Market Wrap

If Wednesday morning had capitulated… then a bottom would already be within hours of starting to form. The corrective bounce has instead refueled sellers for extending the decline. A near-term bottom is still possible, but less likely.

Pattern points… (Setups and technicals)[pay]
Capitulation had a chance to serve as this decline’s bottom following Tuesday’s steady relentless decline. Lower highs were barely rewarding each dip’s buyers, before lower lows quickly punished them. A sudden, steep and substantial downdraft would have been an appropriate ending.

Only Wednesday’s open declined, plunging momentarily to 1624.75. It had a capitulative character, but it was much too brief and shallow to qualify.

The balance of the session rally back up to range around Tuesday afternoon’s 1636.50 high. And above 1632.00. Closing under 1636.50 prevented the rally from gaining traction. Closing under 1632.00 kept alive the decline’s momentum. (The close was actually 3 ticks too high, but that was close enough to qualify, considering the other factors. Other factors like…)

Despite the morning’s rally, Wednesday’s sellers gained traction for their efforts. The final hour was entered under the bias environment low, and the bias environment was exited under the noon hour’s low. The close was under all of them. The only path higher Thursday is to gap up.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Between closing under 1632.00 (or near enough) and afternoon sellers gaining traction, a hold-short was considered to be compelling. It was immediately productive, extending down to 1629.75. But 1632.00 must continue holding tests as resistance to maintain the potential for extending down sharply overnight. [/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 drop were distributive… then where is the capitulation? A lot of selling, relentless and extended, but also seemingly controlled. Wednesday needs to open the floodgates, or else a bottom will become likelier sooner rather than later.

Pattern points… (Setups and technicals)[pay]
Monday’s hold-short extended overnight. That was not predictive. But the morning’s bounce didn’t recover the overnight drop. In fact, the balance of the morning ranged sideways. That was predictive.

And that predicted buyers were marginalized.

Since my methodology is at its core a process of elimination, marginalized buyers wasn’t necessarily bearish. Bouncing into the bias environment’s exit could have led to sideways ranging. But bearish factors — like attractions to unfinished business below — tilted the scale.

More attractions below are outstanding. The next “lower prior high” is 1618.00-1621.00, not too much lower. It could have been met Tuesday. But although the morning’s bias environment exit trended down relentlessly through the afternoon, the decline’s pace never accelerated. The lack of a capitulation leg is eery.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The close did not recover a prior high. Neither did it trend down substantially and borrow selling pressure from Wednesday — plenty was left on table. A hold-short through the close is compelling, but I wouldn’t hold short overnight above 1632.00.  [/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 Kerry had saved his remarks for after the close… then would Monday afternoon simply have “based,” instead of plunging? That might seem to be unknowable. But rallying again Tuesday would suggest as much.

Pattern points… (Setups and technicals)[pay]
Monday morning’s bias-up signal left outstanding its 1669.50 bias-up target. It is “unfinished business above” that requires being tested. Has something changed?

Just testing 1669.50 — just putting it into play by exiting a timing window above 1663.25 — would have advanced a pattern likely also to attack recent highs. That could still develop. But closing back under 1663.25 invalidates its intraday recovery.

Closing back under  Friday afternoon’s 1656.00-1659.00 range has robbed the rally of its traction. The corrective bounce from Thursday’s low has ended. Until something signals a new downleg underway, the bounce’s peak can be retested, including the 1669.50 unfinished business above. Gapping up Tuesday above 1659.00 would be an appropriate start.
[/pay]What’s Next… (Outlook and opportunities)[pay]
As for signaling a new downleg underway… Monday’s close was a couple of ticks and a couple of minutes short of triggering a “hold-short” setup. Extending the late decline anyway would require limited or no bounces before testing 1648.00.[/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 Friday had neutralized its upside attraction earlier… then the balance of the session might have fallen instead of surging. Either would have been a function of the weekend’s impending illiquidity. Now the new week will be greeted with weak-handed buying pressure largely fulfilled.

Pattern points… (Setups and technicals)[pay]
Thursday’s “session-long rally” setup had made a trending attempt to fresh highs above its 1657.75 high likely Friday. Friday’s pre-open surge fulfilled the minimum 1661.00 objective, but not the requirement for a probe to have a complex character. The afternoon’s ranging around Thursday’s 1657.75 high fulfilled the complexity, but not the trending attempt.

Finally, a late surge fulfilled both. And it came within 3 ticks of the noise range around 1661.00 up to 1663.25. The surge originated from under the both the noon hour and bias environment’s highs, so buyers gained no traction for their efforts.

It was the week’s highest close — in fact, Friday’s close was higher than the prior Thursday and Friday, which began the current trading range. But being a trading range, and not trending, Friday’s new relative high close is not a new trend extreme. So, no higher close is required before being able to reverse down.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Join us this weekend for the Saturday Strategy Session at 9:30am ET. We’ll discuss the bigger picture, scenarios for Sunday night and Monday morning’s opens, and any individual stocks you think are timely.[/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 NASDAQ’s outage… then would Thursday’s rally have gotten any higher any faster? Perhaps Wednesday’s high could have been probed earlier, leaving the final hour only to firm, or to range flat-to-higher. But while the integrity of intraday price action during the outage may have been suspect, the high and the close are probably where they would have been.

Pattern points… (Setups and technicals)[pay]
NASDAQ’s little glitch Thursday afternoon interrupted a “session-long rally” that was triggered by gapping up through 1646.50. The outage didn’t affect the setup’s main feature which is to print a new session high in all but one timing window, including the final hour. And it didn’t prevent fulfilling the morning’s 1654.75 renewed bias-up target, kept alive by holding the morning’s 1649.00 bias-up signal as support through the bias environment’s exit.

And it didn’t prevent fulfilling a retest of overbought RSIs at Wednesday’s high. In fact, Thursday’s 1657.75 high formed its own overbought RSIs that require a retest.

The issue also didn’t help sellers. The gap back down to Wednesday’s 1641.50 cash session close will need to be filled at some point, if not also its 1636.50 cash session close. And Wednesday night’s 1631.50 low was a “new Globex trend extreme” that requires retest intraday eventually.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Session-long rallies usually extend higher at some point the following day, so reversing down immediately Friday is unlikely. But reversing down eventually Friday may be the only way to retest Wednesday night’s lows anytime soon. Now that “lower prior highs” at 1648.00 and 1632.00, extending the bounce any higher than 1661.00-1663.00 would target 1669.00. And retesting 1669.00 would be likely also to probe “higher prior lows” 20 points higher. [/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.