Market Wrap

If Tuesday’s session intended to be a refreshing pause… then sellers are fully refueled and ready to retake control. But as a prelude to recovery, Tuesday’s session offered only optimism, “ineffectual optimism” that will turn very sour with any delay in extending higher.

Pattern points… (Setups and technicals)[pay]
Tuesday morning’s attempt to probe above Monday’s 1580.25 high was prevented by… Tuesday morning’s attempt to probe above Monday’s high. Buyers got ahead of themselves at the open, which required dipping back to a new starting point at 1570.00, and trying again.

Probes of fresh highs each failed quickly, gaining no traction, but their reversals also gained no traction. Entering the final hour under those prior highs confirmed the probes were not sponsored by strong hands. But again, sellers weren’t retaking control.

Ultimately, the vulnerability to probing higher highs was exploited to test 1584.75 and 1586.75 bias-up targets. Not being sponsored by weak hands, the probe quickly reacted back down under prior highs to 1581.75. A hold-short was avoided by not also extending back under the last relative low at 1580.00.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Tuesday’s range formed an Ascending Triangle with a false breakout (see image above). Buyers gained no traction, so extending higher Wednesday would require gapping up above its late high. Its late high could be retested before extending down. But since sellers also gained no traction, Wednesday’s open probably needs to gap down under Tuesday’s lows if the decline intends to resume.[/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 WedEx fulfilled expiration’s bearish bias… then can another bearish bias still be influential? Yes, especially since Monday afternoon’s bounce already retraced 61.8% of the drop from Friday’s close. But bouncing so meaningfully from another bearish bias would be more likely to bottom.

Pattern points… (Setups and technicals)[pay]
Monday’s first 3-minute bar ranged 1567.50-1571.00. That’s where the market traded 3 minutes before the cash session close, the session’s last relevant timing window. The mainstream interpretation of closing back within the open’s range is the trend is pausing or even ending.

Actually, the setup is relevant in only two ways: First, extending the decline probably requires extending down aggressively without delay. Second, if Monday’s 1553.25 low is ever retested, then price should be either very far above it or very far below it within hours — probably by that session’s close.

Aggressively probing fresh lows Tuesday morning would likely extend down and not recover. But recovering from any probe of fresh lows would likely form a bottom. Ranging sideways is not likely.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Several other factors discussed during the Market Wrap do suggest fresh lows will be probed. Only gapping up above Monday’s 1580.00 highs, and preferably also above Friday afternoon’s 1592.00 high, would get any benefit of the doubt for launching a multiple session rally.[/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 FOMC really wanted to claim status quo… then it should have authorized a good old-fashioned 3:30 ramp-up. But that was the afternoon’s high, and it reacted down sharply. So, while the spin did have an effect earlier, it seems to have disproved itself.

Pattern points… (Setups and technicals)[pay]
Wednesday’s expiration indicator is intended to identify any intended bias into and out of the weekend. It identified distribution, which means the expectation for lower prices. Since Friday afternoon only ranged sideways, the question is whether Thursday’s immediate massive repricing already fulfilled the bearish WedEx signal.

Possibly. But probably not. A big opportunity to invalidate the bearish WedEx was ignored — i.e. holding the afternoon’s bias-up target test, instead of exceeding it to renew the bias-up signal. And the afternoon only ranged sideways, its last consolidation overlapping the noon hour’s 1585.00-1586.25 exit.

We’re still discussing expiration because its influence extends through Monday morning. And if the WedEx is valid, then its influence Monday morning should be aggressively bearish. So bearish that a hold-short was contemplated at the close.

Friday’s gap up and afternoon recovery from intraday lows did form a Pivot Reversal pattern. It wasn’t credible because the morning’s high wasn’t recovered, and because expirations don’t produce reliable setups. Opening strength Monday still could gain traction, but no opening strength would confirm that no Pivot Reversal had formed.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Oversold RSIs at Friday’s 1570.50 low should be retested down to 1567.50. Trading any lower through a relevant timing window would target 1551.00 and 1546.00. Rallying, instead, still relies upon recovering 1598.00-1600.00.[/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 there were ever an opportunity for rare setups… then it would be this environment of trending sharply, to new lows, into expiration. One such setup is a three-day trend reversal, trending through a prior extreme. Two days were just spent reversing back under recent lows. The rare third consecutive day would be very powerful. That is, if rare setups are in vogue.

Pattern points… (Setups and technicals)[pay]
Sellers were strong-handed Thursday afternoon. Its bias environment was exited under the noon hour’s low and the final hour was entered lower still.  Then the 3:10-3:20 window trended down, producing a fresh low.

But the fresh low was relatively shallow compared to its prior low, its break was hardly aggressive. Oh, and it retraced all of the 3:10-3:20 window downtrend, back to the bias environment’s low. The final hour’s entry was recovered through the close.

While a late short-squeeze was avoided Thursday, selling pressure has been thinning out. That’s not necessarily bullish, and could be caused by the test of long-outstanding “lower prior highs.” But the decline probably can’t absorb a bounce before resuming the decline.

The weekend’s impending illiquidity and Quadruple Witch expiration will exacerbate volatility. That volatility will leave make any trending vulnerable to reversal. Whether an early rally attempt, or a gap down, look for wide opinion shifts intraday.
[/pay]What’s Next… (Outlook and opportunities)[pay]
The 1575.50 target was attacked to within 2 points at Thursday’s low. There is room for noise under it down to 1567.50. No rally attempt would be considered durable until recovering 1598.00-1600.00. [/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 the market intends to retest May’s highs this year… then it probably can’t afford to extend down much lower this week. And it does want to extend down.

Pattern points… (Setups and technicals)[pay]
Wednesday morning’s narrow ranging in slightly negative territory seemed at odds with the wide overnight moves. The FOMC reaction compensated for the delay. The two overnight extra tests of 1648.00 resistance weren’t compensated with any higher high, but that wasn’t even obligatory, let alone required.

The plunge neutralized the attraction back to Monday’s oversold RSIs at 1623.75. Ironically, that was the product of an afternoon plunge triggered by a warning about Wednesday’s FOMC meeting. It was recovered to Tuesday to fresh highs. That had fulfilled potential up to 1646.50-1648.00, and held.

With attractions above and below neutralized, there is no requirement either to trend up or to trend down. That is the only reason Wednesday’s close did not qualify for a “hold-short.” There is vulnerability overnight Wednesday and Thursday to fill the gap back to last Friday’s 1618.00-1620.00 close. But no assurance of its test, of its test breaking, or of its test overnight reacting up sharply into Thursday’s open.

Extending down any further would next target 1612.50 and 1604.00 — presumably on the way to 1585.00 and lower. Bounces have room up to 1638.25 before even suggesting a downleg would not develop immediately. Above 1645.50 would begin signaling a probe above May’s highs.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Wednesday’s Market Wrap recording is a more thorough review of the session’s relevant points. It also describes more thoroughly the passively bearish WedEx signal, and what Thursday’s open can or must do to validate or invalidate it. [/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.