Market Wrap

If not for Friday morning’s headline from Assad… then would the morning’s recovery have been blind-sided by something else? Not retracing it by the close suggests as much, but recovering overnight would suggest that only the knee-jerk reaction was to blame.

Pattern points… (Setups and technicals)[pay]
Thursday’s 1675.00 lows tested Tuesday’s 1676.00 “lower prior highs” as support. The first test is natural, and often suffices to resume the rally. A second test borders on being overkill, and often breaks lower to test prior lows. Since 1676.00 had been tested previously, Thursday’s retest borders on being overkill.

If 1676.00 lower prior highs are giving way, then Friday will immediately break under Tuesday’s 1670.25 prior lows. Oversold RSIs there must be retested, anyway. Their retest might try to launch a bounce, but breaking lower would next target the 1664.00 area, 1661.00 and 1656.00 lower prior highs.

Thursday’s close barely held 1675.50 to avoid triggering a hold-short setup. A last-minute surge to 1678.50 could enable Friday to range flat-to-higher. Similar to requiring immediate weakness for extending down Friday, recovering back above Thursday’s highs all but requires rallying overnight.

[/pay]What’s Next… (Outlook and opportunities)[pay]
It’s Friday the 13th, and you know what that means for the market… absolutely nothing. Fridays do have relevance for their afternoon volume dwindling. This Friday especially, with many participants leaving early for Yom Kippur worship that begins at sundown.[/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 anxiousness ahead of 9/11 inhibited rallying past Tuesday’s open… then was Wednesday afternoon’s rally produced by those weak-hands covering?

Pattern points… (Setups and technicals)[pay]
Monday’s confirmed daily trend change signal required at least one more higher close. Wednesday fulfilled it. There is no other requirement to the trend change signal. It may still be influential — the trend may extend higher indefinitely, or an immediate pullback may recover. But the minimum upside has been fulfilled.

Now, what about more upside? The next higher relevant level above Wednesday’s 1689.00 high (basis Sep, 1682.50 basis Dec) is 1693.00 (1686.50). Exiting a relevant timing window almost any higher would essentially target new highs at 1706.00 (1699.50) and higher.

There is meanwhile unfinished business below, from Tuesday’s 1676.75 (1670.25) low, down to Monday afternoon’s no-bias trending above 1667.75 (1661.25) and 1665.50 (1659.00). Dropping under 1684.50 (1678.00) would be a first step toward neutralizing their attractions. There is not yet any indication whether that would develop into a new downleg, or recover to potentially probe new highs.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The ES futures front-moth rolls over at Thursday’s open from SEP to DEC. There is a 6-1/2 point discount. Levels are identified above, and already quoted as DEC in the Bias Parameters.[/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 gap up were any shallower… then it might have spent the balance of the session trending back down. Those extra 2-1/2 points above the bias-up target created extra room to absorb selling pressure, preventing it from gaining traction.

Pattern points… (Setups and technicals)[pay]
Tuesday’s session was very disappointing. Despite gapping up and renewing the bias-up signal, the 1683.50 renewed bias-up target was only met to within 2 ticks before reversing down. And the reversal down only touched the 1676.75 post-open low before recovering — first probing a fresh low would have been more appropriate.

I still expect Tuesday’s 1676.75 post-open low to be probed, more so since its retest left oversold RSIs. The afternoon’s recovery did not extend above the morning’s high, so the low’s retest was not productive. And where simply probing a fresh low would have sufficed, now a deeper trending attempt would be appropriate.

Although Tuesday’s wide ranging did not have any near-term predictive value, its second consecutive higher close did confirm Monday’s daily trend change signal. Unless Tuesday’s rally were rejected Wednesday — not simply by dipping, but by dipping under relevant levels through relevant timing windows — a third higher close is now required.

[/pay]What’s Next… (Outlook and opportunities)[pay]
An interim dip is possible before producing a third higher close. Gapping down under Tuesday afternoon’s 1679.25 low could trigger a session-long decline setup. Any sell-off would target at least 1675.50. Deeper would be likelier, but still also likely to recover and produce the trend change’s third higher close. Extending higher without any pullback would be likely to gap up above 1689.00 or 1693.00.[/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’s rally was due to a flailing Syrian intervention…  then is the market protected from reversing down? Probably not. Trending in response to inaction is never sustained, since the action can still be taken, and other factors are more relevant.

Pattern points… (Setups and technicals)[pay]
Monday afternoon’s probe above its 1667.75 bias-up signal came too late to trigger. The “no-bias trending” above it must be retraced, probably also down to the 1665.50 print. But Monday’s close held the 1669.00-1671.00 range.

So long as no other timing window were exited any higher, 1667.75 and 1665.50 are likely to be revisited. Exiting a timing window above the 1669.00-1671.00 range could delay the retest for a couple of days.

Meanwhile, just closing above the 1667.50 prior high has signaled a daily trend change to up. A second consecutive higher close Tuesday is needed for confirmation. I’ll believe it when I see it.

No-bias trending is the product of weak hands. So, the trend change signal was produced by weak hands. Closing above the 1667.00 trend change signal on weak-handed sponsorship suggests that optimism is already too high to be sustained. The alternative to a second consecutive higher close Tuesday should be a break back under 1661.00.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Monday’s rally was probably encouraged by various developments throughout the day that undermined the Syrian intervention. Which is fine. But, even if valid, that can become too discounted. The earliest congressional vote isn’t likely before Wednesday, if by then at all.[/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 Putin hadn’t voiced his support for Syria… then would the pre-open rally have been rejected so forcibly? The headline certainly accelerated the sell-off, but too quickly for many sellers unable to exploit it. That helped us to expect so much of its retracement, and later all of its recovery, to fail — because the market has a way of giving every a chance… eventually.

Pattern points… (Setups and technicals)[pay]
The week avoided ending on a high note — at least, on too high of a note. Recovering all of the morning’s 1661.00-1639.00 plunge expended a lot of energy, and closing above prior highs would have gained traction for the effort. But 1653.50 was being tested at the close.

Not only is 1653.50 back under prior highs, it is also the same point of equilibrium that was tested going into Wednesday’s noon hour. Alternating rallies and declines each returned back to and through 1653.50. Settling there once again makes trending vulnerable to the equilibrium setup. I suspect the weekend’s illiquidity will render the setup’s influence moot, but I am amazed at how many alternating false breaks the setup already produced.

Friday’s close trended downward, and the bias environment contained the afternoon’s high. So, gapping up above the afternoon’s 1664.00 high would trigger a “session-long rally” setup. Like the equilibrium setup, the session-long rally’s parameters may be less influential after a weekend of illiquidity. But, also like the equilibrium setup, we’ll give it a benefit of the doubt if it were triggered.

[/pay]What’s Next… (Outlook and opportunities)[pay]
There was no Saturday Strategy Session last week due to the holiday, so be sure to join us this weekend at 9:30am ET. On Saturday. Hence the name, “Saturday” Strategy Session.[/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.