Market Wrap

If this week’s lows are THE lows… then what’s taking so long for their tests to resume the rally? Maybe it’s not the low, after all. We should know soon enough, as the weekend’s impending illiquidity tends to make players show their cards.

Pattern points… (Setups and technicals)[pay]
Thursday’s rally tried something new. Rather than wait for the morning to probe fresh lows, a rally was already underway into and out of the open. Was that premature? That would explain why it didn’t extend higher, while a reversal held its lows. Like Hansel & Gretel, “unfinished business above” left outstanding at the morning’s 1697.50 high’s overbought RSIs could help to attract price higher.

Surely, only strong-hands could sponsor another rally into and out of Friday’s open. Right? Well, it would get a benefit of the doubt, so long as it triggered bias-up instead of rejecting the bias-up’s test.

But that benefit of the doubt would be just to avoid declining into the weekend, and not necessarily for the rally attempt gaining traction. A lot of buying pressure was expended already during Thursday’s last-hour bounce back up to the afternoon’s 1693.00 high — and no higher, so its buyers gained no traction for their efforts. The burden of proof is on buyers.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Thursday afternoon’s 1685.75 low was on the cusp between the bias environment lapsing and the final hour’s entry. Still, gapping down under it would get a benefit of the doubt for triggering a session-long setup. Just putting into play a probe under 1685.75 would be likely to trend down into the weekend. Almost any other setup would avoid new lows.[/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 retracing last week’s FOMC spike is bearish… then is it less bearish not to have extended down sharply by now? No, the timing doesn’t matter, only what is done with that time. And the time since retracing the FOMC spike has not been spent in accumulation.

Pattern points… (Setups and technicals)[pay]
This is becoming a little too familiar. Now into three days of retesting the origin of last Wednesday’s FOMC spike up. Retracing it isn’t unusual, no matter how substantial its interim trending. Not yet resolving the retracement is odd.

More than not resolving the retracement, but also probing fresh lows daily. And more than probing fresh lows, that is how buyers have been rewarded for absorbing the prior low. Two recent setups had potential to marginalize sellers to one degree or another. Repeatedly resolving in fresh lows is lousy advertising to attract more sponsorship for another recovery attempt.

At some point, the remaining buyers are going to capitulate. Finishing Wednesday at the range’s lower-end — despite there being no unfinished business below — suggests that capitulation had gotten much closer, and time available for a rescue is growing very short.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Wednesday’s closing action trended down, so gapping up Thursday above Wednesday afternoon’s 1693.25 high would trigger a “session-long rally” setup. Any shallower initial buying pressure would not be credible for gaining traction. And being vulnerable to breaking sharply lower, any shallower initial buying pressure isn’t likely, 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 Tuesday’s recovery attempt were a little more patient… then the afternoon would have rallied 10 points instead of falling 10 points. Rallying also would have marginalized sellers for more than a day, but buyers still have an opening.

Pattern points… (Setups and technicals)[pay]
Rallying Tuesday was already unlikely since Monday’s buyers had gained no traction for their rally effort. But oversold RSIs at Monday’s low were neutralized, so an afternoon rally would have been credible. Invalidating the morning’s bias-down would have added fuel — a lot of fuel.

But too much optimism became self-defeating. Trapped shorts were fulfilled, from both Monday afternoon and Tuesday morning.

Tuesday afternoon’s drop retraced back to Monday morning’s 1689.25 low, which is the Pivotal Low compared to the 1687.50 Actual Low that printed Tuesday morning. Their 1698.25 interim high was probed Tuesday afternoon, before returning to the Pivotal Low. This setup requires the actual low to also be revisited. Whether its test hold or gives way to a new downleg is irrelevant.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Once again, the only path higher is to gap above the afternoon’s highs. This time it is 1701.00, which would trigger a “session-long rally.” Otherwise, bouncing as high as 1696.00 would still be likely to resolve down. Without gapping up above Tuesday’s high or without yet testing Tuesday’s low, fresh lows are likely. [/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 bounce had extended any higher… then it would have extended back above the morning’s low. That’s a lot of potential to leave on the table. There’s probably a good reason for that, unless Tuesday were to compensate for the delay.

Pattern points… (Setups and technicals)[pay]
The burden of proof is on both buyers and sellers. It is on buyers for failing to trigger the Monday afternoon’s 1696.00 bias-up signal despite touching it during the noon hour. It is on buyers for exiting the bias environment back under the noon hour’s low, despite having probed it up to 1698.25. And it is on buyers, for exiting the final hour under the bias environment’s high — if not also at or under the noon hour’s high.

Sellers did not exploit any of these weaknesses, despite the afternoon still being in negative territory. Similarly, that also puts a burden of proof on sellers. A burden of proof is on buyers for not exploiting the bearish WedEX lapsing after having been so productive. It is on sellers for not exploiting such a productive WedEX.

Monday’s cash session close equated to 1695.00, above the bias environment’s 1694.25 low. Futures extended down to 1692.25, too late for sellers to gain traction for their efforts. Trending either way Tuesday depends upon maintaining a gap in that direction.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Oversold RSIs were left outstanding at Monday’s 1689.25 1689.50 low. A corrective bounce could be very productive before neutralizing the “unfinished business below” — especially if a “session-long rally” were signaled by gapping up above Monday afternoon’s high. Testing the oversold RSIs overnight and already recovering into Tuesday’s open would be bullish. Almost any other scenario would be likely to extend down intraday.[/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 FOMC rally is going to be revisited… then must its reaction down end at the spike’s origin? Its retest is essentially underway, and dipping any deeper would start to threaten gaining traction for a downleg.

Pattern points… (Setups and technicals)[pay]
WedEX was passively bullish. Passive, because its bullishness was due only to a breakout that was two hours old when the signal triggered. By noon Friday, the signal inverted. The morning had trended down, and so did the afternoon.

All of which may have nothing to do with WedEX. But if the signal is responsible for Friday afternoon’s decline, then Monday morning’s price action should trend down, too. The open can be flat, or gap in either direction. Even if gapping up, the bearish WedEX would point the balance of the morning down.

Meanwhile, there are still “lower prior highs” just under Friday’s lows attracting price down. Wednesday’s breakout wasn’t confirmed Thursday. And there’s that nagging Gold tell — the yellow metal’s pre-FOMC slide hasn’t yet induced its customary stock market reaction. Should be an interesting start to the week.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Join us this weekend for the Saturday Strategy Session, linked from the blog’s sidebar. It begins at 9:30am ET, and we’ll discuss the bigger picture, along with any chart analysis of stock picks from 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.