Market Wrap

If sellers are ready to take control… then is there no reason to try rallying again? Only after the morning. A morning rally would still leave time to be absorbed, rejected, and reversed back down more substantially. But an afternoon rally back to or through this week’s highs would be much likelier simply to extend higher.

Pattern points… (Setups and technicals)[pay]
The reaction down from 1503.00 has been developing slowly. This suggests that if sellers are actually taking hold, then their follow-through will be substantial. Still waters run deep, snowball effect, etc.

Friday being the Employment Situation report, it is possible that Thursday afternoon’s drop from 1498.00-1493.00 was just anxiousness. That would make it pessimism, and last-minute pessimism tends to be bullish from a contrarian perspective.

So, an initially favorable knee-jerk reaction up would be bullish, right? It could be. After all, Thursday avoided expending too much optimism while also preventing sellers from gaining traction. That was one of the day’s two bullish scenarios. But that also requires maintaining a recovery. An initially favorable knee-jerk reaction up would still be vulnerable to reacting down sharply.
[/pay]What’s Next… (Outlook and opportunities)[pay]
In any case, not yet reacting down or trending down before the morning’s bias environment lapses would make it difficult to do so later. There is no unfinished business above — the 1506.00 high doesn’t require a retest — but price could still trend up anyway. Back under 1494.00 and 1490.50 at almost any time after the Employment report’s reaction would be likely to trend 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.

If Tuesday’s test of the rally’s target has held… then is there indefinite time before a downleg must appear? No. It should be obvious by Thursday’s close — preferably, before Thursday afternoon — that sellers are retaking control. The battle is over which side’s tactics will define Friday’s close, and a trend change can’t wait until then.

Pattern points… (Setups and technicals)[pay]
The rally’s 1503.00 target continued acting as resistance Wednesday, a behavior that began upon first testing it Tuesday afternoon. Multiple intraday checkpoints returned back to 1503.00, heading in one direction or the other.

Ultimately, that direction was down. Of all the relevant checkpoints, entering the final hour back above 1503.00 would have been optimal for getting back to the 1506.00 overnight highs. Not only did buyers peak under 1501.00, but then 3:10-3:20 trended down to fresh lows targeting at least 1494.00.

Is the downleg now underway, or must the highs be retested, first? The new downleg may be underway, and the highs might be retested anyway. The pattern is likely topping, and no later than Thursday’s close should the pattern signal that momentum is reversing down. But since the pattern avoided closing under 1494.00 or 1490.50 Wednesday to already point down, there yet remains potential to retest the highs.

[/pay]What’s Next… (Outlook and opportunities)[pay]
1494.00 was tested before the Globex open. No setup currently targets fresh highs, but back above 1498.00 would suggest as much. Otherwise, a close under 1490.50 is the minimum requirement to begin signaling the trend has 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.

If finally fulfilling the rally’s target will end the rally… then must the rally’s end be obvious immediately? No. Actually, reacting down quickly would make its sponsorship likely to be weak hands. But a new direction should be obvious by Thursday’s close to avoid extending higher into next week.

Pattern points… (Setups and technicals)[pay]
The rally’s 1503.00 target was met. Fireworks went off, loud music blared, and the Liberty North High School marching band were paraded around behind an acrobat group that was simply amazing. Price action, however, did nothing.

At least, very little. The pre-bias environment window was already attacking 1503.00, and the final hour was entered at 1503.00. The 3:10-3:20 window did trend to fresh highs, but the cash session close dipped back down under 1503.00.

Despite futures extending higher after the close to 1505.50, holding 1503.00 through the cash session is an “equilibrium close.” Unless gapping open Wednesday beyond a relevant support or resistance, the next trending attempt is likely to reverse in the opposite direction. And so is that one.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Trending higher without delay should test 1512.75. Gapping down to the 1495.50 area would be likely to reverse back up to Tuesday’s highs. There is no longer-term expectation from an equilibrium close — although already neutralizing the rally’s target does limit the templates somewhat. [/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 sellers retaking control requires a new relative low close… then buyers should be getting concerned about intraday dips surrounded by higher and higher new highs. They have brought the prior high much closer to current levels.

Pattern points… (Setups and technicals)[pay]
Monday was the best effort yet to reverse the trend down. The rally’s momentum has already slowed, and intraday efforts to extend have failed. Monday afternoon essentially reinstated the Friday afternoon / Sunday night 1494.00-1498.00 range, ignoring the morning’s 1491.00-1500.00 swing.

And now it is sellers that are using tactics to define context. For example, buyers had failed Friday to make a new high close, which would have entrenched the rally and absorb any pullback. Their failure opened the door for sellers to use their own tactics Monday:

Oversold RSIs at Monday morning’s 1491.25 low require a retest. This printed on the way to attacking the 1490.50 objective, which has now become “unfinished business below.”
[/pay]What’s Next… (Outlook and opportunities)[pay]
There was no complexity to the  pre-open test of 1500.00 that might require its retest intraday. But it’s still likely to be retested, and probably also 1503.00. Reacting down after neutralizing one or both objectives could produce a sizable drop — and should, if the high has in fact been met.[/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 intends to extend higher undelayed… then how could it have missed the opportunity Friday to close above Thursday’s highs? It wasn’t for lack of trying, with the entire afternoon ranging narrowly there.

Pattern points… (Setups and technicals)[pay]
Fridays can be tough. Even when there is unfinished business to attract price in one direction, the less liquid environment can enable price action to gravitate to the range’s other end.

That describes this Friday. Unfinished business below at the morning’s 1488.50 bias-down signal was only attacked, holding a test of Wednesday’s 1491.00 high, the same high that Thursday’s close had failed to recover. The reaction up never failed, so it gravitated back up to test Thursday’s 1497.75 high. Futures momentarily touched 1499.25.

This was despite the afternoon bias environment offered every opportunity to extend higher — probing prior highs, as the bias environment lapsed, on a Friday afternoon, at a new trend extreme. Providing all of a signal’s elements, without also triggering, usually transforms the setup into a sell signal

The cash session and futures closes were under Thursday’s prior high. So, the rally did not buy itself any more time. Of course, no sell signal has actually triggered, so the pattern remains vulnerable to extending higher. But that vulnerability is diminishing, as potential grows for reversing down.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Don’t forget to join us for this weekend’s Saturday Strategy Session at 9:30am ET. We’ll discuss the market’s current challenges, and also provide instant analysis of your own stock picks. [/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.