Market Wrap

If Thursday closed higher… then a multi-session rally could be underway. At least, that’s what I warned in this space yesterday. Thursday did close higher. Substantially higher, by gargantuan proportion. Like Thursday WAS a self-contained multi-session rally. But no matter how much buying pressure has been expended already, not extending higher depends upon reversing down soon.

Pattern points… (Setups and technicals)[pay]
Thursday’s “session-long rally” was fulfilled in every aspect but one, sort of. The close did not tick upward to fresh highs, only back to within 1 tick of the 1687.75 high. Well, it wasn’t a requirement. Anyway, after producing all of the setup’s other characteristics, the following morning tends to trend upward, too.

Overbought RSIs at Thursday’s high could help to resume the rally’s momentum Friday morning. A bias-up would give purpose to a morning upward trend. Also, closing above the 1684.00 gap now makes the last prior higher gap at 1688.00-1689.00 an attraction.

What could possibly go wrong?

Regardless of the size of Thursday’s rally, and regardless of what relevant levels or how many it recovered, it lacks one element: Confirmation of a second consecutive higher close. Probing fresh highs all morning could still resolve down into the weekend, but that would be unusual.

[/pay]What’s Next… (Outlook and opportunities)[pay]
This being a Friday, the morning’s bias tends to persist through the noon hour. And strong-handed countertrend  sponsorship then becomes difficult to generate with the weekend’s illiquidity fast-approaching. So, not trending upward Friday morning, or truncating a buy or bias-up signal, would suggest that Friday Factor safety net doesn’t exit.[/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 can recover to close higher… then a multi-session rally could be underway. Significant downside levels have been met, and… significant downside levels have been met. That’s about it. There is no completed accumulation pattern, let alone a triggered reversal setup. So, closing higher Thursday would suggest that buyers are retaking control. There is no evidence otherwise..

Pattern points… (Setups and technicals)[pay]
Wednesday afternoon’s rally missed two bullish setups. One resulted already in a reaction down. The other could produce a multi-day decline from here.

The first missed bullish setup was not entering the final hour above the bias environment’s 1655.75 high. It had been probed by 1 point — twice — but dipped just enough just in time to avoid a breakout. Setups that produce every element except the trigger tend to resolve in the opposite direction. So, while that would have extended another 9 points higher to 1666.00, instead it was reversed 9 points to 1648.00.

Similarly, the session formed a bullish Pivot Reversal, and then failed to trigger it. The open had gapped up in a downtrend, reversed to new trend lows, and recovered to fresh session highs. Actually closing back above the morning’s highs would have triggered the setup, but the close was trending back down. Unless Thursday were to close higher anyway, extending down just a little could easily extend down a lot.

There is one opportunity for intraday weakness to be bullish. Sellers gained no traction for their late efforts — closing above the noon hour’s range, if not also within the bias environment’s higher range. Trending down Thursday without gapping down would likely fail, and recover. Using the opportunity to retest Wednesday’s oversold RSIs at 1640.00 could form a durable bottom.

[/pay]What’s Next… (Outlook and opportunities)[pay]
So, gapping down Thursday would get every benefit of the doubt for breaking to new lows and extending the decline sharply lower. Any shallower opening weakness would more likely hold any test of the lows. And probing above Wednesday’s highs would get every benefit of the doubt for launching a rally.[/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 24-hour dive through Tuesday’s close is the product of weak hands… then imagine what strong hands will do when they regain control. Of course, the bigger question they’ll answer is, which direction do they want to go?

Pattern points… (Setups and technicals)[pay]
Monday’s late-afternoon 1675.75 sell signal was too late to be the work of strong hands, no matter how productive it was, but it doesn’t require being retraced. Tuesday morning’s no-bias signal was invalidated, so its 1672.50 bias-up test’s objective is moot.

But it was still a no-bias environment that probed under the morning’s 1666.00 bias-down signal, requiring it to be revisited. Perhaps even higher, to 10:15’s 1668.00 print.

The late drop to fresh session lows at 1648.25 finished under the afternoon bias environment’s 1651.00 low. A hold-short setup could be considered — although fresh lows weren’t probed until after the position-squaring window began lapsing, that leg was already underway from 1657.00. In fact, fresh lows after the close are already testing 1647.00.  Next targeted would be 1639.50 and 1630.00.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Having said that, be aware — and beware! — that a rally leg is the alternative to extending the decline. Not sideways ranging, and not reversing up at a slow crawl. A rally leg would likely begin by gapping up above Tuesday afternoon’s 1658.00-1659.00 highs. And extend to at least 1666.00-1668.00.[/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 afternoon’s break were one minute earlier… then one of the most bearish templates would have triggered. Price overrules timing, so the setup is still credible. But it is also vulnerable to being derailed by almost any updraft.

Pattern points… (Setups and technicals)[pay]
There was no bullish reason to retest last Monday’s 1666.75-1670.00 low. It was retested already on Thursday. And it’s not as if the test was arbitrary noise from some noon hour rogue leg. Monday’s open gapped down to 1669.00, and the cash session close returned there after midday probing above 1673.00 to 1678.00.

Monday’s 1669.00 close was a new low close for the decline. It was contained within two prior sessions’ ranges, which undermines fresh lows from gaining traction. But it does not prevent fresh lows. Remember, buyers gained no traction Friday and there is no unfinished business above.

So long as bounce limits hold, sellers get every benefit of the doubt — doubt that is lurking nearby. One doubt is the timing of the 1675.75 sell signal, which did not break until a moment after the 3:10-3:20 timing window had lapsed. Another is the eventual close under 1670.50, which would have merited hold-short 3 minutes earlier, but may have borrowed too much future selling pressure by extending already to 1667.00.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Extending down would next target 1656.50-1658.75. Otherwise, bounces should hold the 1676.00 area. But having trended down into the close, gapping up above the bias environment’s 1676.00-1679.50 high would trigger a session-long rally.[/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 a rally is fueled by squeezing shorts… then it’s a bit concerning that Friday afternoon didn’t. Usually the weekend’s impending illiquidity is an excellent catalyst. Perhaps it’s not yet that big of a concern. But not yet rallying at Monday’s open…

Pattern points… (Setups and technicals)[pay]
The breakout underway Thursday afternoon above 1677.00 was finally fulfilled Friday. The Capitol shooting triggered a detour to 1668.25 that half the night was spent testing as support. The open quickly resumed the original position, and then exceeded it to fulfill the 1680.75 bias-up target.

Whether there was more to Thursday’s original story, or perhaps the delay deserved compensation, Friday afternoon extended higher to 1686.00. Probing fresh highs wasn’t difficult since noon hour price action had already signaled that sellers were marginalized for the day.

But despite marginalizing sellers, and despite probing fresh highs, the entire afternoon really only ranged sideways above 1681.50 support. And that’s after a morning rally into the weekend’s illiquidity, not to mention one day off a retest of recent lows with no unfinished business below. That template is otherwise very vulnerable to a short-squeeze.

The rally doesn’t have much more room above — if any — without having more shorts to squeeze. Nevertheless, exiting the morning’s bias environment above Friday’s highs should next retest 1701.00. Otherwise, entering the noon hour back in negative territory, or just trending down through the open, could already resume the decline.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Don’t forget that there is no Saturday Strategy Session this weekend. We did have an expanded Market Wrap after Friday’s close to cover the bigger picture, and its recording is linked in 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.