Market Wrap

If Tuesday’s low intended to launch a durable recovery… then it should have probed Monday’s low first. Instead, it stopped short of touching Monday’s low, which itself had stopped short of a nearby prior low. The impatient buying might produce another bounce, but only another temporary bounce.

Pattern points… (Setups and technicals)[pay]
Tuesday’s 1621.50 low was recovered up to 1635.75. But that was too close to Monday’s 1620.75 low not to eventually break lower. Back above 1638.00 through any relevant timing window — like through Wednesday’s open — would start to signal a bigger bounce underway first.

Friday’s Employment Situation report is an interesting wild card. As with a three-day weekend or expiration, price action at Wednesday’s close might offer some insight into sentiment ahead of the report. Getting a bigger bounce through Tuesday’s 1645.75 high out of the way could refuel sellers. Testing and recovering from 1620.00 could trap shorts.

Unless Wednesday’s open is gapping up above 1638.00, at least a retest of recent lows is likely, probably into the teens. Gapping up above 1638.00 would suggest a rally is underway into and out of the afternoon’s Beige Book release.

[/pay]What’s Next… (Outlook and opportunities)[pay]
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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 morning’s high were recovered earlier, and not still being overlapped at the close… then it would have formed a “Pivot Reversal” setup. That would have been bullish. Being in a position to trigger the setup, without actually triggering it, can make the setup bearish instead.

Pattern points… (Setups and technicals)[pay]
Monday afternoon’s rally didn’t get aggressive until the position-squaring window opened at 3:37. Even that behavior wasn’t very aggressive. No 2-3 minute window of sizable consecutive up-bars, other than approaching a prior high. That’s my biggest concern about extending it any higher after Tuesday morning. Gapping up sharply enough might compensate for Monday’s restrained gain..

This stage of the pattern should behave aggressively. If not to the upside, then to the downside. And it should have been to the upside, No unfinished business below (no oversold RSIs at the low, and all lower objectives met), exiting the bias environment above a prior high, and positioned patiently at resistance.

Anyway, the afternoon’s rally met its minimum objective by retesting the 1638.00 pre-open high. Which held. There is room for noise around it between 1632.50/1633.50 – 1640.00/1642.00. Testing one end overnight and coming out the other end through Tuesday’s open would be likely to extend in that direction. But there isn’t otherwise an attractive setup or objective in-play.

[/pay]What’s Next… (Outlook and opportunities)[pay]
1638.00 was a critical objective last Wednesday, its test launching as large of a corrective bounce as possible. Its retest should be equally eventful, so neither an overnight probe above it or reaction down from it should be taken for granted.[/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 morning’s sellers had no opposition like the afternoon’s sellers… then would the session have ended even lower? Maybe not. Testing support and neutralizing an attraction below early enough on a Friday can suddenly find sellers expended and buyers excited. Instead, the weekend was greeted the other way around. And by the way, that’s how the quarter’s second month ended.

Pattern points… (Setups and technicals)[pay]
So long as Friday afternoon remained vulnerable to sellers retaking control, then it remained vulnerable to getting very, very ugly, ugly. And sellers were able to retake control, since buyers expended so much energy for so long without gaining any traction for the effort.

Sellers would have retaken control by exiting Friday’s open under 1645.25, which the open attacked to within a tick before 9:45. Its break coming out of the afternoon’s bias timing window at 2:30 confirmed a sell signal that had triggered under 1651.00. It had the same effect as if triggered during the open, and even compensated for the delay. Its minimum objective was to probe fresh lows for the week under 1638.00, but the drop didn’t stop until probing 1 point under the prior week’s objective at 1627.25.

That’s a lot of selling pressure to expend. It’s also a lot of selling pressure to fulfill. But was it too much selling pressure to fulfill for a hold-short setup to be compelling?

The break under prior lows was not well underway until exiting the bias environment. And it didn’t begin so late as to be sponsored by weak sellers getting trapped. Extending all the way to the lowest objective could have been bullish if there were also a reaction up above a resistance. Any resistance. But closing AT a relevant level is equally vulnerable to Monday’s open either extending down sharply, or reacting up sharply.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The next lower objective is 1612.00-1615.00, and then essentially 1590.00. A bounce or gap up Monday could test 1640.00 or 1643.00. These might seem like a 1:1 risk-to-reward ratio, but the downward momentum and likelihood of a bounce resolving down were very compelling to consider a hold-short through 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.

If Thursday’s rally isn’t rejected Friday morning… then its late drop could be the reason. It originated too late for its sponsorship to be strong hands, and it expended a lot of selling pressure. Its complete recovery could be bullish.

Pattern points… (Setups and technicals)[pay]
Only one element of Thursday’s session improved the likelihood for resuming the decline. Not its opening surge that extended through Wednesday’s 1651.00-1653.00 highs and up into Tuesday’s range. Not leaving no unfinished business below from the morning — not an oversold RSI, or even a gap back to Wednesday’s close. Even the late 8-point drop originated too late to be sponsored by strong hands.

But at least the probes above the morning’s 1658.25 high were all rejected. At least the 1653.00 close was under the noon hour’s 1654.50 low. Buyers gained no traction for their efforts. None of which is a sell signal, and only makes an early rally Friday likely to fail. And an early rally’s failure is likely to resume the decline.

An early rally Friday had better fail. Otherwise, Thursday morning’s probes above 1658.25 may be rewarded for having chipped away at its resistance. Tuesday’s last relative high was already revisited, while retracing 61.8% of the drop from Tuesday morning’s high. Both are natural corrections, leaving little reason to delay resuming the decline — unless the recovery intends to extend.

[/pay]What’s Next… (Outlook and opportunities)[pay]
This being a Friday, the morning’s bias tends to extend through the noon hour. The most bearish scenario is not necessarily the most aggressive. Rather than already trigger bias-down, more bearish would be to reject a test of the bias-up signal to trigger no-bias, putting into play a test of the bias-down signal.Otherwise, regardless of the eventual resolution down, extending the rally Friday could make new highs likely. [/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 sellers regained traction Wednesday… then does that preclude Thursday from trying to bounce before resuming the decline? No, and it’s almost required — except that a bounce might gain traction for something far bigger if not rejected quickly.

Pattern points… (Setups and technicals)[pay]
My warning before Wednesday’s gap down was that probing back into Thursday-Friday’s range wasn’t itself bearish. It could have been spit back out above 1651.00-1653.00 through a relevant timing window and become bullish. The open’s reaction up held 1651.00, and the afternoon’s bounce held 1653.00.

So far, not bullish. The principle is similar to Friday’s gap down and opening pressure that failed to extend down. Its consequence was a 37-point rally. without extending down. That was a one-day setup. It can be a two-day setup, too, if a rally Thursday morning were immediately productive. Its minimum objective would be 1665.00 and then a retest of 1686.00.

Otherwise, bouncing Thursday morning could still resolve down. That would be likelier. Or, simply extending down through the open could already resume the decline, next targeting 1631.00 and 1627.25.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The expectation for an early downleg Wednesday was that it would bounce temporarily from 1638.00. Regardless of the bounce’s size and duration, whether through the next timing window or the next day, its failure should extend down. So, the next attempt to extend down must succeed, or else new highs could soon be in-play.[/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.