Market Wrap

If Friday afternoon could recover all of the morning’s dive… then does that mean it wasn’t just noise? No, and not only because the close was flat with the opening gap up. Several other important reasons are listed below…

Pattern points… (Setups and technicals)[pay]
Closing for two consecutive sessions above 1528.00 had created a higher objective at 1548.50. It was tested to within 3 ticks by the knee-jerk reaction to Friday’s Employment Situation report. Regardless of whether that suffices, it should not be the rally’s ultimate peak.

That’s because of Friday’s new high close, the first in three weeks. It doesn’t prevent an immediate downturn, but it does say that an immediate downturn would be temporary

Speaking of which, a downturn soon would not be surprising since Friday afternoon’s recovery was not the product of trending — it gained no ground that wasn’t already tested at the open. Retracing the morning’s 10-11 point slide expended buying pressure only to gain a more positive close. The low of the 10-11 point slide was still optimistic for barely probing negative territory.

“Lower prior highs” down to 1518.00 or 1512.00 would have been likely objectives in a corrective leg. Already testing and retesting 1548.50 makes it more difficult for that deep of a dip to be only corrective. But extending higher through Monday’s close without yet beginning a corrective dip could put into play 1570.00 (1575.00 basis Mar).

[/pay]What’s Next… (Outlook and opportunities)[pay]
This weekend’s Saturday Strategy Session starts at 9:30am ET. Hopefully, it will compensate for losing the other hour this 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 S&Ps can keep their heads so still while bonds are losing theirs… then one or the other is in for a big surprise at Friday morning’s Employment Situation report.

Pattern points… (Setups and technicals)[pay]
Thursday’s price action would have been welcome, on a scale of at least three times over. But it was paralyzed by anxiousness ahead of Friday’s Employment Situation report.

Thursday’s 3-1/2 point opening range didn’t trend, as it kept returning up to Wednesday afternoon’s high. The noon hour’s 2-point range narrowed, but still hovered at Wednesday afternoon’s high. The bias environment’s dip back to the morning’s low was retraced entirely back to the morning’s high.

Meanwhile, the long-bond fell meaningfully for its fourth consecutive session — the third one with an excessively pessimistic open. Interest rates markets are, of course, very sensitive to the Employment Situation report. And the bond market’s rubber band has been stretched to the point of either snapping back, or breaking. See a problem here?

Bonds are all but assured Friday morning to react sharply or at least with great volatility. Whichever, the stock market’s three-day narrow ranging seems like the proverbial “deer caught in the headlights,” fixated on the bright light when it had better jump out of the way to one side of the road or the other.

[/pay]What’s Next… (Outlook and opportunities)[pay]
It’s probably too late to form an Island Reversal pattern from the recent ranging above prior highs. But a gap down could still qualify. Regardless, the big question will be whether or not Friday provides a new high close for the first time in three weeks… Coverage is rolling exclusively to the Jun contract from Mar, having become the front-month at Thursday’s open. [/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 buyers have further entrenched the rally… then a drop back under last week’s highs would be likely to recover. But can the rally not extend higher without refueling?

Pattern points… (Setups and technicals)[pay]
Wednesday’s second consecutive close above 1533.00 (basis Mar, 1528.00 basis Jun) puts into play a higher objective at 1553.50. (1548.50 basis Jun) This is not an accumulation pattern breaking higher, so a detour down can refuel buyers and very likely recover.

Wednesday afternoon’s false attack on the morning’s 1544.75 (1539.75) high was a little odd in that it did not extend higher. Its reaction was essentially still testing 1539.50 (1534.50) through the close, so sellers didn’t gain any traction for preventing the afternoon rally. Odder, still

The afternoon’s surge’s failure made Wednesday’s close settle back under 1541.00 (1536.00). Since being the target which contained Tuesday morning’s surge, it has been influential through every timing window. Buyers gained no traction for the second consecutive session.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Wednesday’s session did reflect “ineffectual optimism.” The open gapped up, the entire session was spent in positive territory, and prior highs were probed (all optimistic) without extending higher (ineffectual). This setup is often followed by a near-term drop, unless new highs were maintained through the open. [/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 had not started so strongly… then its higher close could have been the product of trending up throughout the day. But it gapped up sharply and tried extending higher without a pullback, repelling its sponsorship into the close.

Pattern points… (Setups and technicals)[pay]
The same leg fulfilling the 1526.00 objective was likely also to fulfill the longstanding 1533.00 objective. It did, and then some. Exceeding 1533.00 through 9:45 was likely to renew the bias-up next targeting 1541.00. It was fulfilled, and then some.

The rally might have been better served by leaving a higher objective outstanding.

Instead, the session high printed during the afternoon’s bias environment, and the close was under the noon hour’s low. This means buyers gained no traction for their efforts. It would be helpful if some unfinished business were left outstanding to attract price higher, but it has all been neutralized. And then some.

There is one opportunity to extend the rally. Closing above 1533.00 essentially puts into play 1553.50, if not also 1575.00. This is already undermined by not closing above 1542.25 despite testing it intraday. Nevertheless, a second consecutive close above 1533.00 (not necessarily a second consecutive higher close, or even above 1542.25) would at least confirm a new upleg is underway.

[/pay]What’s Next… (Outlook and opportunities)[pay]
If the trend intends to reverse down, nothing requires that it be immediate. A durable top shouldn’t form until dipping back under the 1523.50-1530.00 “lower prior highs” and then bouncing to test Tuesday’s 1532.25 opening gap. That doesn’t mean a sizable downdraft can’t occur meanwhile.[/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 recent drop into Friday’s low refueled buyers… then does a retest of prior highs have potential to extend higher than was expected? Yes, but the two recent abrupt recoveries also suggest potential to reverse back down more abruptly once the rally ends.

Pattern points… (Setups and technicals)[pay]
Monday’s return back to Thursday’s late high essentially makes new highs only a formality. Reacting down first would likely recover, and extend to fresh highs — assuming the reaction down is relatively minor and brief. There is room down to “lower prior highs” at 1518.00 just as noise, normal backing-and-filling to refuel an upleg.

Under 1518.00 would find little remaining support before 1515.00. And almost any lower would start to return into the orbit of oversold RSIs at Monday’s 1510.50 low, perhaps even Friday’s 1499.50 low.

That’s all in case of initially dipping.

The likelier scenario is simply to extend higher without delay. A very late surge to fresh highs fulfilled Friday’s last “unfinished business above” at 1526.00. A retest of the recent 1530.00 high up to 1533.00 could easily be part of the same leg, so long as Tuesday’s open isn’t dipping on the way down to 1518.00.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The bigger picture remains vulnerable to resolving down with very little delay after probing new highs. Last week’s extra dip may have refueled enough to try extending higher for a second day, but beware the tenuousness of any fresh high.[/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.