Market Wrap

If Thursday’s selling was inflated by pre-weekend fears… then should Friday morning’s rally have held onto at least some of its gains? Closing unchanged in such a wide intraday range, following two wide intraday slides, is an opportunity for a bottom. An opportunity. Meanwhile, it maintains potential simply to resume the decline.

Pattern points… (Setups and technicals)[pay]
Friday’s 1375.50-1376.00 close was only fractionally (decimally?) higher than Thursday’s close. In any case, it was not negative. And a future negative close is all but assured by Wednesday and Thursday’s breakout and confirmation. So, this is not a low.

At least a new low close on Friday was avoided, which would have signaled the trend’s momentum intact. It may be intact for other reasons, but that’s one fewer.

The 1363.50 pre-open low was arrived at by probing the prior low temporarily, and then trending down lower. This is a “new Globex trend extreme” that requires being retested intraday.

Friday afternoon’s trading range formed a Descending Triangle. A very wide one, at that. Closing back under 1376.50 suggested that it was preparing to break lower, with sufficiently lower targets to consider holding-short through the close. The setup is much less attractive into the weekend, since liquidity is days away in case of gapping up.

And gapping up instead is possible. Price trended down into Friday’s close, and the afternoon’s ~1384.00 high printed before the final hour. So, gapping up Monday to and/or through 1384.00 would trigger a “session-long rally” setup. And gapping up at all Monday in this wide of a range could gap up a lot.

[/pay]What’s Next… (Outlook and opportunities)[pay]
With a lower target in-play, and the potential for another corrective bounce, the Saturday Strategy Session will have plenty to discuss. Especially individual stocks, many of which have been jarred loose by the past week’s action. See you there, say 9:30-ish? Great! [/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’s last-minute slide was weak-handed pessimism… then must Friday’s open reverse up immediately? Extending lower during the morning could still be recovered, but that’s a dangerous bet without yet being signaled.

Pattern points… (Setups and technicals)[pay]
Thursday’s second consecutive lower close confirms Wednesday’s breakout close under 1397.00-1397.75. Regardless of the 1348.00 that it put into play, at least a third lower close is all but required. But not necessarily a consecutive lower close.

Having signaled and confirmed objectives below, sellers might now rest on their laurels to refuel, allowing a counter-trend bounce to trap longs. No bounce is required, and the alternative at this stage is often to aggressively extend the confirmed signal — i.e. trade down painfully.

There is no unfinished business below. Thursday’s slides came too late to trigger a pattern, and its last-minute oversold RSIs don’t require a retest. The pattern is vulnerable nevertheless to extending down — sharply, and by gapping — and extending down with the trend is more likely. But gapping down, perhaps sharply, is essentially the only path lower to avoid a significant corrective bounce through Friday morning.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Thursday afternoon’s sellers may have feared that Wednesday’s plunge was about to repeat. They may have accelerated week-end selling ahead of a perceived rush Friday, in case it is exacerbated by sellers that fear the weekend’s impending illiquidity. All of that fear often soon leads to a low. Other times it is justified, a long time coming. [/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 Obama had won by a landslide… then would Wednesday’s slide have been any greater? Clearly exacerbated by Eurozone headlines, Thursday may show that Wednesday was just the market throwing a hissy fit. Even then, another hissy fit Thursday afternoon would be much more substantial.

Pattern points… (Setups and technicals)[pay]
Wednesday’s close under 1397.00-1397.75 signaled a new downleg underway, targeting 1348.00. A second consecutive lower close would confirm. Closing above 1397.00-1397.75 would invalidate the breakout, but not quite signal momentum reversing up.

Oversold RSIs were left outstanding at Wednesday’s 1384.00 low to require its retest. Its retest overnight or Thursday morning without first bouncing would be more capable of holding and recovering, instead of extending down intraday. But that bullish potential would have been much likelier had Wednesday closed above 1397.00-1397.75.

Generally, the bullish scenario is that the prior two-week range is absorbing the attempt at a new downleg, and one more failed probe like Wednesday’s would trap shorts. The bearish scenario is that Wednesday morning’s probe under the prior two-week range was corrected already Wednesday afternoon, and now the decline is ready to resume.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The bearish and bullish scenarios are very similar, in that each would retest Wednesday’s low. So, immediate weakness Thursday probably would get a benefit of the doubt for extending until disproved. An immediate rally would be suspicious.[/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 a clear winner is known Tuesday night… then must Wednesday trend? It probably should. The late-morning rally was neither rejected nor extended throughout the entire afternoon, so a resolution either way is likely.

Pattern points… (Setups and technicals)[pay]
Maybe Monday afternoon’s rally was a delayed version of what Monday morning failed to produce. But Tuesday morning’s version was a better portrayal. Gapping up above the prior session’s highs, extending sharply higher — aggressively, at one point — and also closing back above Friday afternoon’s highs.

It’s as if Thursday’s breakout is being given a second chance to confirm.

Tuesday’s entire afternoon expended selling pressure — from the 1429.25 noon hour high back down to 1421.75 — while correcting the morning’s rally. Last Friday afternoon’s 1421.50-1422.50 highs held as support through the close.

If the second chance can’t be exploited to resume the rally effort, a third chance is unlikely.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Election results will be a big distraction Wednesday. Keep in mind that the only reason for this possibly being bullish is that pre-election flux inhibited the rally. The details are not nearly so significant as the event becoming history.[/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 rally had developed at the open… then Friday afternoon’s slide might have been rejected before Monday’s close. It may still be, but there remains a vulnerability to probing lows.

Pattern points… (Setups and technicals)[pay]
Friday afternoon’s slide to 1405.00 expended a lot of selling pressure without gaining any traction. It left the next week precariously positioned, but not necessarily bearish. Initially rejecting that slide Monday morning would have been credible for extending higher.

It didn’t. Instead, Monday morning remained under pressure in mostly negative territory. And it created a lower target at 1402.50. That target’s influence Monday ultimately prevented a durable rally. Even Monday afternoon’s 10-1/2 point rally to 1415.50 was retraced to close back at the morning’s 1411.00 high.

Monday afternoon’s 10-1/2 point rally was probably a delayed version of what Monday’s open could have done to reject Friday afternoon’s slide. Better late than never? Returning back to the morning’s high suggests not. A morning effort would have had time to attract sponsorship.

At least Monday afternoon’s rally got something for its effort — overbought RSIs at 1415.50 that require a retest. That unfinished business above, and 1402.50 below aren’t tied to any timing. But exceeding either through a relevant timing window would be likely to extend in that direction.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Election predictions are not going to influence price action Tuesday. Media coverage can only create opportunities to fade. But trending would be interesting if there is any connection to word that one candidate or the other is doing better.[/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.