Market Wrap

If expiration were to produce a new trend high close… then the next downturn might not be possible until midweek. Expirations are unlikely to contain a trend extreme, as are Fridays.

Pattern points… (Setups and technicals)[pay]
Buyers gained no traction for their efforts Thursday. That seems odd to say when S&Ps closed 9 points higher, trading almost exclusively in positive territory. But that was produced entirely through the morning’s bias environment. The afternoon… not so much.

Also, Thursday’s new high close was not an arbitrary level, but at the afternoon’s 1787.75 bias-up signal. Resistance was touched, and held — not broken. Also, after the bias environment lapsed, Thursday’s last 90 minutes ranged narrowly around 1787.75. There was plenty of time to extend higher, had that been the market’s intention.

None of which is a sell signal. Friday’s expiration is a wild card, regardless of whether the rally from Friday’s low has been expiration’s influence all along. The late breakout that triggered the WedEX setup still leaves the possibility that expiration’s influence was already fulfilled.

[/pay]What’s Next… (Outlook and opportunities)[pay]
No matter how much buying pressure has been expended, just entering expiration at a new closing high still carries significant upside risk. Trending throughout expiration’s opening 15 minutes of volatility tends to extend in that direction through the day. And this being a Friday, the morning’s bias is likely to persist through the noon hour. So, not rejecting the rally immediately Friday might not be able to reject it until midweek.[/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 this rally intends to peak anytime soon… then it had better peak Thursday, because ending the week with fresh highs could require that the rally extend even higher.

Pattern points… (Setups and technicals)[pay]
A new trend high close on Friday would all but require there to be another, since trend high closes just don’t happen on Fridays. Same can be said for a new high close on option expiration, since expirations simply don’t have a history of coinciding with a trend high.

So, a bullish Wed Expiration indicator would confirm the rally remains alive and well, right? Maybe. Wednesday’s breakout above all prior highs didn’t happen until after the bias environment had lapsed. That’s not exactly the strongest hands. In fact, it’s the basest of signals for a setup that looks back two entire sessions. So, rejecting Wednesday’s late breakout — e.g. gapping down Thursday under the bis environment’s 1770.25-1772.75 prior high and low — would qualify as a passively bearish WedEX. In any case, WedEX influences Friday afternoon and Monday morning.

Gapping or trending down wouldn’t necessarily extend down for long Thursday. Wednesday’s buyers did gain traction for their efforts, having closed above the noon hour and bias environment’s highs. But that only makes a new high likely intraday, not necessarily maintained through the close. Having fulfilled potential to 1777.75 and 1779.50 (already extending higher post-close to 1782.00), not already topping by noon Thursday could extend to 1785.00 or even 1794.00.

There is otherwise no unfinished business above, and some very interesting indications to be revealed before Thursday’s close.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Jobless Claims being reported before Thursday’s open is the week’s only influential report. The afternoon’s 30-year auction can influence price action, too — probably not pessimistically in advance, since Wednesday’s 10-year went off well.[/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 not for the dovish Fed speaker’s surprisingly hawkish statement… then Tuesday morning’s recovery probably would have probed fresh highs. The question now is whether that effort was knocked off track, or if it can regroup.

Pattern points… (Setups and technicals)[pay]
Tuesday’s selling pressure was relatively shallow as expected. Not expected would the be the extra pullback, or the delay in recovering from the pullbacks. In fact, we’re still waiting.

But every probe under 1763.00 returned to 1763.00 before producing a fresh low. Eventually, a recovery to 1763.00 extended through it, then recovered from dipping to 1763.00 before the close. The last low was no-bias trending likely to retrace back to 1763.00, and it was. The close maintained the final hour entry’s recovery above the noon hour and bias environment highs, after the bias environment had probed fresh session lows.

All of which suggests that sellers were weak-handed held.

None of which suggests that buyers are strong-handed.

