Market Wrap

If Monday morning’s slide had extended a little lower, a little later… then the session’s next 18 points would have been down to 1525.00. But sellers lost momentum, and an 18-point rally formed, instead. Did the recovery start to stretch buyers too thinly to last through mid-week?

Pattern points… (Setups and technicals)[pay]
Plus les choses changent… The more things change, they don’t. Not really. Last week’s relevant levels remained influential as the new week began.

Sunday night’s rally to 1557.00 had reacted down intraday to the ever-relevant 1543.00-1544.00 support. Its reaction to and then through the ever-relevant 1548.50-1549.25 extended sharply higher. The evermore relevant 1555.50 was also influential, first reacting down like its opening test, but this time recovering to fresh highs at 1561.00.

Futures reacted back down to 1555.50.

Buyers gained traction for their efforts. That means the only way to reverse momentum down immediately is to gap under Monday afternoon’s 1552.50 low. Confirmation would come from specific behavior — extending down further with only the slightest hesitation throughout the opening 15 minutes of volatility.

Otherwise, since Monday prevented the decline from resuming, its potential reward would still fill the gap back up to 1569.50. So log as the trend does not reverse down, it should extend at least that much higher. What happens there is a different matter — close above it, or hold its test — which would speak to the bigger picture.

[/pay]What’s Next… (Outlook and opportunities)[pay]
At the recent high I pointed out it had been three sessions since the legendary so-called “3:30 ramp” had appeared. Now it has been longer than two weeks. This is not the only market characteristic, but it was very high-profile so its sustained disappearance is relevant. This does seem to be a different market environment in several other ways we’ve been discussing. Now that expiration’s influence has waned, we’ll be looking for more obvious changes to come more 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 any stocks of interest were affected by the week’s ranging… then be sure to join us for the Saturday Strategy Session. After discussing the market, we’ll have instant analysis of any chart requests. This weekend’s session is open to guests, just have them email me before 9:30am ET for special access instructions.

Pattern points… (Setups and technicals)[pay]
Friday retested only one relevant piece of unfinished business below that had been neutralized already Thursday. That was the two-week old 1535.25 opening print. It was touched at the low of the pullback into Friday’s open, which also filled the gap back to Thursday’s 1536.75 close.

Both held as support. And that’s when expiration’s intent started becoming obvious — to expend buying pressure without gaining traction for the effort, i.e. “ineffectual optimism.” The evidence continued piling in:

Buying pressure was expended in order to hold that support. And that buying pressure was productive, extending higher. But the nearest that buying pressure came to recovering a relevant level through a relevant timing window was to still be testing the morning’s 1543.00 bias-up signal in time to invoke the grace period. The bias-up signal did not trigger.

Extending higher after the bias environment began lapsing was also productive, touching 1550.00. But, again, that was not extended and the afternoon triggered another no-bias. The balance of the session ranged sideways, expending a lot of buying pressure just to hover. Finally, buying pressure was expended for a late probe of fresh highs up to 1550.75, only to be retraced back under the morning’s high down to 1547.00.

Expiration can be a wild card. The mildly bullish WedEx indicator might have prevented trending down, but so far Wednesday afternoon’s 1548.50-1549.25 resistance continues to hold. Its influence extends through Monday morning. Regardless, expiration seems to be facilitating distribution — expending buying pressure without gaining traction for the effort. If so, then expiration’s end should prove the optimism was ineffectual, and that the optimism had ended.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Friday’s hovering essentially ranged between 1543.00-1544.00 and 1548.50-1549.25. In fact, the range’s lower-end only touched 1544.00. Its retest and break Monday morning or Monday afternoon would confirm that buying pressure had been fully expended. Trending higher would all but require extending higher early, and avoiding any corrective dip intraday.[/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 close had been any lower… then it would have been a lot lower. It should be obvious by mid-morning Friday whether that narrow escape was only temporary, or a glimpse of much bigger things to come.

