Market Wrap

Closing above Tuesday’s opening high had indicated sellers were done. At least, the most recent sponsorship, responsible for the overnight and post-open plunges. Although the decline was likely to resume with new sponsorship, that’s usually delayed by a bounce that seeks out those new sellers at higher levels. And that usually persists into the 1-3 following sessions.

But Tuesday’s rally was never extended. The afternoon’s 2754.75 high had reacted down to 2738.50 into the close. Initial overnight ranging never recovered it.

A deeper overnight dip to 2719.75 was recovered back above 2735.50 to repeat Tuesday’s signal that sellers were done. Again. But its bounce to 2742.00 was reversing down through the open. Last chance pullback limits at 2735.50, 2721.00-2723.25, 2715.50 — and even 2701.50 — gradually failed. Always a possibility in every scenario, the invalidation template made a rare appearance.

Wednesday’s drop neutralized “unfinished business” at the oversold RSIs at Tuesday’s 2692.25 low. Tuesday’s bounce neutralized the normal attraction to “higher prior lows” at 2751.00-2752.50 from Monday. Oversold RSIs at Wednesday’s late 2652.25 low are now outstanding.

The next lower objectives that we’ve been discussing at 2671.00 and 2663.75 were met and exceeded. A 20-point bounce after the cash session close held its test of 2671.00 as resistance. The next lower objective in-play is 2637.25. Oversold RSIs at the close made a hold-short compelling.

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Did it, or didn’t it? Did closing back above Tuesday’s opening highs create a position of strength?

That would enable recovering from dipping immediately on Wednesday, if not already backing-and-filling overnight. Likely objectives would be 2735.50, 2721.00-2723.25, 2715.50 or even down to 2701.50. Any lower would start to signal that Tuesday’s intraday bounce was self-fulfilling.

The position of strength could instead resume the rally overnight to test Monday afternoon’s 2766.00 highs. At that point, the open can either extend higher or react down to indicate whether the bounce was extending or done.

I wouldn’t expect the bounce to extend higher immediately, so testing 2766.00 at Wednesday’s open would be likely to reverse down. At least reversing down immediately overnight could satisfy selling pressure that is still very much intact, without yet resuming the decline.

The only other significant template — which is always a template — would be among the exceptions to the rule. Sure, closing back above the morning’s high, after trending down overnight and through the open, often delays the prior trend. But failing to hold support through relevant timing windows could find that Tuesday’s recovery attempt only attracted more sellers out of the woodwork.

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Sunday night’s gap down and probe under Friday’s lows had nothing to do with the bearish WedEX. Consequently, its recovery to open Monday back in positive territory was also irrelevant. The bearish WedEX’s only interest is post-open, which it did produce a 31-point side through the first hour.

Of course, this destroyed the Isolation setup that would have formed by the reaction down being shallower. The two setups could have co-existed. Choosing not to exploit the Isolation’s bullish opportunity suggests that the market remains bearish.

In fact, the balance of the session ranged flat-to-lower, albeit more flat than lower. Forming another Isolation setup at Tuesday’s open would be as credible for ending the decline. Meanwhile, the pattern remains vulnerable to extending the decline, at whatever pace and slope.

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No decline, collapse or plunge ever resumed — the noon hour and on was spent fluctuating around unchanged at 2772.00. But buyers gained no traction for their efforts, and the Ascending Triangle’s retracement was retained.

Friday afternoon’s bearish WedEX influence was intact, after the overnight and morning’s rally was absorbed. A more obvious bearish influence is likely to develop at Monday’s open, regardless of opening flat or gapping in either direction.

A very late sell signal triggered and produced several points through the close. But not to fresh lows, which would have made a compelling hold-short. Oversold RSIs at the high will be Monday’s likely attraction if no decline, collapse or plunge has yet resumed.

Details and other markets coverage are discussed in the post-market Wrap recording here.
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Thursday’s gap down formed a “session-long decline” at the open, one of the most productive ever. Every intraday timing window except the noon hour probed its prior timing window’s low. Until the final hour, which only ranged relatively narrowly sideways.

That second timing window’s exception isn’t common, but it’s not unusual. The next session then tends to compensate for the missing fresh low by gapping down under the prior session’s lows. That would confirm both the session-long decline, and the Ascending Triangle’s false break. Oversold RSIs at Thursday’s low would be neutralized, and oversold RSIs at the Triangle’s low would be in-play.

Thursday morning’s gap down also served as proxy to trigger a bearish WedEX. Its influence would be relevant Friday afternoon. Uh-oh…

Friday is October 19, which is the anniversary of the 1987 “Black Monday” crash. Friday, October 16, 1987, was also pretty ugly — down an almost unheard of 108 points. The week had been pretty ugly, too. And it was a fairly fresh decline.

Similarities to current price action abound. There’s no perfect algorithm, only common principles, and they’re all here. So, trending down sharply again into the weekend — back to last week’s lows — would be extra vulnerable to extending down sharply coming out of the weekend. But only ranging sideways Friday would still be vulnerable.

Details and other markets coverage are discussed in the post-market Wrap recording here.
Monitor overnight Globex trading in the chaRTroom here.