Market Wrap

If Bernanke cannot say anything more bullish Thursday than he said Wednesday… then the market probably cannot react any more optimistically. So, did Wednesday’s session range just to pass the time while waiting for the testimony to resume?

Pattern points… (Setups and technicals)[pay]
Wednesday’s opening surge erased Tuesday morning’s extended drop. That proved Tuesday’s selling was just defensive posturing ahead of Bernanke’s day-1 Congressional testimony. Yet, only a shallow post-open high followed, and then only momentarily.

Was the defensive posturing overdone?  Was the positive reaction to Bernanke overdone? Or, is the market juuuust right?

To the degree that QE and tapering effect the rally, don’t forget that day-2 of Bernanke’s testimony is Thursday. If he cannot say anything more bullish than he said Wednesday, then the market probably cannot react any more optimistically. Perhaps Wednesday’s post-open ranging was just passing time while waiting for that testimony to resume.

Meanwhile, Wednesday’s buyers gained no traction, despite gapping up and spending the entire session in positive territory. The final hour was entered under the bias environment’s low, and under most of the noon hour’s range. Having probed a fresh trend high intraday, this triggers a “passively bearish” Wed-EX indicator. Unless Thursday’s open were to gap up and extend higher, we’re not expecting an uptrend into and out of expiration.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Continually testing 1674.00 Wednesday is now know to have been chipping away at its support. Breaking under it would fill the gap back to Tuesday’s 1671.00 close, probably down to 1669.50. Otherwise, gapping up above 1678.00 would target a fresh high at 1682.50. [/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 were living dangerously… then it would have tried to greet Wednesday’s news while probing fresh highs. In that regard, Tuesday’s retracement back to Friday’s lows could be bullish from a contrarian perspective.

Pattern points… (Setups and technicals)[pay]
Monday’s last hour had signaled the session’s upward momentum to 1679.50 had lapsed. That upward momentum was the product of gapping up above Friday’s 1674.25 high, which was tested by an upleg originating from Friday’s 1667.00 noon hour low.

The momentum failure was retraced back down to 1667.00. Tuesday’s open momentarily touched Monday’s 1679.50 high, so its intraday reaction down retraced two days of gains. Try, try again?

Getting market participation back up to its pre-holiday levels initially found some kindred sponsorship for last week’s rally. But its extension higher is struggling. And might soon fail. Testing fresh highs for the week can’t yet be discounted, and testing fresh highs for the week can’t yet be trusted to resume the rally.

Perhaps Tuesday’s drop was defensive posturing ahead of Bernanke’s first part of his two-day Humphrey-Hawkins testimony Wednesday. His remarks will be un-embargoed an hour before the open, so any overnight trending could be retraced and reversed before the morning’s bias is signaled.

[/pay]What’s Next… (Outlook and opportunities)[pay]
An dip under 1669.50 and 1667.25 could extend to test 1663.00 — all overnight, and already be recovering back above 1672.50 before the open. But extending down under Tuesday’s 1666.50 low Wednesday would all but ensure testing 1648.00 “lower prior highs” next.[/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 gap up had extended higher faster… then an afternoon decline would have been likely. Slow-playing the upside momentum did help to keep sellers from regaining control. But the price was a shallow gain and slope. The rally might not tolerate any near-term selling.

Pattern points… (Setups and technicals)[pay]
Monday’s session was another one of this rally leg’s rare exceptions. It actually rallied post-open. Not that fresh highs were probed intraday, but multiple timing windows were exited above prior timing windows.

And this was a session that gapped up above all prior highs, making it more difficult to extend higher. It extended higher, anyway.

The bias environment’s exit above prior highs established that any subsequent selling could be only by weak hands. So, we assume the final hour’s dip to 1677.00 was the product of weak hands. Extending down Tuesday would still be likely to recover, if only to retest Monday’s 1679.50 high.

[/pay]What’s Next… (Outlook and opportunities)[pay]
There is an exception to maintaining this rally leg’s momentum, by rejecting the setup that signaled or confirmed the momentum. Gapping down Tuesday not only under Monday’s low, but also under Friday’s 1670.50 close, would undermine the uptrending session. The objective would be to test “lower prior highs” at 1648.00. Otherwise, the rally’s momentum remains intact. [/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 surge were any higher… then its reaction down might have held above Thursday’s high. Originating a little earlier could have attracted more sponsorship. Instead, reacting back down into the session’s range prevented a trend-preserving new high close.

Pattern points… (Setups and technicals)[pay]
Friday’s session was uneventful. Except for one event, which proved uneventful.

Several of the opening hour’s 15-minute checkpoints overlapped unchanged at 1670.50, which meant sponsorship for trending was absent. Both the morning and afternoon bias environments triggered no-bias, so no objective above or below was attracting price to it.

A late surge during the position-squaring window did probe fresh highs from 1670.50 to test 1674.00. That was eventful, momentarily, until it was retraced entirely into the close. Friday’s new high close was under Thursday’s high, so the uptrend is not ensured to extend any higher for any longer.

The continued absence of sponsorship for trending intraday is becoming eery. Especially during a week that wasn’t much busier than the holiday-shortened week before it. That’s not itself a sell signal, but it is a concern that the rally is exploiting the light attendance.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Friday’s close back within Thursday’s range did not immunize the rally from ending without delay. But it does suggest that extending any higher immediately would likely be done at an accelerated pace, if not exponential, perhaps spiking up sharply. So, any open Monday that is not hyper-bullish could be very bearish. [/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 Bernanke was concerned with market conditions ahead of Thursday’s 30-year auction… then he did an excellent job shifting the paradigm. Careful what you ask for.

Pattern points… (Setups and technicals)[pay]
1671.00 objective met, very late, would have reacted down if met during the open or morning. No hold-long could be considered from that since the objective’s test held. Also, the pattern containing 1671.00‘s test was itself overlapping the session’s “lower prior highs,” so not clearly trending up. And the high’s RSIs were not overbought, so a downdraft would not be required to recover.

Holding short would have been suggested by closing back in the intraday range, which was avoided. But all available buying pressure was fulfilled by testing and holding the 1671.00 objective. And although the bias environment exit probed fresh session highs, the final hour’s entry and the 3:10-3:20 window did not confirm.

Much is being made of Thursday’s new high close, which is well-deserved. But May 21’s intraday high was not tested — let alone exceeded — leaving the rally as vulnerable now as it was then to reversing down sharply. We should know much within Friday’s first hour. Either the market intends to extend much higher well into next week, or “lower prior highs” in the 1648.00 area will be tested next.

[/pay]What’s Next… (Outlook and opportunities)[pay]
This being a Friday, the morning’s bias signal should persist through the noon hour. And this being a new trend extreme, closing at a new trend high should immunize the market from peaking — not from a temporary corrective drop, but from ending the rally permanently — so long as the close is a new high.[/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.