Market Wrap

If the recent basing isn’t launching a durable rally… then Thursday’s rally into Friday’s open only stretched back the rubber band. And Friday’s reversal down has let it start snapping back down.

Pattern points… (Setups and technicals)[pay]
It shouldn’t have been that difficult. Friday’s open needed only to recover fresh highs above the 1425.25 bias-up signal to then target 1430.50. Recovering 1430.50 through the bias timing window would have targeted up to 1450.00. In fact, 1430.50 was being probed already by 1 point before the open.

But it was another case of too much, too soon. Natural resistance upon filling a two-week old gap proved resilient, and pushed price back down.

Rejecting both bias-up parameters through 10:15 targeted both bias-down parameters at 1419.00 and 1413.00. The cash session reached 1407.75 and futures extended to 1405.00. That’s a 50% retracement back into the past week’s range. A 38.2% or 61.8% retracement would be normal, so Friday’s retracement was too deep to be deep enough.

Closing the cash session under 1409.00 would have been compelling to hold-short through the close. But it was still being tested then, and not clearly broken. Extending further down into the futures close only expended some of the pent-up selling pressure that a gap down would depend on. Yet, not immediately recovering Monday could see a new downleg underway.

[/pay]What’s Next… (Outlook and opportunities)[pay]
How long has it been since we’ve had a Saturday Strategy Session? On a Saturday? Last Monday’s special session doesn’t count. Anyway, this weekend’s is at its normal 9:30am ET starting time. See you there.[/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.

It sentiment just before an event is contrary… then Thursday’s restrained optimism suggests the market is eager to break sharply higher. Its post-close surge was temporary, but illustrated the pent-up buying pressure. The trick now is in greeting the report from within or above Thursday afternoon’s range.

Pattern points… (Setups and technicals)[pay]
Thursday morning’s optimistic surge was barely retraced intraday. That wasn’t due to “ineffectual optimism” spinning its wheels just to stay in place. It was more of  a restrained optimism, even pessimism — pessimism atop a 26-1./2 point rally from overnight lows.

Weak-handed buyers never probed fresh highs intraday that would have exposed them to being rejected, and trapped. Meanwhile, anxiousness ahead of Friday’s Employment Situation report failed to produce more than a temporary last-hour dip. That’s strength, Gary Cooper style.

That strength assumes the report will not be greeted from under Thursday afternoon’s 1419.00 lows.Thursday’s post-close surge up to 1425.00 apparently assumed that, as well.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Speaking of 1425.00, we’re not yet out of the woods, there being one more “higher prior low” of significance above at 1425.25. Its recovery would target 1431.00-1433.00. This being a Friday with the illiquid weekend fast- approaching, and the second day of a breakout, and 8-9 point rally seems weak. Rallying at all could be big — to 1443.00 or 1450.00 — if at all. Back under 1419.00 could target new lows under 1400.00.[/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 Wednesday’s attempt to break higher was false… then it should be obvious at Thursday’s open. Otherwise, the alternative is for making it obvious that Wednesday’s last-minute plunge was itself ineffectual pessimism, by immediately rejecting the entire slide.

Pattern points… (Setups and technicals)[pay]
Try, try again? Wash, rinse, repeat. Wednesday afternoon’s buyers took a perfectly good rally signal and got carried away with it too much, too soon.

Having held the noon hour’s test of 1401.00-1402.00 support, no lower objectives were in-play. Firming back up to 1407.00 through the bias environment didn’t expend too much buying pressure. Anyway, a corrective dip to 1403.25 worked off any excess. That allowed trending up aggressively above 1406.00 through 3:10-3:20 to trigger a rally into the close.

Buyers delivered, and then some, testing 1309.00 resistance at the wrong time — they needed either to break through it by then, or not to have touched it at all. I noted earlier the consequence of not resuming the rally into the position-squaring window would be a dip back down into 1405.00-1406.00. The cash session dipped to 1406.00. Then futures plunged to 1401.00-1402.00.

That was too late to close too low to marginalize buyers. The excessive pessimism created a vacuum that should propel another rally effort if recovered back above 1405.00-1406.00. Regardless, don’t forget the past week’s basing is still only potentially bullish. It remains vulnerable to breaking lower until some relevant window were to recover some relevant resistance.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Happy Halloween tonight! And best wishes to those who are still dealing with Sandy’s effects.[/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 Globex trading is any indication of Wednesday’s open… then we’ll be picking up essentially where Friday afternoon’s high left off. That’s the bad news. Friday afternoon’s high led to a couple of dips back to the range’s lows. The good news is that those dips have been recovered… By the way, is the market staying open?

Pattern points… (Setups and technicals)[pay]
Monday night’s trading 1393.00 low fulfilled a retest of Thursday night’s 1394.50 low. That was a new Globex extreme, but not necessarily a new “trend” extreme since there wasn’t much complexity to its price action. So, a retest was not required.

An intraday retest would have been preferable, since there was a little bit of complexity to last night’s 1393.00 low. Regardless of any likely or required retest, no retest would be likely anytime soon if Wednesday’s open were to recover above a prior high.

That’s what makes Tuesday’s 9:15am ET Globex close a potential inflection point. The reaction up from 1393.00 came within 1 tick of Friday afternoon’s 1412.50 high. And 1412.50 has been the range’s upper-end, with support back down to 1409.00. Back under 1407.50 would start to suggest that Wednesday morning will be back on defense probing under 1397.00. I may update these levels in the pre-open First Trade blog post.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The exchange has announced an intention to open “normally” Wednesday morning. This is a relief for those who are dependent upon quarter-end transactions and valuations. Everyone’s so excited, but I haven’t heard anything about Thursday, or Friday. That would be problematic for sustaining a recovery attempt. [/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 strong-handed buyers are growing in force… then is it bullish that they weren’t excessively optimistic before the weekend? The range’s upper-end held a test as resistance. Its reaction down fell back into the range. Either that is patient buyers, or the beginning of a new downleg.

Pattern points… (Setups and technicals)[pay]
There’s not much to add here about the market’s current situation, that hasn’t already been in much of Thursday and Friday’s posts. The opportunity is great for a bottom to have formed. Not only have all downside objectives been fulfilled and neutralized, but repeated attempts to extend lower were rejected. More so, the resolution rallied back to the range’s upper-end.

Selling pressure has never been thinner at such low levels.

None of which is to say that the opportunity for a bottom has been exploited. In fact, Friday afternoon’s rally peaked upon touching the 1412.50 target, instead of breaking higher, which the afternoon timing window combination would have allowed happily. Also, instead of leaving buyers pent-up at support, they were expended at 1412.50, which doesn’t leave any upside objective through the weekend.

So, while the past week’s trading range could be bottoming that can launch a full recovery, it remains capable of breaking lower to resume the decline to much lower levels. At least Friday did not close with sellers regaining traction. But Monday’s close or Tuesday’s open should resolve the situation either way..

[/pay]What’s Next… (Outlook and opportunities)[pay]
There is no Saturday Strategy Session this weekend, so we had an extended Market Wrap Friday that included a bigger picture review. Its recording will be linked from the blog’s sidebar.[/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.