Market Wrap

If rejecting an opening surge back under its low is a reversal signal… then rejecting two opening surges back under their lows should lead to a trend change. Wednesday’s decline was on the cusp of triggering that signal. 

Pattern points… (Setups and technicals)[pay]
Wednesday’s closing action trended up to 1684.00. The last 3 points above 1681.00 all printed after the cash session close. The afternoon bias environment had been ranging around 1679.25, whose break would have signaled the daily trend reversing down. Trending up earlier would have rejected the trend change attempt.

Trending up earlier made another difference, too. The daily trend reversal attempt would have been rejected by the cash session closing back above 1683.50. The late sponsorship did not qualify, so Thursday’s open could still send a delayed signal that the daily trend is reversing down.

Two consecutive sessions probed fresh highs, and the third session closed back under both sessions’ lows. Sellers are showing their hand. So, if that’s not the start of a more sizable multi-session decline, then it should be the start of a new rally leg. Sellers get a benefit of the doubt, and the burden of proof is on buyers.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Since Wednesday’s closing action trended up, and the afternoon’s 1677.50 low was printed during its bias environment, gapping down to or through 1677.50 would trigger a “session-long decline” setup. Holding a test of 1677.50 would trap shorts, and start to form a bottom. But extending higher without even testing 1677.50 would have room up to 1689.50 before even suggesting a bigger rally underway.[/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 rally wants to resume… then it will need to break the recent pattern of only probing fresh highs. At least none has been rejected back under a prior low — not yet. A new downleg won’t be so forgiving of so deep a reaction.

Pattern points… (Setups and technicals)[pay]
Tuesday afternoon’s drop returned to within 2 ticks of the mornings’ 1686.00 low. That earlier drop had already neutralized selling pressure by exiting the morning’s bias environment back above 1687.50. The cash session close was still testing 1687.50.

Buyers gained no traction Tuesday, and they left outstanding no unfinished business above to attract price higher. The rally can extend without delay Wednesday only by gapping up above Tuesday afternoon’s 1691.75 high or its 1694.25 opening high.

Meanwhile, there is room for noise under 1687.50 down to 1685.00. Reacting up from its test overnight or after Wednesday’s open might be able to launch a new rally leg. Good luck with that.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The alternative to rallying Wednesday could simply range narrowly sideways, but probably not. Last Wednesday’s 1688.50 high hasn’t let trending attempts extend in either direction. But Tuesday rejected a new high, one day after the trend high close, so closing Wednesday back under a prior low like Wednesday’s 1685.00 or 1679.25 closes would trigger a very bearish Gotcha! setup.[/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 late high was bullish… then it should have extended higher Monday. That is, trying to extend it higher should have gained traction. Not trying to extend higher would not have undermined Friday’s rally effort. But Monday did try to extend higher, and the effort failed, which is not bullish.

Pattern points… (Setups and technicals)[pay]
Friday’s 1687.50/1689.50 cash session and futures closes would not let trending get away from its zone Monday. Probing above it overnight to 1694.25 was retraced back into the zone. Its reaction up to 1693.00 was reversed back under the zone. And that was all before the open.

The morning’s bounce up to 1693.00 was reversed back into the 1687.50/1689.50 zone, as was a shallower afternoon bounce. Just as sure as the zone was to attract price back to it, its support held. And held. And held.

The zone also contains last Wednesday’s 1688.50 prior high. Repeatedly probing above it Monday failed to launch a new rally leg. That “ineffectual optimism” is not itself bearish, but probably shouldn’t try extending higher before a corrective dip can refuel buyers.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Extending higher without first correcting Tuesday would likely expend buying pressure upon testing the 1694.25 “new Globex trend extreme,” probably at least up to 1696.00. Back under 1687.50 would trigger at least a corrective dip. [/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 passive bearish WedEX is valid… then it should be planning some interesting action for Monday morning.

Pattern points… (Setups and technicals)[pay]
Friday’s session ranged in negative territory until the last half-hour. Until then, only the very last part of the afternoon’s bias environment had even probed above Thursday’s 1684.75 cash session close. And then only by a few ticks. That’s one effect of the passively bearish WedEX indicator.

That’s not enough.

“Passively bearish” doesn’t prevent a rally effort. It didn’t prevent Thursday’s probe well into positive territory. But similar to Thursday’s complete retracement of the morning’s gains, Friday’s late probe into positive territory should be retraced, too. WedEX influence hasn’t played out fully until Monday morning has ended.

That’s a little more interesting, since Friday’s late probe into positive territory was dramatic. The last half-hour had firmed 2 points into the 1687.50 cash session close. The next 15 minutes surged 3 more points to touch 1690.50.

That’s typical expiration behavior, and we had even discussed it in the Chartroom an hour earlier. But it’s not bearish in itself — that’s for WedEX to prove. If Monday were only to trend higher, then sellers could be marginalized until Wednesday morning.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Having trended up into Friday’s close, gapping down Monday under Friday’s 1682.00 bias environment low would trigger a “session-long decline.” Having held under Thursday’s 1688.50 high until after Friday’s cash session close, there is no new high close that would prevent extending down substantially. Only dipping back to the 1684.75 area through Monday morning would be likely to resume the rally Monday afternoon.[/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 afternoon’s drop had been shallower… then it wouldn’t have triggered a sell signal. But triggering its sell signal did create a lower objective, which wasn’t met until the post-close plunge. Rather than create room to absorb GOOG’s earnings reaction, optimism let the reaction threaten to reverse the trend’s direction.

Pattern points… (Setups and technicals)[pay]
Thursday’s last low was a retest of 1682.50. This relevant level had attracted price down from the morning’s 1688.50 high, and then repelled it back up to 1687.00. So, falling back down to the afternoon’s 1682.50 low had meaning.

1682.50 was also the next higher objective above prior highs coming into Thursday’s session. It was Thursday morning’s bias-up target. Its relevance was a function of the same patterns that had triggered a passively bearish WedEX indicator. If 1682.50 were exceeded, then the bearish WedEX would invert to bullish.

Thursday’s cash session close was ranging in a consolidation supported by 1682.50. Futures reacted to GOOG earnings by falling sharply to the next lower support at 1679.25. The pattern of buyers not being done probing higher highs, but not gaining traction, lives to influence another day.

[/pay]What’s Next… (Outlook and opportunities)[pay]
This being a Friday, the morning’s bias signal is likely to persist through the noon hour. This being expiration, trending through the first 15 minutes of volatility would be likely to extend in that direction throughout the day. These factors make it difficult for a retest of Thursday’s overbought RSIs at 1688.50 also to reverse down bearishly into and out of expiration.[/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.