Market Wrap

If Wednesday’s intent was to entrench buyers… then the patience may pay-off handsomely. The morning’s fresh highs created a higher objective, and the rest of the session’s decline expended sellers. Did it expend enough

Pattern points… (Setups and technicals)[pay]
Two consecutive sessions of gaps down and lower lows had reached a turning point. Either end the corrective dip, or become an expansive drop. Gapping up above prior highs Wednesday and extending higher to test Friday’s 1459.00 futures close suggested the former.

Reacting down from its obligatory resistance, spending the balance of the session in decline, suggests not.

But it doesn’t necessarily suggest the latter, that a bigger drop is underway. A sell signal could develop, but simply invalidating Wednesday’s recovery attempt isn’t it. Wednesday’s rally to 1459.00 created a lot of room to absorb selling pressure, and that selling pressure never probed negative territory. It also fulfilled a downside objective at 1453.00.

So, a lot of selling pressure was expended without sellers gaining any traction for their effort.

There’s also “unfinished business above” at Wednesday morning’s 1461.00 bias-up target. I still don’t expect its test to avoid probing above Friday’s 1463.00 high up to 1464.25-1465.50. None of which would matter, not in the near-term, if Thursday’s open is breaking under 1450.50… on the way down to 1413.00.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Wednesday’s closing action bounced off of the 1452.50 low up to 1455.50-1456.50. Closing above it would have qualified for holding long through the close. It didn’t qualify, but similar to Tuesday’s close, gapping up would be credible for extending higher intraday. And gapping down would be credible for extending, too. [/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 anxiousness ahead of AA’s earnings inhibited Tuesday’s buyers… then Wednesday’s buyers should inhibit sellers. Gapping up would do that. Gapping down only shallowly could get a late start at recovering, but it’s getting late already.

Pattern points… (Setups and technicals)[pay]
Continuing Monday’s decline into Tuesday doesn’t mean much itself. But continuing the two-day rally into Wednesday would mean the decline could no longer be limited. Preferably, normally, Tuesday would have ended in rally mode, if a bigger decline was not underway. But Tuesday did not recover into positive territory.

So, either the decline extend considerably lower through the week, or Wednesday’s open will gap up enough to compensate for not having found the strength Tuesday. Perhaps anxiousness ahead of Alcoa’s (AA) post-close earnings inhibited Tuesday afternoon’s recovery attempt. At least sellers didn’t gain traction, since the close recovered back above Monday’s prior low.

Whatever the delay’s cause, gapping up sufficiently Wednesday — above a prior high like 1456.00-1458.00 — could resume the rally to probe above Friday’s 1463.00 high. Otherwise, resuming the decline must also gap down Wednesday, at least under 1450.50. Any shallower opening weakness could still recover intraday.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The quarterly/annual earnings onslaught among high-profile companies has unofficially begun. The calendar actually gets busy next week. But look for more chatter about it, and an opportunity to gauge how the market intends to respond. [/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 Monday afternoon’s recovery were any higher and faster… then it would have merited a hold-long through the close. The alternative isn’t necessarily bearish, not unless the rally doesn’t extend higher almost immediate.

Pattern points… (Setups and technicals)[pay]
Closing at a new trend extreme on Fridays tends not to be permanent. Monday’s gap down to 1455.00 failed to extend lower. The late-morning fresh low down to 1451.25 never extended either. Each held a fresh low that only threatened relevant support before reacting up.

Monday afternoon’s rally retraced them entirely, and probed above the morning’s 1456.25 high to 1457.75. Sideways action into the close did not recover high enough early enough to suggest holding-long through the close. But at least sellers gained no traction, and Monday afternoon’s rally is likely to extend higher.

Extending the rally Tuesday morning should waste no time before probing fresh highs up to 1464.25-1465.50.  The market would be vulnerable to reacting down from there, or else first continuing up to 1469.75 and/or 1474.25.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Having reacted down from a new trend extreme on Friday, the rally must resume Tuesday, or else risk not resuming this week. Back under 1451.00 would launch a deeper and lengthier pullback.[/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 session never really trended… then does its new high close qualify as a trend extreme? It does, but it is vulnerable to reversing down into a pullback.

Pattern points… (Setups and technicals)[pay]
New high closes on Fridays rarely mark a trend’s peak. This doesn’t preclude Monday from dropping, or from dropping sharply. But any immediate drop would be only a reaction or a pullback, and only temporary.

1461.00 was probed late Friday up to 1463.00. The 1458.75-1460.75 close was essentially still testing 1461.00, neither rejecting it nor exceeding it. Higher highs remain likely, presumably up to 1464.25-1465.50.

Friday’s last-minute reaction down to 1457.50 did not affect the upside momentum. It was already lacking for the slow upward slope. But probably should extend higher without delay to avoid a deeper pullback.

A pullback has room down to 1447.00 without suggesting a greater dip underway, like down to 1413.00. Diving that deeply would likely develop over multiple sessions.

[/pay]What’s Next… (Outlook and opportunities)[pay]
There is not a Saturday Strategy Session this weekend… NO weekend session.[/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 afternoon’s slide was defensive posturing ahead of Friday’s Employment Situation report… then mildly surprising or in-line numbers should allow fresh highs. But look out below if “too many” people have jobs, considering the FOMC latent hawkishness.

Pattern points… (Setups and technicals)[pay]
Thursday afternoon’s slide never intended to reverse the trend down. No more so than the morning’s rally intended to extend the week’s uptrend. Simply, having retested Wednesday’s 1458.00 high, and with the afternoon’s FOMC news impending, there would not be sponsorship for trending. Defensive posturing ahead of Friday morning’s Employment Situation report also inhibited buyers.

FOMC Minutes had an unusually hawkish bias, but a retest of the morning’s 1452.75 low was already likely. Lower lows down to 1450.00 already punished the excessive optimism that made 1452.75‘s retest likely, as well as the excessive optimism on its retest.

Thursday’s 1454.50 cash session close ultimately robbed sellers of their traction. Violated bounce limits had already suggested as much. That was not high enough to suggest holding long into the close, especially not ahead of Friday’s pending news.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Being a Friday, a probe of fresh highs might not be rejected at all if not rejected early. Not unless the probe were unable to extend throughout the morning. Similarly, reacting down would be difficult to recover before 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.