Market Wrap

If the payrolls’ gap up reversed the downtrend… then it’s probably not going to be very durable. A lot of distribution preceded it, and unfinished business was left outstanding below.

Pattern points… (Setups and technicals)[pay]
Friday’s gap up didn’t extend higher immediately. The morning was spent defending a dip from 1802.75 back to the 1796.00 bias-up target as support. The afternoon’s probe of fresh highs touched 1806.00, but that didn’t really extend higher either. Its reaction probed back under the morning’s 1802.75 high.

But Friday afternoon did leave outstanding its 1807.00 bias-up target. Its attraction should propel Monday’s session higher to retest the prior Friday’s 1812.50 high. A detour is possible, albeit unlikely. Only gapping down back under Thursday’s 1790.00-1792.00 high would resume last week’s initial decline.

As for last week’s initial decline — including the prior Friday, four consecutive sessions rejected their morning rallies — that represented an inordinate amount of selling pressure. Filling the gap back down to 1777.75 neutralized its momentum, but did not fulfill its selling pressure. No gap up can invalidate the distribution that preceded it, or the unfinished business below that was left outstanding.

[/pay]What’s Next… (Outlook and opportunities)[pay]
We’ll flesh out those bigger picture influences this weekend during the Saturday Strategy Session. Join us at 9:30 ET, as we discuss everything from the bigger picture, to analyzing your chart requests. See you there![/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 Employment Situation report isn’t the catalyst for a deeper decline… then can a retest of last week’s highs be avoided?

Pattern points… (Setups and technicals)[pay]
Thursday’s session was spent entirely in negative territory, but remained within Wednesday’s range. That doesn’t mean buyers patiently preserved their energy. Something prevented buyers from exploiting that sellers were so weak-handed. The afternoon’s 1782.00 low probed the morning’s 1783.25 low without extending down. But that pessimism isn’t “ineffectual” unless their 1790.00 interim high had been retraced to some relevant degree. It was not.

The market is greeting Friday’s Employment Situation report from a weakened posture. Sellers are crouching defensively to discount a negative reaction, but not enough to fully discount it. Testing a relevant support and closing back above it would have made a negative knee-jerk reaction likely to recover. Instead, a favorable knee-jerk reaction is likely to fail.

Oversold RSIs at Wednesday’s 1777.75 low remain outstanding and requiring a retest. Neutralizing the attraction in time to exit the opening 15 minutes of volatility above a relevant support could put in a bottom for the day. Otherwise, its support was already chipped away, so its break through a relevant timing window could trend down substantially intraday.

Maintaining a gap up above a relevant resistance may be the only path up. There is no unfinished business to attract higher, so holding up anyway would be bullish.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Having yet to fulfill the consequences of the bearish sequence since last Friday’s high, trending down a little could mean trending down a lot. Being a Friday, the morning’s bias signal is likely to remain influential through the noon hour. So, not trending down initially could marginalize sellers for 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 doesn’t gap beyond either end of Wednesday’s range… then trending intraday beyond either end would be difficult. But trending to either end, and reversing sharply from there, would be likely.

Pattern points… (Setups and technicals)[pay]
Selling pressure was already fulfilled before the Beige Book release, having fallen 8 points under 1787.00. Greeting the report from above 1794.00 would have been bullish. So, it’s not coincidental for the afternoon’s rally to have reached 1794.00 and then to have held it as resistance.

The recovery from 1777.75 was not accumulative. The three-day setup of failed morning rallies did extend its string to four days. The afternoon’s bounce is a product of the decline having reached its target. Notice that its reaction up failed to close positive.

The afternoon bounce’s higher highs and higher lows was a singular upleg. And it retraced as much of the morning’s peak as possible without gaining any traction for the effort. Think about that — the vast majority of patterns measure 4-6 points high, but the current pattern now forming from Wednesday afternoon’s rally is 22 points high. That pattern’s breakout in either direction would be significant.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The market did dodge a bullet by not closing under 1780.00 area, which would have triggered a trend change. There may be another bullet coming, since oversold RSIs left outstanding at the low require a retest. And retracing Wednesday afternoon’s rally could target at least 1767.00. Extending higher first could probe last week’s highs before launching a new downleg.[/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 three consecutive post-open rallies each fail… then what sort of buyers will defend against declining at the fourth session’s open?

Pattern points… (Setups and technicals)[pay]
Friday was an abbreviated session. Nevertheless, its late plunge began at its last :37 minute mark, when every session’s position-squaring window opens. And it reversed the morning’s probe of new highs to fresh post-open lows. The open’s gap up was retraced back to Wednesday’s prior close, and lower.

Monday morning’s rally began a little more choppily. But it got underway, and it was productive. Until it wasn’t. Its noon hour peak gave way to an afternoon slide well into negative territory.

Tuesday’s opening buyers can be forgiven for not yet getting the picture. They were knife-catching the overnight slide’s gap down. But that effort soon peaked — the earliest peak, yet — producing the first morning probe under the open’s lows.

Buyers are being trained not to be too optimistic too early for too long. Sellers are being trained not to be too patient anymore. The latter wouldn’t be so much of an issue, except that the lower closes mean sellers are gaining traction. In other words, this is not a corrective dip. There is no unfinished business above, and there are attractions below.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Gapping up above Tuesday’s late 1794.00 high but under its morning’s 1796.00 “higher prior lows” would be too shallow to reverse the trend up. But it’s the only way to delay the oncoming capitulation that is the next natural step when buyers have become more patient than sellers. Absent a gap up, Wednesday’s open could already be declining sharply.[/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 any unfinished business above… then Monday morning’s rally might have neutralized it. There was none, but at least the timing of Monday morning’s bounce left no doubt..

Pattern points… (Setups and technicals)[pay]
There being no “unfinished business above,” Monday’s delayed decline is that much more bearish. The week wasn’t greeted pessimistically. Sellers weren’t so aggressive as to prevent an optimistic bounce. And optimists were in given a little more rope with which to hang themselves.

New rope. Not that week-old stuff whose selling pressure would have been residual leftovers. Instead, Monday afternoon’s 12-point slide was all new selling pressure.

But that new selling pressure still can’t be trusted to launch a downleg. Monday’s low momentarily pierced last week’s 1798.75 prior low. Its prior high was probed in the interim. There is no bullish reason for returning down to 1798.75. But closing back above it suggests extending down will be difficult without another corrective bounce.

Extending down anyway — closing Tuesday under 1796.00 — would essentially put into play 1780.00. Bounces meanwhile should hold 1805.00.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Trying to extend down at Tuesday’s open could be absorbed and reversed for a bigger corrective bounce. More important to knowing how this week ends is knowing just how big of a bounce — or how big the bounce won’t be allowed to get. [/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.