Market Wrap

If the market intends to top before Christmas… then it also needs to start declining from that hypothetical top. Before Christmas. Not that either is required before Christmas — a January top would not be inappropriate for this pattern. And that may be the case if the market isn’t topping soon.

Pattern points… (Setups and technicals)[pay]
Monday’s range wasn’t a surprise. Monday’s ranging was. A rally did not depend upon opening strongly, but recovering the overnight dip to 1411.00 earned some sort of rally.

Of course, buyers were rewarded by probing above Friday’s intraday high to 1421.00. That would have qualified as “some sort of rally,” if not for retracing entirely back to unchanged

Reversing — not just retracing the fresh high, but also reversing to new session lows — that would have been most surprising of all. At least that was avoided, keeping alive the bigger picture expectation to test 1424.00-1425.50.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Getting there is another matter. Monday afternoon’s timing windows all avoided signaling trending. At least the cash session settled in positive territory (the futures surge to 1420.50 only confirms the thinness of resistance). Tuesday morning’s open should be trending — and preferably trending upward — to avoid another couple of non-trending timing windows.[/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 not for the dueling fiscal cliff pressers… then perhaps all of the unfinished business above would have been neutralized Friday. Regardless of its size, was the momentary pre-open spike up sufficient to reward this week’s buyers for having absorbed so much selling pressure?

Pattern points… (Setups and technicals)[pay]
Friday’s reaction to the Employment Situation report neutralized two bits of unfinished business above at 1416.75 and 1421.50. The week-old 1424.00 “new Globex trend extreme” remains outstanding, likely to be tested up to 1425.50.

Spiking up 13 points probably worked against itself in covering too much ground too quickly. Gapping up to resistance is difficult to extend. Being a Friday was also an impediment — as with Mondays, it can be difficult to extend extreme pre-open sentiment. Dueling fiscal cliff press conferences meanwhile inhibited sponsorship.

Nevertheless, closing above the noon hour’s high means that buyers gained traction for their efforts, despite closing well off the morning highs. That should translate into probing fresh highs much sooner, rather than later. Fresh highs can translate into an extended rally, or a durable top.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Join us for this weekend’s Saturday Strategy Session at 9:30am ET. We’ll discuss the bigger picture in greater detail, along with opening setups for Monday. Your stock requests will also be addressed. [/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 Employment Situation report can’t dislodge this week’s trading range… then Friday’s session could range very narrowly, indeed. Otherwise, the premise remains that buyers are due to be rewarded for their efforts, or else the weekend will be greeted by another downleg.

Pattern points… (Setups and technicals)[pay]
[insert obligatory “date that will live in infamy” joke here]

Anxiousness ahead of the monthly Employment Situation report often paralyzes the prior timing window’s price action. Occasionally it enhances it. Thursday morning’s choppiness suggested it would be the latter, but Thursday afternoon only ranged — widely, but ranged.

The bias environment’s exit was testing the noon hour’s 1411.75 high. Despite probing higher by 1 point, the final hour was entered back under all intraday prior highs. The balance of the session was a dip down to 1409.25 that recovered back to the morning’s 1413.25 high.

At the risk of both sounding like a broken record, or resembling a corrupted flash drive, Friday’s rally signal should be familiar. Gapping up above Wednesday’s 1414.50 prior highs. Thursday’s 1413.25 highs already chipped away at them by proxy. So, not gapping up higher Friday would be bearish.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Saturday’s Strategy Session begins at 9:30am ET. We’ll discuss the bigger picture and little setups, as well as any stock requests you may have. Special note: Please bring your own cup for drinks as we ran out last weekend. Oh, and bring your own drinks.[/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 were due a reward for absorbing Tuesday’s shallow dips… then how much bigger is that reward after absorbing Wednesday’s plunge? Or, is the bigger concern that there may be a pattern of not rewarding buyers for their efforts?

Pattern points… (Setups and technicals)[pay]
Buyers stopped Monday’s drop from breaking under a prior low, and Tuesday’s fresh lows gained no traction. Wednesday’s steep, deep drop was retraced entirely. If buyers aren’t being rewarded Thursday, then a bigger drop must be underway.

Rewarding buyers consists of Wednesday afternoon’s 1416.75 bias-up target. The 1411.00 bias-up signal barely avoided being rejected, barely, so its target becomes unfinished business above. Add that to Monday’s 1421.50 gap up and the pre-open 1424.00 “new Globex trend extreme.” They all require a test eventually — 1424.00‘s retest is required intraday — which is likely to include 1425.50.

Closing under both Wednesday’s noon hour high and low means that buyers gained no traction. Sellers gained no traction Wednesday, too, since the noon hour high wasn’t probed before closing under the noon hour low.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Like Wednesday’s opening parameters, rallying should begin by aggressively. If Wednesday’s late 8-1/2 point drop to 1406.00 neutralized excessive optimism, then Thursday’s open should gap above Wednesday afternoon’s 1414.75 high. Otherwise, Wednesday’s late drop will be attracted further down to unfinished business below from the oversold RSIs at Wednesday’s 1396.75 low. [/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’s decline were bearish… then Tuesday should have extended it. Probing lower lows doesn’t qualify, not when interim bounces kept returning to Monday’s “higher prior lows.”

Pattern points… (Setups and technicals)[pay]
The most bullish thing about the market after Monday’s close was the unfinished business it had created above. After Tuesday’s close, it may be that sellers failed to extend Monday’s decline. Not for lack of trying, which is also bullish, since that means sellers were weak hands.

Still, buyers have yet to capitalize on those failed sell-offs. At least, not yet. It’s not required the same day, so the pressure is on Wednesday’s buyers to put up, or shut up.

Since buyers gained no traction Tuesday, extending higher Wednesday would all but require gapping up. Sellers gained no traction either, so extending Monday’s drop should begin by gapping down. Not gapping would be unlikely to trend at all. So, Wednesday’s intent should be obvious before the open.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The market has begun trading as if it is waiting for some other shoe to fall. The question is, which other shoe? Jobs data will start creeping in, as we head toward Friday’s Employment Situation report. Eurozone headlines are triggering less reaction. Fiscal cliff “negotiations” have leaked out sporadically. Perhaps the question is from what level will the news hit. [/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.