Market Wrap

If Tuesday’s session isn’t trending early… then it might not trend at all (again) before the close. At least, nothing until very late in the day.

Pattern points… (Setups and technicals)[pay]
Monday morning’s dip to its 1833.50 objective reacted up to 1836.50 resistance. Which reacted back down to 1833.50 and back up to 1836.50. Then almost back down to 1833.50, before spiking up to almost… You get the idea.

Trending is difficult in lower volume, lower participation environments. This is that, but it’s something else, too.

Monday’s final hour was entered above its noon hour and bias environment highs. That wasn’t very difficult considering the narrow range, but it also wasn’t lower. And meanwhile the close was at or within ticks of 1836.00 for the third consecutive session.

The action isn’t random. It’s not trapping shorts, nor is it rejecting 1836.00. The next leg probably won’t be a reaction to current sponsorship — there is none — so any initial trending either up or down would be credible for extending in that direction intraday. Whether Tuesday before things slow down into the afternoon, or before heading into the weekend, its potential would be to trend 20 points either way, to 1816.00 above or to 1856.50 above.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Monday’s post-close Market Wrap was extended to discuss bigger picture influences and resolutions, and to do instant analysis of several stock requests. I’ll link its recording from the Strategy Session page, but it will also be available as Monday’s Market Wrap.[/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 rally was going to extend above Thursday’s resistance… then flat-to-lower ranging Friday was needed to refuel buyers. Even a deeper downdraft would have helped to renew the rally. Of two opportunities for a deeper downdraft, one was steep and shallow, while the other was delayed and brief.

Pattern points… (Setups and technicals)[pay]
Thursday’s close failed to exceed 1836.00 which prevented putting into play higher targets at 1856.50 and potentially 1869.00. Thursday’s last hour was entered under the afternoon’s bias environment high which failed to keep optimism inflated. Neither of which indicated momentum reversing down, especially with unfinished business left outstanding above.

Unfinished business which Friday’s open neutralized, and failed to exceed through a relevant timing window. Again, none of which was bearish.

A drop Friday wasn’t going to be the product of a bearish environment. Dropping Friday would be bullish, at least bullish enough for its recovery to produce fresh highs. Not dropping would be bearish, for stretching the rally too thinly — too far, for too long, too high, and too soon as described in the pre-open First Trade blog post.

So, if not dropping would have been bearish, then only a shallow drop isn’t very bullish. Especially on a Friday, during a holiday-shortened week, when a deeper drop could have trapped weak-handed shorts. The rally missed an opportunity to refuel, which durable rallies rarely fail to do. That doesn’t prevent extending higher, but it suggests that any extension higher will fail miserably if not preceded by a deeper dip.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Friday’s relatively flat close could be considered as the second non-consecutive countertrend session of the past nine. Two more consecutive higher closes would form an Up-Down Crash setup, which often resolves sharply in one direction or the other. Just one more higher close Monday would suffice for making Tuesday’s year-end session vulnerable to beginning a deeper retracement… Don’t forget there is NO weekend Strategy Session this week or next, but we will have one intraday Monday (time will be announced Monday).[/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 rally wants any buying pressure outstanding to keep pushing price higher… then it will need to insert a downdraft much sooner rather than later. The eight-day rally underway through the FOMC statement has exceeded last month’s high by the same distance that it had originally reacted down.

Pattern points… (Setups and technicals)[pay]
Apparently all of the market’s Grinches were busy today standing in line at return counters throughout the mall. Meanwhile, Thursday’s session imitated Tuesday’s session-long rally by trending straight up to new highs through every intraday timing window. And Tuesday’s session wasn’t even normal length.

Despite the relentless strength, there are still hints of pessimism. That’s important, because it can be bullish from a contrarian perspective. The morning’s bias-up target wasn’t met until the bias environment had begun lapsing. The afternoon’s bias-up target was met to within 1 tick, after its bias environment had begun lapsing.

So, an immediate downdraft would not be very credible for reversing the trend down, and would likely recover. It would also help to relieve the pent-up selling pressure from having rallied in 8 of the past 9 sessions. Closing higher again Friday would put into play 1856.50 and potentially also 1869.00 before a downdraft could be credible.

[/pay]What’s Next… (Outlook and opportunities)[pay]
No hold long was contemplated Thursday, but only because the next higher attraction was already within 1-2 points. Maintaining fresh highs through Friday’s open would overcome that challenge, and likely be rewarded intraday by extending higher. By the same token, not quickly capturing that nominal extra ground would stop reflecting pessimists yet to be converted into buyers, and start reflecting buyers becoming weak-handed.[/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 you haven’t yet checked out entirely for the holiday… then have a great Christmas, with my best wishes to you and your family!

Pattern points… (Setups and technicals)[pay]
Monday night’s choppy sideways ranging greeted Tuesday’s open essentially unchanged, unchanged from Monday’s close that was essentially unchanged from its 1822.00 opening print. That lack of momentum undermined buyers just a little — not enough to prevent extending higher, but enough to limit that extension. In practice, the unusually shallow 1828.00 bias-up target was met.

1828.00 was probed by 6 ticks, but only after the cash session had closed. Tuesday’s entire final hour ranged narrowly sideways between 1827.00-1828.00. Closing higher would have reflected strong-handed buyers. It was otherwise just noise.

Holiday-shortened sessions aren’t predictive. They can’t leave unfinished business outstanding. Their targets and technicals aren’t the product of normal participation, so they don’t much influence normal participants.

[/pay]What’s Next… (Outlook and opportunities)[pay]
All that having been said, Asian and European opens will be greeted with markets basically having rolled through their latest session. And there is somewhat less participation again to absorb any initial trending (Tokyo and London are closed, for example). Extending any higher would be vulnerable to reversing down through the afternoon and into the weekend. Reversing down, first, would gain traction if not absorbed early.[/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 bullish WedEX had been aggressive… then the morning would have probed overnight highs and kept going. But the overnight rally was preserved, and its high was probed. And now its bullish influence has lapsed.

Pattern points… (Setups and technicals)[pay]
No real surprises Monday, which rallied overnight, but failed to extend any intraday higher highs. The bullish WedEX wasn’t aggressive as a complement to Friday afternoon’s defense against sellers, but it produced a fresh high. Friday’s breakout was confirmed Monday, but only by a session that netted no improvement from the open. And that lack of improvement comes from ending the day where its gap up began.

Unimpressive as it may be, there is no re-gifting Monday’s rally. Gapping down Tuesday back into Friday’s range would be credible for trending down into the early close, but not reliably. Rather, an opening dip could find that overnight sellers disappeared like Sunday night’s buyers. Trending is difficult to reverse in light volume, but more difficult to begin in abbreviated sessions.

Extending the rally faces similar challenges. Not that overnight buyers can’t force another gap up, but extending higher intraday would be difficult. At least pulling back from a gap up would leave outstanding the gap to attract price higher.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Attendance in the Chartroom is thin, as it should be this week when trading is more difficult, and when family is a welcome distraction. If you’re planning to leave early Tuesday, have a very Merry Christmas — overnight futures trading doesn’t re-open until Thursday morning.[/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.