But buyers had better prove soon that they’re strong-handed. Pullbacks are no longer likely to be shallow, and they’re not likely to be recovered. Unfinished business above at 1769.50 should be retested early Wednesday if at all. And that could be extended to retest last Thursday’s 1774.50 high, potentially up to 1777.75 and 1779.50.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Tuesday’s choppiness seems to have been a function of absorbing the morning’s reaction to an otherwise dovish Fed speaker seemingly receptive to tapering. Think of that as a sucker punch, and then picture the market staggering around the ring as it struggles to stand back up. The market is prepared to duck or absorb being blind-sided again by the same headline, so better trending should be more reliable.[/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 not for Monday’s holiday liquidity constraints… then would its hovering at trend highs have launched an upleg into uncharted territory? That’s doubtful, since Friday’s rally probably would have been shallower if the weekend’s illiquidity were not going to be compounded by Monday’s holiday. In other words, the market is where it should have been. Or, at least, it will be where it should should have been, after Tuesday’s opening action.

Pattern points… (Setups and technicals)[pay]
A narrowing range like Monday’s often reflects indecision. When it does break, it is likely to break falsely and then reverse more substantially in the opposite direction. That’s all intraday. Monday’s narrowing range avoided even a false trending attempt through the close.

An initial trending attempt Monday night or Tuesday can still be false, but it can extend much more substantially before it is reversed in the opposite direct. Initial trending attempts that are delayed beyond the close can gap, i.e. explode at the following open.

There is a growing attraction to retest last Thursday’s 1774.50 pre-open high, presumably including 1777.75. Neither requires a retest, but not yet reversing Friday’s bounce makes it increasingly likelier to extend. The path up can be down, first, to 1760.00 or 1753.00 Extending any lower would suggest the delay in reversing Friday’s bounce was only a delayed reaction due to Monday’s slower volume.

[/pay]What’s Next… (Outlook and opportunities)[pay]
In the absence of a weekend Saturday Strategy Session, the post-close Market Wrap on Monday included a discussion of the bigger picture. Its recording is located in both spots, each linked from the blog’s sidebar.[/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 bias environments aren’t exited under a prior low… then it’s nearly impossible to reverse trending that the bias environments produced. That caveat was proved out once again when Friday morning’s recovery kept drifting and drifting, higher and higher. Regardless of the steep slope and depths from which it recovered, Friday’s rally was really just noise in the range.

Pattern points… (Setups and technicals)[pay]
Friday’s recovery wasn’t satisfied with retesting the 1756.00-1757.00 resistance, or with fulfilling the morning’s 1758.00 bias-up target. Although the afternoon’s bias-up signal was touched by 1:20, the recovery wasn’t satisfied with only triggering no-bias, either. Exceeding the bias-up signal through 1:30 invalidated the no-bias, and the balance of the session trended up to 1768.00.

That was a new high close.

This new high close doesn’t require any higher close, since it wasn’t a new trend high. Not by long-shot. Friday’s high was 2-5 points under the prior Wednesday’s highs. It was under the next Wednesday’s high, and 3-6 points under Thursday’s highs.

That last high includes a pre-open touch of 1774.50 that doesn’t require being retested. But now it very well may be retested, since price is back in its orbit. Probing it up to 1777.75 would be an appropriate reward to Friday’s buyers that kept sellers from retaking control.

Of course, that would assume Friday’s buyers actually retook control. Having trended up into the close, gapping down under the afternoon bias environment’s 1758.25 low would trigger a “session-long decline.” Any shallower opening weakness would be likely to recover and probe new highs. No opening weakness might be probing new highs already overnight, greeting the week with extreme sentiment…

Friday’s new high close makes a suspicious new trend high for another reason — it’s pre-open low was a “new Globex trend extreme” in the opposite direction. Since Thursday’s high actually was a new trend high (remember, that’s why Thursday’s close under prior lows was disqualified from signaling a trend reversal), Friday’s pessimistic reaction to the Employment Situation report does require a retest. Intraday.

Now, about greeting the week with extreme sentiment…

[/pay]What’s Next… (Outlook and opportunities)[pay]
Don’t forget that there is no Strategy Session this weekend. We’ll do one Monday afternoon, and then return to Saturdays next weekend… Once again, my thanks to everyone for indulging my past two weeks of truncated hosting and staggered schedules. [/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.