Market Wrap

If Tuesday’s rally doesn’t resume immediately Wednesday… then resuming Monday’s drop shouldn’t be far behind.

Pattern points… (Setups and technicals)[pay]
Tuesday’s close was above the noon hour and bias environment highs, so buyers gained traction for their effort. At least, a little. Perhaps they just prevented sellers from regaining traction.

The bias environment high consisted of 1-2 momentary ticks higher. That was pierced momentarily by 1-2 ticks while the bias environment was lapsing. But the final hour was entered from back under the noon hour’s high. Probing higher anyway was retraced again back under the noon hour’s high. At least sellers didn’t gain traction.

Extending higher Wednesday without delay, and without reversing down from the open, would still be bullish. Tuesday afternoon’s hesitation would become moot. But not having gained traction at Tuesday’s close, gapping down is essentially the only path down available Wednesday morning.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The quarterly/annual earnings onslaught continues Wednesday, along with the afternoon’s Beige Book. It’s all influential, but so is position-jockeying ahead of Friday’s expiration. So, the WedEX indicator has a good chance at triggering an active signal. [/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 December’s breakout is done… then can the bull market be very far behind? The reaction to last month’s FOMC meeting hasn’t been retraced. Not entirely, only by proxy.

Pattern points… (Setups and technicals)[pay]
December 18’s FOMC policy statement triggered a rally from fresh lows at 1761.00 back to the 1805.50 prior highs. The following session consolidated the rally before Dec 20’s breakout close at 1813.50, which the next session’s 1823.00 consecutive higher close had confirmed. That confirmed breakout was fulfilled by extending through 1843.00.

Last Monday’s lows had retraced the confirmation session’s 1823.00 close. That required also retracing the breakout close, at least to the breakout session’s 1816.00 “lower prior highs.” Monday’s plunge probed it down to 1809.50.

That can’t be the end of that. The consequence to retracing the breakout’s confirmation should do much more damage to the chart. Containing the downside damage now relies upon creating unfinished business above, capable of attracting price higher after a decline runs its course. Excessive pessimism from gapping down aggressively and probing supports prematurely might be the only bullish case.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Bouncing overnight immediately would leave outstanding a gap back to Monday’s 1813.50-1815.00 close, wanting to be filled. A corrective bounce has room either to 1820.00 or 1826.00 before suspecting more substantial upside might be interrupting the decline.[/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 pre-open high didn’t require a retest… then retesting it post-open Friday would have trended up into the weekend. Testing it intraday Monday could still be bullish. But there is otherwise no requirement outstanding to test recent highs.

Pattern points… (Setups and technicals)[pay]
Intraday on Friday’s blog, I described that extending the decline under the morning’s 1827.00 objective would have been credible for launching a new downleg. It just had to break before entering the noon hour. Coming out of the noon hour would still be plausible, but less credible. Any later could have extended, but would have been retraced.

The point is that Friday afternoons are not dominated by strong hands. So, whichever direction breaks late is sponsored by weak hands. Strong-handed sellers would have broken 1827.00 early, and weak-handed sellers would have sponsored a later break.

Instead, there was a rally. Barely firming into a narrow range hovered in negative territory until the final hour, and THEN broke higher. Unless that effort recovered a relevant level, its buyers are the weak hands — not sellers.

So, did that effort recover a relevant level? It did, but it didn’t. The relevant level is 1836.00-1836.50. That late break higher reached it with 45 minutes to spare. But those last 45 minutes were spent ranging around 1836.50, instead of extending above it, happening to settle several ticks above it, but still within the range.

If buyers are weak-handed, then sellers must be in control coming out of Monday morning’s bias environment, or earlier. There should be negligible hesitation at 1827.00, having chipped away at its support. Probing higher highs first should be contained to 1841.00 if the afternoon doesn’t intend to extend to fresh highs.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Iiiit’s baaaaaack… Having been on break for two weeks, the Saturday Strategy Session returns this weekend at 9:30am ET. We’ll discuss Sunday night and Monday night possible price action, and the bigger picture objectives in either direction. Also, attendees can request 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 afternoon’s bounce had extended just a little higher… then it might have marginalized sellers. Having that opportunity but not fulfilling it should be a cause for concern.

Pattern points… (Setups and technicals)[pay]
Thursday’s early rally peaked at resistance and left no unfinished business above. Its gap up to 1837.75 was retraced to within 1 tick after an interim dip touched Wednesday’s highs as support. Its attraction is neutralized.

Closing back above Wednesday’s highs and preferably above 1836.50 would have greeted Friday’s Employment Situation report from strength. That would have been likely to absorb an initially negative knee-jerk reaction. A reaction down could still be absorbed, retraced and reversed up, but not reliably.

Thursday’s reaction down wasn’t rejected. Probing under Wednesday’s lows has left the pattern vulnerable to extending down. There is an attraction outstanding at Monday’s 1821.50 close. Already having probed a fresh high in the interim, returning down to 1821.50 would be likely to extend down much more substantially.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Meanwhile, Thursday’s close was again at least consolidating around the same 1831.25 that defined the prior two closes. That’s similar to the year-end ranging that closed persistently for three sessions around 1836.50. Closing between the two won’t be any more vulnerable to resolving in either direction. But an early breakout would be credible for extending in that direction.[/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 there were a knee-jerk reaction to FOMC Minutes… then Wednesday’s close could have been sharply higher, or sharply lower, instead of unchanged — unchanged from Tuesday’s close, which is also where the FOMC Minutes was greeted.

Pattern points… (Setups and technicals)[pay]
Tuesday’s 1831.25 close had been influential all day, even before Wednesday’s open. It was Tuesday morning’s bias-up target, and it was overlapped through each intraday timing window. It was also Wednesday’s opening print, and also overlapped through each intraday timing window, again. It was also Wednesday’s close.

Actually, it was Wednesday’s cash session close. Futures extended to 1833.00, fulfilling the 1829.00 buy signal’s minimum objective. That leg followed the afternoon’s dip to its 1827.25 target.

Recovering to either 1831.25 or 1833.00 recovered closing above it for a hold-long to be compelling. Those levels represent a 61.8% retracement back into the midday range. Until extending higher through a relevant window, that might be only a corrective bounce, and the drop to 1827.25 might have been only the beginning of a more substantial decline.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Back under 1830.50 would start to signal the corrective bounce was reversing down. Extending higher through Thursday’s open would invalidate the corrective bounce problem. But a similar vulnerability would appear at 1836.00-1836.50 or 1839.75-1841.00 — reversing down from either level could still launch a more substantial decline. But extending any higher would target 1856.50. [/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.