Market Wrap

If Friday were to fulfill the outstanding new high close… then would that buy the rally even more protection as it creates another upside objective? Probably, yes. And the impending holiday offers seasonal bullishness to further inhibit sellers. Bears will have to be tricky to be at all productive anytime soon.

Pattern points… (Setups and technicals)[pay]
Wednesday’s late dip being sponsored by weak hands and the three-day pullback had ended was confirmed by Thursday’s gap up. Retracing back to Wednesday morning’s ECB knee-jerk reaction high confirmed that momentum had reversed up. Closing positive above all other timing window highs confirmed the intraday rally was sponsored by strong hands.

But not too strong. Gapping up impatiently created a gap back to Wednesday’s close, confirming the recovery’s sponsorship is weak hands. Leaving outstanding a retest of oversold RSIs at Wednesday’s low confirms as much, too.

Last Friday’s new trend high close all but requires there to be at least one more. While the market has reached levels where a brief opening surge could easily probe new highs, that doesn’t ensure maintaining the probe through the close. And if the market intends to top here instead of extending higher, then it should avoid another trend high close Friday.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Probing a fresh high well above 1800.00 intraday Friday, but closing under last Friday’s 1792.00 low, could at least reverse momentum down for a deeper drop than this week’s 1774.50 low. Not even attacking last Friday’s high before the weekend would keep alive potential for reversing down next week anyway.[/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 high is going to hold a retest… then already rallying Wednesday would have been preferable, instead of extending the pullback further down. That extra dip under Tuesday’s low came after the afternoon’s bias environment. And it was largely retraced. Fully rejecting it Thursday before trapping many more sellers — and before refueling buyers much further — would keep alive potential for fresh highs to peak.

Pattern points… (Setups and technicals)[pay]
Wednesday’s reaction to the FOMC Minutes produced an 8-point drop from 1788.50 to 1780.25 during the bias environment. It was retraced by 61.8% up to 1785.75. Bouncing a little higher would have triggered a short-squeeze, but a fresh low was probed instead. Recovering that fresh low and entering the final hour back above 1785.75 would have triggered a short-squeeze, too. But fresh lows were probed instead.

Opting to probe lows instead of recovering… sounds like sellers are in control. Or, is price dropping because of patient buyers?

The last probe of fresh lows was retraced all the way back up to the bias environment’s 1780.25 low. That suggests the interim dip was arbitrary, just noise delaying a recovery. Strong-handed countertrend sponsorship doesn’t arrive that late in the day, so recovering would have been the product of weak hands.

And weak handed buyers aren’t going to produce a new trend high close, which Friday’s new high close required.
[/pay]What’s Next… (Outlook and opportunities)[pay]
None of which means the drop from Monday’s high has ended. It is ready to end, but might first want to retest the oversold RSIs at Wednesday’s 1774.50 low. The drop might first extend down to “lower prior highs” at 1768.50. Exiting Thursday’s open above 1785.50 would start to signal strong-handed buyers had arrived already. [/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 high is going to hold a retest… then it should be retested soon, like Wednesday. Tuesday’s ranging either ended a brief correction, or it is the beginning of something much deeper.

Pattern points… (Setups and technicals)[pay]
Tuesday morning’s probe under Monday’s lows was recovered to fresh post-open highs. There was no retracement along the way to refuel buyers. Extending that uncorrected surge back to Monday’s highs would have dictated its failure. It at least prevented any no-bias trending to rally.

But now, extending back to Monday’s highs on Wednesday would not be so assured of peaking. Tuesday morning’s excessively optimistic rally was reversed to a second fresh low in the afternoon, which helped to rid the market of being too optimistic. Retesting Monday’s highs might not peak.

It’s still possible to rally without trending down any further. since Tuesday didn’t extend Monday’s late plunge. But an immediate rally must still begin by gapping up — preferably above 1794.00, although gapping up Wednesday above 1792.00 would be credible for extending higher.

It’s also still possible to extend Monday’s late plunge since Tuesday didn’t reject it. Extending the decline at all past Wednesday’s opening 15 minutes of volatility at 9:45 would likely extend down sharply — not necessarily steeply — to 1768.00.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Monday’s equilibrium close exercised more than its minimum influence Tuesday. Multiple convincing trending attempts were reversed by convincing trending attempts in the opposite direction. Neither buyers nor sellers gained traction, so immediate rallying Wednesday should begin by gapping.[/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 pattern requires at least one more new high close… then producing it sooner, rather than later, would enable a bigger downleg than would simply extending down first.

Pattern points… (Setups and technicals)[pay]
Monday afternoon’s plunge from 1798.25 began precisely at 2:30 when the bias environment began lapsing. Its sponsorship is single-minded, and not the combination of earlier selling pressure. Its momentum can be fulfilled in a single timing window.

The drop’s 1784.75 low developed as a probe under the 3:10-3:20 timing window’s low. The probe recovered before the 3:37 position-squaring window opened, while 1-minute RSI diverged positively. Its sponsorship was weak-handed and gained no traction for its effort.

The low held 1785.00, which was very influential Thursday when that session’s buyers gained no traction for the morning’s new highs. Retracing the interim probe above Thursday’s highs is only partial consequence for extending higher on no traction.

And Monday’s close was at 1789.50, which was the morning’s unfinished business below. That created “equilibrium” by neutralizing its attraction without creating a new one — neither extending to close under it, nor bouncing to close above it. The next two trending attempts should be very convincing, and then reversed very decisively.

Monday’s session formed a bearish Key Reversal by gapping up to a new trend high, and then closing negative under the morning’s lows. Key Reversals are often temporary, because they leave outstanding the opening gap above prior highs. Monday’s opening gap is not outstanding, already neutralized after first dipping back into Friday’s range. Its resistance is substantial.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Extending down without hesitation has room down to 1768.50, if not an attraction there, before reversing up to retest Monday’s 1799.75 high. Extending up first would likely begin by gapping up to 1793.25-1794.00, holding 1791.50 as support, and then later reversing down from probing Monday’s high.[/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 Friday’s session wanted to decline… then it had every opportunity during the morning’s sideways ranging. But it held support, and created an attraction above to inhibit selling pressure. It didn’t trend up too much more until very late.

Pattern points… (Setups and technicals)[pay]
Friday’s new high close is a new high close for the trend, above all prior intraday highs. New trend high closes on expiration aren’t usually associated with THE trend high. That is equally true for new trend high closes on Fridays. At least one more higher close is likely.

That is useless information if Monday doesn’t reverse down. But reversing down immediately would leave outstanding that “unfinished business above.” A recovery might be delayed, but we would be confident in its eventuality.

As for the potential to reverse down immediately… Friday’s 1794.00 objective was probed twice, and both probes were retraced. The objective’s buying pressure is satisfied, and RSIs diverged negatively into its retest.

Meanwhile, Friday’s opening 15 minutes of volatility having trended down is nagging. Perhaps its effect was limited to constraining the morning’s rally effort. It might also have a delayed effect on reversing momentum down Monday from Friday’s 1794.00 test, unless fresh highs probe 1799.50 without reacting down abruptly.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Join us tomorrow for the Saturday Strategy Session. Its link can be found in the blog’s sidebar. We’ll review the bigger picture, and analyze any stock requests from you and other subscribers.[/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.