Market Wrap

If the range is going to break higher… then Thursday can’t delay it for even a moment, so that opening higher might serve by proxy. By the same token, an overnight slide could grow legs, too.

Pattern points… (Setups and technicals)[pay]
When Tuesday’s session ended, still trading within its recent range, Wednesday’s session became likely to resolve the recent consolidation either up, or down. There was nothing magical about the day. Any day in the past week would have been credible either to extend through the New Year’s high, or else to react down from it. Wednesday just happened to be the last day of the sequence.

Resolving up instead of down became more likely after recent dips expended more selling pressure than buying pressure, without gaining traction for their efforts. The drop into expiration and Tuesday morning’s reversal were each steeper slopes than their recoveries. And the latest recovery was much nearer to the range’s upper-end than lower, which also made resolving down by Wednesday’s close unlikely, since breakouts don’t originate from their opposite end.

So, perhaps the most bullish factor is that buyers have the upper-hand. Or, had. They’ll still get a benefit of the doubt by proxy if Thursday’s open were to surge, if not already gap up. By the same token, although gapping down under the 1834.00 “unfinished business below” would be difficult, it would give sellers credibility for retaking control.

[/pay]What’s Next… (Outlook and opportunities)[pay]
RSIs barely approached overbought territory Wednesday afternoon while price firmed almost 5 points. Not yet reacting down suggests that buyers were conserving energy, and being patient. But that still requires an immediate reaction up to be credible.[/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 were any lower… then the session might have rallied 18 points instead of dropping as many. But that would have tested the next higher target, which probably won’t be rejected immediately upon touching it. So, dipping first may have bought the rally a little more time — assuming that it resumes Wednesday.

Pattern points… (Setups and technicals)[pay]
The small Double Top at Tuesday’s 1844.00 high should be probed by new highs eventually. Tuesday afternoon’s consolidation at its 1837.25 bias-up target chipped away at resistance, keeping the door open to probing new highs.

The trick is to not look down. While hovering at resistance — and chipping away at it — all but requires breaking through, closing first keeps the door open to a corrective dip, first. The trick to dipping first is to keep it brief. The better trick would be just to extend higher without delay.

Exiting Wednesday’s open trending down under Tuesday afternoon’s consolidation would be a problem for probing fresh highs this week. Tuesday’s lows already pushed the edge of the envelope, and will need to be retested eventually. But there’s not much support any lower to force a recovery.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Don’t forget that econ reports don’t have any real influence this week except for Thursday. That leaves earnings news able to have more impact. That impact can be inhibitive, like preventing trending, as much as it can trigger volatility. [/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 New Year’s Eve retest isn’t probed soon… then its eventual retest could take the form of a new, durable rally leg. Test it sooner, rather than later, and more durable top could form.

Pattern points… (Setups and technicals)[pay]
If WedEX had any bullish influence Friday, it was to hold a test of Tuesday’s “lower prior highs” (boxed in blue). Even that success is marginal, since the close didn’t recover decisively. But it’s enough to be prepared for a more obvious bullish influence the following morning on Tuesday — whether that is to retest Friday’s low down to 1827.00 before rallying, or simply opening through 1836.50-1838.00 and extending higher.

Probing Friday’s low but not recovering would next target 1818.00-1819.50 (follow the red arrow). Even that wouldn’t be bearish, not without also closing under 1821.50 (red line). That would break free from the highs and their retest, and become attracted back down to the much older “lower prior highs” that Tuesday’s drop had been on its way to testing.

Extending the pullback any deeper shouldn’t be necessary before recovering to new highs. Recovering from an extended pullback won’t be likely if extended too deeply and for too long.

Meanwhile, the above comparison among major indexes suggests that sellers aren’t yet retaking control. While S&Ps recovered back to prior highs, the Dow underperformed, which suggests that bigger money isn’t focusing on safer stocks. NDX outperformed by probing new highs, which suggests that speculative fervor hasn’t yet died. It’s not a buy signal, but it does keep the burden of proof on bears.

[/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 discuss the bigger picture, those items discussed above and others. Futures do re-open normally Sunday night, so the Chartroom will be open. I’ll update on anything relevant. [/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 so many setup Thursday rejected the opportunity to decline… then why should early selling pressure Friday be any more credible?

Pattern points… (Setups and technicals)[pay]
Dip after dip Thursday tested relevant levels, but holding them through relevant timing windows. Sell signal after sell signal was probed, with only one probing deeper than its first three minutes — and that required an assist from the noon hour’s noise.

Multiple buy signals were probed, too. They also all failed to extend any further than their 3-minute highs. No bounce recovered into positive territory, although Wednesday afternoon’s 1840.50 low was touched as resistance.

Despite multiple dips not gaining traction, Thursday’s only commitment was to remain in negative territory. A small attraction back to the structure at the noon hour’s low was neutralized by a post-close dip. And that dip was reacting down from the cash session’s last-minute bounce, so its sellers failed to gain traction, too.

Except for one feature, Thursday’s session was almost “ineffectual pessimism,” which often resolves bullishly. This still could. Almost any initial strength Friday would be credible for extending higher intraday. Meanwhile, the most bullish influence  is that so many bearish influences weren’t productive.

[/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 this being expiration, trending through the opening 15 minutes tends to extend in that direction throughout 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.

If Thursday delays probing Wednesday’s high… then the recovery has a problem.

Pattern points… (Setups and technicals)[pay]
First, WedEX triggered an actively bullish signal. Price action into and out of expiration should be biased upward. That’s Friday afternoon and Tuesday morning. An interim dip is possible, not abnormal, and likely to be recovered.

Second, dipping at Thursday’s open would be too soon to be “interim.” And it is possible. Normally, it would not be recovered. The bullish WedEX would be negated by proxy.

Had Wednesday’s session trended upward, then Thursday’s open probably wouldn’t dip down so far that it negates the bullish WedEX. But Wednesday’s upward trending was limited to the morning’s bias environment. No other window joined it. Sliding through the open back under Wednesday’s 1840.50 lows could invalidate whatever upside had been signaled.

Extending higher without delay would be helpful confirmation to expiration’s upward bias. While ranging sideways 1840.50-1844.50 through Thursday morning wouldn’t invalidate the bullish WedEX, it would be extra vulnerable to an afternoon drop, perhaps into Friday morning — likely to be recovered, but down in the interim.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Thursday’s session is full of economic reports and events that, if absorbed, would make Wednesday’s breakout stronger. At least, not reversing down on Thursday morning’s items would imply the rally is on a mission, and its 1856.50 would be tested much sooner rather than later.[/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.