Market Wrap

If trend high closes don’t occur on Fridays… then Monday’s new high close neutralizes the requirement for any higher close. That’s not a sell signal, just a warning.

Pattern points… (Setups and technicals)[pay]
Not much more useful of a warning than it was before Monday’s open. There i s no particular timing to a new trend high close following Fridays. Now the point is moot.

Two other attractions above remains outstanding. Overbought RSIs at Monday’s 1670.75 noon hour high are likely to be retested. So is oversold RSIs at the afternoon’s 1661.00 low. But, again, there is no requirement to their tests.

Attractions above are likelier to be tested next, since Monday’s close held above prior lows. Attractions above are a little likelier to hold as to be exceeded. Otherwise, immediately trending down Tuesday would be as credible for extending the pullback. Breaking prior lows through a relevant timing window could reverse the trend down.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Housekeeping item: I will update Tuesday only during the morning, except for the afternoon bias signal. [/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 bullish WedEx indicator remains valid… then Monday morning’s bias should be obvious by now. But Monday’s opening print is actually less predictable than its reaction.

Pattern points… (Setups and technicals)[pay]
The bullish WedEx indicator seems to have identified the expiration bias. Keep in mind that its influence also applies to Monday morning. Typically, one of those windows is noticeably more aggressive than the other.

Also keep in mind that Monday’s open isn’t immune to gapping down — the bullish WedEx would likely facilitate its recovery from the opening tick, but that opening tick could be anywhere.

And then comes Monday afternoon.

WedEx’s influence will have lapsed. Although a new trend high close on Friday is unlikely to be THE trend’s high close, that doesn’t prevent a multi-session interim decline.

The next higher targets upon breaking out of 1627.25‘s orbit were 1654.50 and 1671.75. I’m adjusting that down 2 ticks to 1671.25. Regardless, its test isn’t needed before sellers can mount a serious effort to retake control. But testing it first would make that effort more serious.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Don’t forget to join us this weekend for the Saturday Strategy Session at 9:30am ET. Its link is found in the blog’s sidebar. We’ll discuss the current patterns in greater detail, and describe likely scenarios for Sunday night and Monday morning. Also, it’s a great time for instant analysis of any stocks that currently interest you.[/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 unfinished business below had been left outstanding… then it could have attracted price down overnight to extend the decline. But it was tested into the close. So, not extending down overnight could be bullish.

Pattern points… (Setups and technicals)[pay]
Ranging Wednesday was largely contained within Tuesday afternoon’s range. Only a late break probed under its low. And only the latest part of that break. Then, the latest part of that break neutralized “unfinished business below” left outstanding from the morning at 1648.50.

And not left outstanding overnight, which could have ensured extending the decline through Friday’s open. But momentum clearly had difficulties with its test — first bouncing from within 1 tick, then bouncing back above 1648.50 from 1 point below, and finally bouncing back to 1648.50 from touching 1646.00.

Touching 1646.00 was interesting, since that was Wednesday morning’s last relative low. Having touched it, no “hold-short” would be compelling without also closing under it. And the close was AT 1648.50, still testing this objective instead of bouncing off of it — a setup that would be bearish on any close other than right before expiration’s opening rotation.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The bullish WedEx indicator suggests an upward bias Friday afternoon and Monday morning. That could be from much lower levels if Thursday’s drop to 1648.50 doesn’t hold through Friday’s open. Not already declining at Friday’s open would 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 Thursday’s open isn’t obviously weak… then a bullish slant into and out of the weekend would become much likelier — even if Thursday were to weaken later, or not too deeply.

Pattern points… (Setups and technicals)[pay]
The timing to reject Tuesday’s rally by Wednesday’s close took on different possibilities as the rally evolved. For example, Wednesday’s gap down could have formed a Pivot Reversal by rejecting a fresh trend high intraday to close back under the morning’s lows. That didn’t happen.

Another opportunity to reject Tuesday’s rally came with Wednesday afternoon’s dip back to Tuesday’s 1648.75 high. This created a new element, whose reaction back up to 1654.50 allowed that any close inside that leg would be noise around Tuesday’s high. Its upper-end was probed, but the close fell back to 1654.50 in the final minute.

Ultimately, Tuesday’s rally leg wasn’t rejected. But it was only fulfilled, by closing at its 1654.50 target. The clear opportunity to close above it, and to put into play 1671.75, was rejected.

[/pay]What’s Next… (Outlook and opportunities)[pay]
That’s similar to how Wednesday morning’s no-bias trending undermined the afternoon’s bias-up signal. It leaves the door open for Thursday’s open to serve by proxy where Wednesday’s close failed. Trending down immediately under 1644.50 and 1642.75 would be an obvious start. Just trending down immediately under 1651.00 and 1648.50 would threaten the bullish WedEx indicator. Otherwise, any later or shallower intraday weakness would likely trend up into and out of the weekend to test 1671.75.[/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 Tuesday afternoon’s retracement wanted to extend down… then it could not have been much better positioned. But it didn’t extend down. Instead, the last hour probed fresh highs. Either sellers were biding their time for a more timely attack at Wednesday’s open, or they’re trapped.

Pattern points… (Setups and technicals)[pay]
This being expiration week, price action through Wednesday’s close can be very predictive of any bias into and out of the weekend. That’s because expiration activity doesn’t wait until Friday. In fact, Tuesday’s price action is already somewhat influenced by the event.

Some degree of Tuesday’s 21-point rally — from the pre-open dip to 1626.50 up to 1647.50 — was accelerated two or three days early. That means it has already influenced price action — its buying pressure won’t be available to buffer or rescue the market from a decline.

Not that the market is necessarily going to decline. The window is closing on the bearish scenario of rejecting a breakout attempt, by either Tuesday’s close or Wednesday’s close. Tuesday’s close has passed.

Rejecting Tuesday’s breakout the same day could have been done aggressively. That’s not an option for reversing down on Wednesday. Only a super-aggressive reversal like gapping down under a prior low, or a gradual reversal like trending down from a flat-to-higher open, can extend lower without leaving any attraction above.

Tuesday’s late 5-point bounce from its 1642.50 pullback low back to session highs was essentially noise. But not rejecting it Wednesday — dipping only so deeply, recovering from a probe under prior highs, or not dipping at all — would suggest the rally is next targeting 1654.50 and 1671.75.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Tuesday morning’s rally was a product of the morning. The noon hour’s brief probe to a fresh high was reversed down until the final hour. And the morning’s high wasn’t probed until the last half-hour. Gapping down under the afternoon’s 1643.75 lows would almost form a “session-long decline” setup. No opening weakness Wednesday would almost ensure playing out the rally by noon. [/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.