Pattern points… (Setups and technicals)[pay]
So, the session that closed under 1542.50 didn’t close substantially under 1542.50, which I had suspected. Not that the cash session’s 1537.00 close wasn’t clearly under 1542.50, or the 1534.00 futures close — both reacting up from the afternoon’s 1530.75 low. But they were only testing the morning’s 1535.75 low that was itself the prior probe under 1542.50, not recovering it.

That’s not to say the morning’s 1535.75 low held as support. The 3-point range of congestion there was not recovered. So, the bounce from the afternoon’s 1530.75 low expended as much energy as possible without gaining traction for the effort. And still closed under 1542.50.

Unfinished business at the two-week old 1533.25 Employment Situation report low was also probed Thursday afternoon and still being tested at the close. But not recovered. Closing under it is irrelevant, already having closed under 1542.50.

If Thursday’s break under 1542.50 — and all that that entails — is going to be rejected, then Friday’s open must essentially gap up through 1543.00-1544.00. It can be tested as resistance and resolve down, but probably only if tested at the open..

[/pay]What’s Next… (Outlook and opportunities)[pay]
The reason why gapping up to 1543.00-1544.00 can still resolve down has to do with Friday being expiration. Trending through the opening 15 minutes of volatility would be likely to trend in that direction throughout the day. Regardless, this being Friday, the morning’s bias signal tends to persist through the noon hour. Meanwhile, Thursday left outstanding oversold RSIs at its 1530.75 low that requires being retested — not necessarily intraday.[/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 potential for retesting last week’s highs is done… then the next downleg should be obvious Thursday. And obvious means both slope and degree being steep and substantial.

Pattern points… (Setups and technicals)[pay]
Two or three significant objectives were tested during Monday morning’s bias environment decline — 1548.50-1549.25, 1543.00-1544.00, and 1542.50. It was the last one whose break through a relevant timing window would have entered the destructive phase.

1542.50 held.

It was also tested during the afternoon’s bias environment, and during the last 60-90 minutes. It’s so rare for so many relevant levels to be tested during one timing window that the balance of the session was unlikely to continue ranging among them. Yet, it did.

Closing back above the all of the objectives would have signaled their tests were absorbed. Closing back above them would have been likely to close well above them. But the highest of them at 1548.50-1549.25 held yet another resistance test at the close. Sellers were not absorbed.

Meanwhile, the objectives are relevant from before the recent Employment Situation reaction that opened below all of them. Its low was the product of impatient buyers, as was Monday’s attack, and now Wednesday’s attack, too. Rejecting these objectives again by essentially gapping up Thursday above 1555.50-1556.25 could once again delay the inevitable. But resuming the decline from closing this low would more likely bring it on.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Wednesday’s expiration indicator triggered a passive bullish signal, by probing under Monday’s prior low and closing back above it. It’s suspicious since that low was made so briefly, and Wednesday’s recovery back above it was so shallow. Thursday’s open will either confirm 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.

If Tuesday’s rally isn’t just a corrective bounce… then can it afford to hesitate extending higher Wednesday? Monday’s recovery pattern would have extended sharply higher from here. Nothing has changed that.

Pattern points… (Setups and technicals)[pay]
An air pocket under 1569.50 targeting 1561.25 had defined Monday’s noon hour drop. That was pre-Boston, and its complete recovery had been anticipated until that news. This relevant area regained its relevance as Tuesday’s close reached fresh highs at 1570.75.

Recovering 1569.50 — not just retracing it — would be further in-line with assuming that Monday afternoon’s drop was exclusively the product of Boston’s terror.

Having touched Monday morning’s higher prior lows at 1570.75 into Tuesday’s close, gapping up above that range’s 1576.00 upper-end would qualify as recovering 1569.50 — not just retracing it. Its purpose would still be limited to retesting last week’s high instead of trending through it, but momentum would meanwhile continue up.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Otherwise, almost any delay to extending higher Wednesday would instead start to suggest that Tuesday’s bounce had ended a correction. Dipping back under Tuesday afternoon’s ~1563.00 lows would essentially signal that Monday afternoon’s buyers had been rewarded for stepping in front of the knee-jerk reaction down, and the original drop was resuming. [/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.