Market Wrap

If Wednesday’s fresh session highs aren’t exceeded soon… then their failed test and retest is more than bearish. It’s potentially a turning point for the recent consolidation to produce a downleg before the weekend.

Pattern points… (Setups and technicals)[pay]
There was quite an opportunity to extend the rally to above recent highs — more so, when Wednesday’s final hour was entered probing fresh intraday highs. That setup tends not to reverse down, but reversing down tends to be very productive.

It reversed down. And it was productive. The 14-point drop from 1694.00 printed a fresh intraday low. Key resistance at 1682.00 wasn’t recovered until after the cash session close, which made a compelling hold-short setup. A bounce almost touched 1686.00 into the futures close.

The afternoon’s sudden reversal down did fulfill its setup, and the hold-short setup was fulfilled. The burden of proof is on buyers. Sellers get every benefit of the doubt.

Nevertheless, I will keep an open mind to them gaining traction if sellers aren’t obviously in control after Thursday’s open. Only testing prior intraday highs, and not their nearby overnight highs, seems a little too impatient and excessively pessimistic.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Econ reports are almost as frequent and high-profile Thursday as they were Wednesday. The morning’s resolution should be in-line with the recent range’s ultimate resolution. [/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 morning’s open had extended the overnight rally… then new highs could have printed before noon. That’s going to be difficult with FOMC hanging over the market’s head. But not extending down on the news could find the afternoon trending higher.

Pattern points… (Setups and technicals)[pay]
Tuesday morning’s optimism wasn’t crushed immediately. And that was the problem. “Ineffectual optimism” only delayed the predictable downside consequence of not having exploited so many bullish setups. It also made that downside consequence more aggressive.

Price only drifted down through the morning in several distinct waves. Each bounce failed, but only to a slightly lower low before bouncing again. The afternoon’s 7-point slide delivered the aggressive downside consequence.

Sliding did fulfill its 1677.00 objective. And it stopped short of any level whose break would have sent momentum over the edge. Then its reaction up tested the morning and noon’s last three slightly lower lows up to 1682.50, 1683.00 and 1684.00.

That last bit could be key to a rally. Tuesday morning’s waves created substantial resistance. There are two ways to extend through its 1687.00 upper-end. Either spend time and expend buying pressure sawing through, or else gap up. Already having tested the range’s lower-end is one less thing for buyers to do Wednesday before extending higher.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Otherwise, there is no unfinished business below, but potential for retesting Tuesday’s 1677.00 low. And probing it by 4-5 points to test 1672.50 would be too deep for only a corrective dip, and more likely to launch a new downleg.  [/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 dip 61.8% retracement of Friday’s recovery is retested… then Friday morning’s drop will likely extend down sharply into Wednesday’s FOMC statement. Delaying another recovery attempt would not be bullish.

Pattern points… (Setups and technicals)[pay]
Monday’s most interesting similarity to Friday was that both were spent exclusively in negative territory. Just touching Thursday’s late 1686.25 high during Monday’s opening surge prevented defending against a 10-point drop to 1676.50.

Both negative sessions did close above their noon hour highs. But Friday’s last 60-90 minutes trended straight up, where Monday traded flat-to-lower. Neither session triggered a hold-long, despite last-minute surges.

At least Monday’s session had an opportunity to reverse back down into the close. A sell signal under 1681.00 didn’t trigger until the position-squaring window was lapsing. Its sponsorship was immediately productive down to 1679.50, but that was retraced entirely back up to 1681.00, and then 2 points higher to 1683.00.

[/pay]What’s Next… (Outlook and opportunities)[pay]
An overnight repeat of Monday’s late dip to 1679.50 could extend much lower overnight. A new downleg would be triggered back under 1672.50. Opening through or above Thursday and Monday’s 1686.25 high could leave the recent ranging behind, if only for a temporary probe of new highs. [/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’s recovery had stopped a few points short… then it would have left pent-up buying interest outstanding to help resume the rally on Monday. Closing above prior highs can create new buying interest, but Friday didn’t challenge a prior high until its last minutes. At least sellers gained no traction.

Pattern points… (Setups and technicals)[pay]
The end of the week began with a probe under 1675.25 prior lows. The origin of that probe indicated that it would not extend down after fulfilling its 1672.50 target, and it didn’t. That didn’t change whether there was no bullish reason to probe prior lows, which there was not.

The week ended with that probe’s recovery extending relentlessly higher into the close. The gaps back to Thursday’s 1684.00/1685.25 closes were not revisited until after the 3:10-3:20 timing window. Thursday’s 1686.50 high was barely touched at Friday’s close, and then exceeded into the futures close. But positive territory was not recovered during a relevant timing window, especially for a Friday afternoon.

A lot of extra buying pressure was expended without necessarily gaining traction for the effort. But no prior high’s touch was rejected, so there is no requirement to reverse down. And closing above the morning and noon hour highs allows Friday’s recovery to extend higher Monday without first gapping up, or by recovering from initial weakness.

Extending down immediately Monday could resume the drop from Thursday’s close by retracing the origin of the last 60-90 minutes rally from 1679.25. Until that is reversed, any pullback could still recover to resume the rally.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Please join us this weekend for the Saturday Strategy Session at 9:30am ET. Its link can be found 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.

If Thursday’s recovery attempt fulfilled its objective… then Friday’s open will attract new sponsorship for either extending the recovery, or else for resuming the downleg. And this being a Friday, the morning’s bias signal could persist well into the afternoon.

Pattern points… (Setups and technicals)[pay]
The market wants to rally. Look out above if it does. Look out below if it doesn’t.

Wednesday’s sell-off tested the 1679.25 level whose break would have triggered a daily trend reversal. That was in the morning, with plenty of time to extend lower. But the opportunity was not exploited.

Thursday’s open rejected tests of both bias-down parameters, although only the 1678.00 bias-down signal was tested post-open. The 1672.50 bias-down target had held its test overnight. But there recovery was invalidated by exiting the bias environment too low.

Finally, Thursday afternoon’s 1681.75 bias-up signal triggered. But the bias environment was exited back under it.

Printing fresh highs during Thursday afternoon’s bias environment did leave unfinished business above at its 1687.00 bias-up target. Then a 6-1/2 point rally into the close fulfilled it to within 2-3 ticks. The market wants to rally. But one way or another, it keeps undermining its efforts.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Thursday’s close was still testing its 1684.25-1685.00 noon hour and afternoon bias environment highs. They weren’t rejected, so the session’s trending can extend without delay, and extending the rally without delay on a Friday could marginalize sellers. But not closing above those prior highs now requires the rally to extend higher without delay, or else buyers may be marginalized for the day, instead.[/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.