Market Wrap

If Wednesday’s confirmed trend change signal is done… then where is its bottom? Rallying relentlessly since Friday’s open doesn’t change that its gap down under prior lows wants to be filled. And the relentless rally is no more durable simply because its price action continues to be the same excessive optimism as at Friday’s lows.

Pattern points… (Setups and technicals)[pay]
Anything bullish done by Monday’s low-volume rally was done too late, or too little, to consider it being anything more than a temporary correction. For example, waiting until Monday to extend above the 1546.00 “higher prior lows” that held Friday allowed the corrective bounce to test the 1557.50 last “prior high” without gaining traction for the effort. Monday’s cash session close was testing 1557.50.

By the same token, waiting until after Monday’s cash session close to extend 3 points above 1557.50 was too late to gain traction.

The gap back up to Thursday’s 1554.50 close wasn’t tested until Monday’s last half-hour, too late to be relevant regardless of extending higher. Recovering from a reaction down would have reflected accumulation. But Monday’s pattern reflected un-refueled extension.

Monday only left outstanding more unfinished business below. The afternoon’s “no-bias trending” above the 1550.50 bias-up signal will require being retraced. When delayed for at least a timing window, the eventual retracement tends also to test what was the 1:20 print, or 1548.00, if not lower.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Often, no-bias trending is not retraced for at least two sessions when it is not retraced in the same day. Unless Tuesday morning’s bias environment were to begin or contain the dip, sellers could be marginalized as late as Wednesday. So, the likelier path down would not be delayed. [/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 close had dipped back under a prior high… then it could have been a compelling hold-short through the weekend. Holding a test of the highest bounce potential at the last-minute high made it interesting. Just not reliable enough.

Pattern points… (Setups and technicals)[pay]
Wednesday’s trend change signal was confirmed Thursday by the narrowest margin. Only Monday’s prior low close held as resistance through the close, but not Monday’s intraday low. That still qualified, while expending all available buying pressure without gaining any traction for the effort.

Sound familiar?

Trending straight up from Friday’s open would have been bullish but for one problem — it all took place in negative territory. All of that buying pressure was expended without gaining any traction for the effort.

Same likely resolution, yes. But the bigger point is that the same behavior means Friday’s post-open rally had the same sponsorship as Thursday’s ranging. And that sponsorship just satisfied a lot of buying pressure by testing and holding the intraday 1548.50-1549.00 corrective bounce target.

[/pay]What’s Next… (Outlook and opportunities)[pay]
This weekend’s Saturday Strategy Session begins a half-hour early at 9:00am ET, and will not last longer than an hour. We’ll look more closely at this week’s trend change signal, and where Friday’s price action fits into it, then how that affects Sunday night and Monday’s opens. We’ll also review instant chart analysis requests with any remaining time.[/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 were any higher… then Wednesday’s trend change signal would not have been confirmed. The confirmation that it did get wasn’t optimal. None of which requires extending down any more aggressively. But not extending down into the weekend would be suspicious.

Pattern points… (Setups and technicals)[pay]
Did it, or didn’t it? Wednesday’s trend change signal still needed confirmation Thursday. Unlike a breakout that is confirmed by extending the following day, the trend change needed only to avoid a recovery. And then only too much of one.

Thursday’s pre-open rally to 1556.50 was retraced back under Wednesday’s 1548.50 close. Then another rally to 1557.50 was also retraced, eventually to under 1547.00 going into the afternoon’s bias environment. The balance of the afternoon trended back up toward the morning’s highs.

Essentially.

Monday’s lows held for the most part — the 1555.50 close being more relevant than the session’s 1552.50 low. In any case, Thursday’s behavior did not seem to be rejecting Wednesday, so much as correcting it. Spending the vast majority of the session in positive territory also reflects some degree of optimism. And that could be bearish from a contrarian perspective ahead of Friday’s Employment Situation report.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The trend change signal is not a timing tool. It only offers context, which now expects that bounces will resolve down in new lows. It should preclude there being any new high. Regardless, considering the gravity of Friday’s NFP, not ending at new lows for the week would undermine the bearish scenario.[/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 break was a trend change… then any bounce Thursday should be absorbed before the close. If there is any bounce, at all.

Pattern points… (Setups and technicals)[pay]
Wednesday’s decline appears during a pattern that already established buyers were the weak hands. This, alone, doesn’t explain not retesting Tuesday’s 1568.00 high, especially after Wednesday’s pre-open rally to 1567.75 stopped pessimistically short of the retest. Not that 1568.00 needed to be revisited ever again, but it was attracting price higher until just before Wednesday’s open.

That’s what’s so interesting about Wednesday’s decline — not that it began so soon after trying to retest Tuesday’s high, but that it got underway so dramatically so quickly.

Either sellers are very intent, or else they’re very done.

The former case is made by Wednesday having closed under Monday’s 1552.50-1555.50 lows. Failing to recover them Thursday would confirm the trend change (a second consecutive lower close is not necessary in a trend change). A bigger bounce intraday could still fail through the close, and no bounce is necessary, at all. The latter case would be made by recovering 1555.50-1558.50.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Regardless, oversold RSIs at Wednesday’s 1544.00 low require its retest, presumably down to 1541.00. That could be done overnight to greet Thursday in rally mode, or it could be left outstanding to cause an intraday bounce to fail. But, again, there is no requirement to bounce, so Thursday morning is vulnerable simply to trending down to fresh lows. [/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 new high close were all that was relevant… then this rally would have just found new life. But the new high close was under Thursday and Friday’s prior highs. That was despite gapping up and spending the entire session in positive territory. This is “ineffectual optimism,” and while that is not a sell signal, it is at least a warning.

Pattern points… (Setups and technicals)[pay]
This week’s first two sessions have shared at least one common trait: their mixed signals. Sell-offs that persist through relevant timing windows to reflect strong-handed sponsorship, followed by productive bounces that fail to gain traction. It’s distribution, but it’s not yet a reversal down.

Tuesday’s cash session close was attacking 1565.00 which also held as resistance Monday — albeit at Monday’s open. So, 1566.25 also was not recovered. Probing both without closing above them suggests that buyers are running out of energy. It doesn’t mean they can’t be probed intraday again.

In fact, recovering Tuesday afternoon’s dip to 1560.00, by closing back above 1563.75, all but requires retesting Tuesday’s 1568.00 high. Whether that is to 1571.00, or through it, even the most bearish scenario need not immediately reverse down. The most bullish scenario might dip quickly from a fresh high, leaving time to launch another rally leg before the close.

[/pay]What’s Next… (Outlook and opportunities)[pay]
So long as Wednesday’s open isn’t gapping down back into Monday afternoon’s range around 1555.50, at least a temporary probe of fresh highs remains 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.