798.00.

This late dip wasn’t too late to form a bearish WedEX. Breaking from within the two prior sessions’ range to close below them makes the signal active — closing back above higher prior lows would have formed a passive bullish setup. Opening high enough Thursday could still trigger a late passive bullish WedEX, but even that might not prevent at least more weakness before a recovery attempt could be credible.

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It might seem odd that Tuesday’s session shared a relevant feature to last Thursday and Friday, since Tuesday ranged choppily sideways, but Thursday and Friday trended down exclusively in negative territory. How are those similar? Because both sets expended a lot of selling pressure, without maintaining a break under a relevant support.

Thursday and Friday retraced much of its prior session’s (Wednesday) rally. Tuesday has retraced all of its prior session’s (Monday) range.

Of course, Thursday and Friday did resolve down through relevant support. Tuesday’s session may yet do the same, and for a similar reason — bottom-fishers aren’t comprised of strong-handed buyers, as seen by ending the period at or near the lows. The next lower objective is 2696.00 and then 2786.00. Gapping up above Tuesday afternoon’s 2740.50 high would start to signal momentum reversing up, instead.

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Two consecutive sessions spent downtrending in negative territory were likely to bleed into a third. Monday fulfilled the setup, despite having rallied overnight to the morning’s 2795.50 bias-up target. Opening back down at its 2775.00 bias-down signal was only the beginning of a collapse that erased the last of last week’s rally. Not just Wednesday’s election results surge, but also the Tuesday and Monday rallies preceding it down to 2722.00.

Those two days were also consecutive sessions spent uptrending in positive territory, which bled into a third — Wednesday’s election results surge. Their different context allowed Monday’s initial selling to bottom, and for its recovery to be rewarded by retesting Wednesday’s high. Which is still possible, to the degree that Monday’s decline is rejected.

Just recovering interim resistance at 2739.00-2743.00 would be a start. Leapfrogging over it at Tuesday’s open would be the quickest signal of rejecting Monday’s decline, especially maintaining and extending a gap up to and or through Monday afternoon’s 2752.00 high. Meanwhile, extending this leg could reach 2786.00 before its next opportunity to try bottoming again.

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Friday’s 2793.00 open did what Thursday’s open and close did not. Opening or closing there Thursday could have started reversing the two-week old correction. Delaying its test allowed a position of strength to form at the rally’s highs, to help recover from backing-and-filling.

Which there was. The backing-and-filling could also be considered a pullback, or even downtrending — at least, downtrending within the context of a pullback. Regardless, it would have been done already if the open had held its test of 2793.00. But it didn’t, putting into play 2781.00 and potentially 2764.00.

Both were met (to within 2 ticks). The likely bottom there developed quickly, if not also 2 ticks short of thoroughly fulfilling its downside potential. The bias environment exit reversed up to within 2 points short of the 2793.00 open. Its resistance pushed back down to 2781.00 at the cash session close on the way down to 2776.50.

Two consecutive sessions spent exclusively in negative territory may have ended a corrective dip. Fresh lows immediately Monday could extend down, but the burden of proof would be on sellers. We’ll discuss the possible paths and their likely behaviors this weekend.

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Gapping down Thursday under Wednesday afternoon’s 2793.75 bias environment low would have ensured ending the week-long correction and reversing the trend down. But Thursday’s open was too shallow to indicate anything more bearish planned than backing-and-filling.

Gapping down to 2804.50 bounced 9 points but didn’t avoid triggering the morning’s 2808.75 bias-down signal. The open’s retest launched another bounce, which tested the afternoon’s 2815.25 bias-up signal but barely avoid triggering the afternoon’s 2806.00 bias-down signal. The nonN-bias environment fulfilled the morning’s 2800.75 bias-down target (in the wake of the afternoon’s FOMC policy statement), and its next lower objective at 2795.50. Consolidating back up to 2804.50 suddenly surged up to 2811.00 through the close.

Oversold RSIs at Thursday’s 2795.50 low require an eventual retest, which could visit 2793.75, but it has become too late for that to ensure ending the week-long correction and reversing the trend down. There’s now room down to 2764.50 before suggesting a more substantial reversal may have begun. Meanwhile, at least a retest of Wednesday night’s 2818.00 highs would be likely, if not also resuming the rally to the 2850.00 area.

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