Market Wrap

If Monday’s range had avoided touching Friday’s highs… then its positive close could have gotten a benefit of the doubt for confirming Friday’s breakout. But the prior high held its intraday test, as did the afternoon’s probe above the morning’s high.
Pattern points… (Setups and technicals)[pay]
Sunday night’s weakness extended Friday afternoon’s pessimism. The dip stopped short of gaining traction. But it created room to absorb buying pressure. Monday’s 1615.25 high held a test of Friday’s 1614.25 high.

Monday’s fresh high close doesn’t clearly confirm Friday’s breakout, since Friday’s high was probed intraday. Despite spending the entire session in positive territory, buyers gained no traction for the effort. Closing in positive territory means sellers gained no traction, either.

This pattern often repeats with another two-day pair. Trending to fresh highs again Tuesday, then not closing higher Wednesday, would make Thursday very predictable, and usually Wednesday afternoon, too. Immediate weakness Tuesday instead of extending higher also leads to reliable setups, although less definable until Tuesday’s close.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Early strength in positive territory Tuesday would get a benefit of the doubt for extending higher, at least during the morning. But initial weakness would be credible, presumably gapping down under the 1608.00 area, for retesting last week’s “lower prior highs” down to 1592.25. [/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 breakout had happened on any other day… then the following session would be likelier to confirm it with a second consecutive higher close. Monday’s are less likely to follow-through.

Pattern points… (Setups and technicals)[pay]
Extending higher without delay Monday is already unlikely for the same reason that Friday morning’s high was likely to hold: its sponsorship either was borrowing buying pressure from the afternoon, or else chasing the pre-open surge.

But the rally is also unlikely to extend higher immediately because Friday was a breakout. And Friday breakouts tend not to be confirmed by a second consecutive higher close on Monday. (Why? See the paragraph above.) Probing fresh highs Monday while retesting Friday’s high is possible, but the probe would likely reverse back down.

A pullback would be likely to recover — at least, back into Monday’s range. That is because gapping open above prior highs would need at some point be retested after probing “lower prior highs” back under 1594.25. Also, a new trend high close Fridays is very unlikely to be THE trend high close.

Pulling back to 1586.50-1588.00 Monday, or down to 1574.00 into the middle of the week, would still be likely to recover back to 1606.50-1609.25.

[/pay]What’s Next… (Outlook and opportunities)[pay]
A second consecutive higher close Monday would nonetheless confirm Friday’s breakout. In any case, gapping down Monday would still be vulnerable to bouncing back into Friday’s range before extending back under prior highs. Gapping up would be likely to probe above Friday’s high before failing.[/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 a fresh high had been probed Thursday afternoon… then it would have been reversed before the close. Greeting Friday at the highs does make reversing down a little less likely — at least, if not reversing down by noon.

Pattern points… (Setups and technicals)[pay]
Thursday morning’s post-open 14-point rally suddenly met a 2-point range that lasted 3 hours. That’s not including the 90 minutes of narrow ranging since the morning’s bias environment lapsed. Obviously, anxiousness ahead of Friday’s Employment Situation report apparently paralyzed Thursday afternoon’s price action.

That was an interesting spot to suddenly become paralyzed — not at a fresh high, and not just under a prior high, but right AT prior highs. Thursday’s 1594.25 highs had been the peak to Tuesday’s late surge into the close. It was exceeded only momentarily Wednesday morning, and only by 1 point.

Surely, Wednesday’s session-long decline wasn’t recovered all the way back up to prior highs, just to attack those prior highs without actually probing fresh highs. At least, that’s often the case. It is not always the case that fresh highs are probed without first dipping, regardless of how narrowly three consecutive timing windows have ranged.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Fresh highs are not required, just probable. Fresh highs will also probably be reversed down hard — unless the open were to remain above prior highs. At that point on Fridays, countertrend sponsorship usually becomes marginalized for the day. The best chances for trending down into the weekend are either to quickly reject a probe of fresh highs, or else to gap down strongly.[/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 low had extended any lower… then perhaps sellers would be stretched so thinly to make a gap up likelier Thursday. Instead, the late consolidation leaves the door open to a volatile open.

Pattern points… (Setups and technicals)[pay]
Wednesday’s steep, relentless reaction down is one more piece of evidence that significant highs are forming. We’ve discussed during the past week other instances of turbulence upon attacking, testing and probing prior highs where the air is apparently thin. Another metaphor: The music keeps stopping and fewer chairs remain.

However, the deep session-long drop did not yet signal the trend is reversing down. Not convincingly. Closing under Tuesday’s morning’s 1581.25 low is a start, since it is between two high closes. But its session is one of those high closes. Closing under Friday’s 1572.50 low would be more convincing.

Meanwhile, Wednesday’s close was still consolidating at the afternoon’s 1578.50 bias-down target, if not actually testing it. Sellers gained traction, so rallying Thursday morning would all but require gapping up above the afternoon’s 1586.25 high. Only testing 1583.25 through the open could easily reverse down sharply through the morning.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Wednesday’s 1595.25 pre-open high or the gap back to Tuesday’s 1592.50 close don’t require being retested. Their retests would become likely on a big enough gap up Thursday. Otherwise, rejection of last week’s recovery could unfold very quickly. [/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’s opening dip were delayed until the afternoon… then the afternoon’s fresh high could have formed a meaningful top. Instead, Wednesday might need to give that pattern a try.

Pattern points… (Setups and technicals)[pay]
Monday night’s narrow sideways ranging eventually put in a lower low. Its recovery into Tuesday’s open was blind-sided by a much lower low. Their cumulative recovery into Tuesday afternoon barely touched Monday’s high.

The market just does not absorb big and repeated dips only to touch the origin of those drops. Its late recovery to fresh session highs was not surprising — only its delay.

A bigger question now is whether the ongoing higher lows have made a new rally leg likelier than just to retest prior highs. That potential would depend upon whether an accumulation pattern has formed. And none has. At least, no new one.

The pessimism of teasing the highs would have been more bullish (from a contrarian perspective) had Tuesday not ultimately rallied to close at its new high. None of which means a productive or durable downdraft is forming, only that a downdraft would be more credible for being productive and durable.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Testing 1594.75 overnight would neutralize its attraction. Probing fresh highs with any complexity would leave in its place a “new Globex trend extreme” requiring retest intraday — not always the same day. In any case, there is no close under a prior low, nor is one threatened, so the trend has not reversed down.[/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.