Market Wrap

If the rally intended to extend higher… then did it miss an opportunity with Wednesday’s FOMC Minutes catalyst? Probably, at least for extending higher. But fresh highs can still be tested intraday.

Pattern points… (Setups and technicals)[pay]
Overbought RSIs at Wednesday’s 1653.00 high were produced by a knee-jerk reaction to news. That is the definition of “weak-handed.” Overbought RSIs produced by trending are the definition of strong-handed, so that its reaction down is the product of weak hands that would require being retraced.

Meanwhile, the reaction from Wednesday’s overbought RSIs down to 1641.50 barely took 1-minute RSI oversold, and not at all the 3-minute. There is no requirement to retest its low. Bernanke’s post-close speech could successfully clarify the earlier Minutes to trigger a retest of 1653.00.

That said, the low was 1 tick above the 1641.25 overnight low, reflecting impatient buying. That optimism is potentially bearish from a contrarian perspective. And all unfinished business is below, outstanding from last week’s rally: gaps, bias-down parameters, and a sizable air pocket.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Neither buyers nor sellers gained traction for their efforts again. So, intraday trending would be likely to retrace if not proceeded by gapping open beyond a prior high or low. [/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 market has been conditioned for another Pavlovian repsponse… then that conditioning is to reiterate buying weakness, being likely to resolve at fresh highs. Probing fresh highs Wednesday would suggest that training wasn’t yet complete.

Pattern points… (Setups and technicals)[pay]
The 1648.00 area was known resistance. It was unknown how aggressively it might be rejected, if rejected, at all. That is still unknown. Three tests through three timing windows Tuesday afternoon still have yet to break lower. Their reactions down each held 1645.00-1646.00. That’s barely a 4-point range, for the entire afternoon, hovering at fresh highs.

The relatively narrow range did persist through the bias environment lapsing at 2:30, making a decline unlikely. Or, making a decline unlikely to extend down, or likely to recover entirely. It was the former — a late dip from 1649.00 fell back to 1645.00-1646.00.

Once again, neither sellers nor buyers gained traction for their efforts. Trending in either direction without delay would require gapping open. Opening within the range could still try trending, but probably only temporarily. If testing the 1648.00 area is going to end the rally, and that’s not obvious at Wednesday’s open, then it probably won’t be obvious before Thursday.

The afternoon’s 1650.00 bias-up target was left outstanding above, and the gap back to Monday’s 1634.00 close is outstanding below.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Wednesday morning’s econ reports are uneventful. But the afternoon’s FOMC Minutes should be a focal point with it providing a peak into potential tapering.[/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 opening gain were the product of strong hands… then Monday’s close should have been higher. But it wasn’t, despite all of the intraday swings. Often, the only path higher or lower requires gapping open sharply in that direction.

Pattern points… (Setups and technicals)[pay]
Sunday night’s rally and Monday’s opening surge share one important characteristic, in that each held their tests of 1637.50. Monday’s opening surge included a test of 1639.00, which is the upper-end to 1637.50-1639.00 — the rally’s next higher objective.

Holding an intraday test of 1637.50-1639.00 satisfies buying pressure. Two or three tests suggest its resistance is being chipped away. So it is interesting that 1637.50-1639.00 was tested pre-open, post-open, and then also post-close in reaction to the Alcoa (AA) earnings. Only the intraday test qualifies as a test, so chipping away at its resistance would require extending higher Tuesday.

Extending higher would next target 1641.50, and then potentially the 1648.00 area. Reversing back down would be attracted to the gap outstanding at Friday’s 1625.00-1627.00 close(s).

[/pay]What’s Next… (Outlook and opportunities)[pay]
Extending higher is not at all assured, despite not rejecting the overnight rally. That’s because Monday’s 1634.25 close did not improve from the open’s 1634.00 gap up print. Buyers gained no traction for their efforts. Sellers also gained no traction, so reversing down immediately would require gapping down. Otherwise, reversing down would require probing a fresh high first[/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 last-minute rally were restrained… then it would have left pent-up buying pressure outstanding to justify holding long through the weekend. Does already expending that buying pressure mean the rally can’t extend anyway?

Pattern points… (Setups and technicals)[pay]
Closing Friday above the 1621.50 morning and 1624.50 noon hour highs means that buyers gained traction. Gapping up is not the only way to extend the rally, and the alternative to immediately trending up is not to trend down. An immediate pullback can still be recovered to extend Friday’s rally.

That doesn’t mean the extended rally will get very far, or for very long. The pre-open 1630.75 “new Globex trend extreme” can be rejected easily through 10:15 bias timing window, especially when the prior session’s open displayed that much elasticity. And it’s not much higher — 1625.00-1626.00 at Friday’s cash session close, and 1628.50-1629.00 at the futures close.

Meanwhile, Friday’s late buyers were not strong hands. A hold-long setup would have been considered by closing just above 1621.25, preferably at 1623.00-1624.00. But no buying pressure was left pent-up as price ticked higher through close.

Unfinished business below also suggests the interim bounce is sponsored by weak hands. Friday’s 1600.00 and 1591.75 bias-down parameters were put into play by rejecting both 1614.50 and 1621.25 bias-up parameters through 10:15. Rejecting another early rally would only trap more longs. If not — if 1632.00-1633.50 were tested without being rejected — then a bigger rally would be underway.

[/pay]What’s Next… (Outlook and opportunities)[pay]
This being a holiday weekend, there is no Saturday Strategy Session. Please don’t hesitate to request a chart analysis as needed for any equities by posting to this post’s comments section in the blog.[/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 Wednesday’s open were up instead of down… then the balance of the session could have been spent trapping shorts. Instead, shorts were squeezed. A negative reaction to Friday’s Employment Situation report could drop dramatically.

Pattern points… (Setups and technicals)[pay]
Monday afternoon’s dive undermined the morning’s buyers, but it was not deep enough to be the product of strong-handed sellers. Sellers were marginalized through the holiday. Tuesday’s afternoon and overnight drop therefore was unlikely to extend down.

Exiting Tuesday’s opening 15 minutes of volatility at 9:45 back above 1598.00-1600.00 also undermined the overnight momentum. The setup was duplicated, and a combined test of both bias-down parameters was nearly rejected by 10:15. Nonetheless, sellers were marginalized.

Marginalized sellers taking price back down to prior lows would have made a very bullish reaction very likely to Friday morning’s Employment Situation report. Oh, well.

Instead, the balance of Wednesday’s truncated session already rallied. Unfinished business above at 1611.25 was neutralized by retracing Tuesday afternoon’s no-bias trending. Room for noise above it up to 1613.00 was touched at Wednesday’s high. And yet another probe above last Friday’s 1609.50 high held as resistance.

[/pay]What’s Next… (Outlook and opportunities)[pay]
More buying pressure can be expended up to 1614.50 and 1617.00 during Thursday’s holiday trading. Greeting Friday morning’s report from above 1617.00 would be vulnerable to reacting favorably. But greeting it from under 1602.00-1604.00 would be vulnerable to selling off sharply into the weekend.[/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.