Market Wrap

If sellers have flubbed multiple attempts this week to retake control… then could the consequences be limited to only a slightly higher high? Probably not. But that’s assuming sellers actually flubbed Thursday’s attempt. 

Pattern points… (Setups and technicals)[pay]
Thursday’s pre-open retest of Tuesday’s 1511.00 high would have been “obligatory resistance” had it been intraday. The reaction down would have been sure to recover. But after Wednesday’s two failed sell-off attempts, the reaction down from 1511.00 extended lower for a third. Did it fail?

The reaction’s follow-through down to 1494.50 was the biggest sell-off attempt yet, and it was mostly recovered. “Mostly,” as in 61.8%, back to 1504.75. That’s often where a correction peaks. So, either Thursday morning’s dive has been corrected and it is about to resume, or else the recovery will extend back to the 1511.00 high.

It’s odd that wasn’t resolved Thursday. This stage of that pattern was likely to trend 9 points either way from 1503.00. Even the 3:37-3:52 position-squaring window only ranged sideways, which is unusual for so volatile of a session. Gapping open Friday would explain that away.

[/pay]What’s Next… (Outlook and opportunities)[pay]
This being a Friday, a new high close would entrench the rally’s momentum into next week. Whether that meant extending higher without delay (probably) or absorbing an immediate reaction down, this week’s sellers would be undermined. Similarly, probing fresh highs Friday morning would be vulnerable to reversing down sharply into negative territory — think Thursday, on steroids (or, suffering steroid withdrawal).[/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 rally’s target has been met… then should the next leg — either reversing direction down, or accelerating the rally’s pace — be delayed much longer? Probably not, for two reasons. Tuesday and Wednesday’s flirtations with both ends of the range suggest a break is coming. And Friday is one day away, another deadline to rejecting the rally.

Pattern points… (Setups and technicals)[pay]
Wednesday’s open gapped down to Tuesday’s 1499.00 lows. That was a reasonable opportunity to prove that Tuesday’s retest of Friday’s 1508.25-1510.50 highs had neutralized the attraction above. Instead, the market rallied through the noon hour.

The noon hour peaked within an acceptable 3 ticks of its 1509.50 objective. Its sudden, steep and substantial reaction down attacked the morning’s lows down to 1501.50. That was a reasonable opportunity to prove that the bounce had failed. Instead, it was retraced up to 1506.00.

Having exited the bias environment under the noon hour’s 1506.00 low, trending down into the final hour or through the 3:10-3:20 window would have launched another steep and substantial slide. Instead, a narrow consolidation resolved up to 1507.75 into the close.

A new high close above 1508.25 would be preferable to leaving on unfinished business above. So would actually testing Wednesday morning’s 1509.50 bias-up signal. Coming so close to one or both is almost pessimism, which is almost bullish from a contrarian perspective.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Like Wednesday, there is potential for the best (or worst) of all worlds. A probe of fresh highs that fulfills potential to 1512.75, yet closes under prior highs to prevent buyers from gaining traction. Rejecting a new high intraday but still closing above 1508.25 to fulfill the prior high’s retest. Rejecting a fresh high to close under the morning’s low — after the open had gapped down — would form a bearish Pivot Reversal. Regardless, fresh highs could simply extend higher. And the open could simply extend down (gapping under Wednesday afternoon’s 1501.50 low would even trigger a “session-long decline”). [/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 rally’s momentum remains intact… then Tuesday’s recovery should have closed above prior highs, or else not tried so hard to do something that it could not. Probing the prior high without closing above it is just one of many problems the rally’s momentum is encountering.

Pattern points… (Setups and technicals)[pay]
Friday’s new trend high close didn’t predict Monday’s reaction. It did predict that reacting down would recover. Trends simply don’t end with a new extreme close on Fridays. Tuesday’s probe above Friday’s 1410.50 high now fulfills that template.

One more higher close is also likely in the template. Tuesday’s late drop prevented it by dropping back under Friday’s 1508.25 high close, retracing to the noon hour’s 1505.50 buy signal. The gap back to Friday’s close was filled, without closing above it.

Monday’s interim drop to 1490.25 did manage to close under 1494.00, which required strong-handed sponsorship. Reacting up immediately only undermined the near-term potential for extending down. Having originated from under 1494.00, Tuesday’s probe of fresh highs should prove to have been sponsored by weak hands.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Rallying from a strong-handed close under prior lows, filling an outstanding gap without closing above it, probing the prior high without closing above it, retracing the noon hour’s productive buy signal back to its origin… All of which reflects weak-handed buyers. (We covered more elements in the Market Wrap, whose recording is in the blog’s sidebar.) None of which is signaling momentum has reversed down — but it should, soon, if at all.[/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 rally had ended like Monday’s decline… then the week would have begun by probing fresh highs. Instead, Friday afternoon’s fresh high was rejected through the close. Monday’s fresh low was not. Not until after the cash session close. But was that too late?

Pattern points… (Setups and technicals)[pay]
Friday afternoon’s bearish tell wasn’t matched by any bullish tell Monday. Its 1492.50 support did hold several tests, reacting up meaningfully. But not durably. And finally its test during the position-squaring window probed fresh session lows.

Just closing back under 1494.00 would signal at least a multi-session pullback underway. Monday’s last probe under 1492.50 extended down sharply enough, for long enough — and, equally important, early enough — to consider 1494.00 as having broken.

Just closing under the earlier tests of 1492.50 support would qualify as a hold-short setup. But while the cash session close equate to 1491.50, that didn’t prevent a post-close spike up to 1494.25. It doesn’t affect the setup, but it is understandably much more difficult to hold.

[/pay]What’s Next… (Outlook and opportunities)[pay]
If the post-close surge affects anything, it is the potential for extending higher. A “session-long rally” could have been signaled by gapping up above Monday afternoon’s 1496.75 high. That would have rejected the close’s bearish sentiment, but the post-close surge already did..Such a gap up could still extend to fill the gap back to Friday’s 1508.00 close. Otherwise, a second consecutive lower close Tuesday would signal a deeper pullback targeting 1467.00-1468.00. [/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 you’re available Saturday morning… then please consider joining us for the weekly Saturday Strategy Session at 9:30am ET. Its link can be found in the blog’s sidebar.

Pattern points… (Setups and technicals)[pay]
Room for noise around the rally’s 1503.00 target up to 1512.75 was tested up to 1510.50 Friday. Narrow sideways ranging back down to 1506.50 through the afternoon never reacted down meaningfully, and never extended higher.

But it was nonetheless a new trend high close at 1508.00. Since trend’s tend not to end on Fridays, the new high close entrenches the rally, and all but requires at least one more new high close.

That doesn’t mean momentum remains intact. In fact, it suffered by entering the final hour back at the noon hour’s lows to reject the bias environment’s 1510.50 session high. This suggests Monday will be either a deep corrective dip before resuming the rally, or else begin a shallow delaying dip that precedes a better top. An immediate higher close remains possible.[/pay]

What’s Next… (Outlook and opportunities)[pay]
Trying to extend the rally higher before Monday’s open would not be surprising. It would also not be healthy from Friday afternoon’s narrow ranging that hovered at trend highs. The attempt would risk not only expending all available buying pressure, but also borrowing heavily from future buying pressure, which rarely works out well.  [/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.