Market Wrap

If GOOG’s impact Thursday was exacerbated by expiration… then can expiration impact GOOG Friday? I’m not sure either one can stomach any further weakness from the other.

Pattern points… (Setups and technicals)[pay]
Thursday afternoon’s pullback was what the morning was expected to be, but longer and drawn out like the morning could have been, and ultimately held key support like the morning did. Recovering both 1448.50 and 1452.00 avoided threatening or invalidating Tuesday and Wednesday’s signals targeting new highs.

Longer, drawn out weakness during Thursday morning would have launched a durable afternoon rally to new highs, unlike the morning’s premature rally into the noon hour — it had not yet refueled enough to extend. The afternoon’s pullback offers a second chance for the setup to launch a rally that actually extends.

But the rally had better be underway at Friday’s open. Thursday formed most of a “pivot reversal” setup. Not disproving it by rallying immediately would be likely to prove it by gapping down under the afternoon’s 1447.75 low.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Friday is the 25th anniversary of the “Black Monday” market crash. Anniversary’s don’t have any presence in my work, except that focusing on it makes it unlikely to repeat.[/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 close confirmed Tuesday’s late signal… then it would not be surprising for Thursday to rest a little on its laurels. But just a little, and not so deeply or for so long to allow counter-trending to gain traction.

Pattern points… (Setups and technicals)[pay]
1448.50 was recovered too late Tuesday to be reliable for putting into play new highs. Recovering 1452.00 through Wednesday’s open would have qualified. Recovering 1452.00 through the open still could have been invalidated by closing under it. No problem.

Actually, there was an attempt to avoid recovering 1452.00 by exiting the afternoon’s bias environment under its 1453.25 prior low. That was recovered. But the bias environment’s exit was under the noon hour’s high, the final hour was entered under the bias environment’s high, and the 3:10-3:20 window did not probe fresh highs. Its opening recovery held up through the close, targeting new highs.

1452.00‘s recovery can be invalidated by immediately breaking back under its prior low. That would mean opening through or under Wednesday morning’s 1448.50 low. So, there is that much room to absorb initial weakness Thursday without reversing momentum down. And initial weakness is possible since Wednesday afternoon never extended higher.

If a break back under 1448.50 were actually invalidating the signal for new highs, then it should be very productive very quickly.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Wednesday’s Expiration Indicator did not trigger. No prior high was probed intraday whose resolution could trigger either an active bullish signal or a passive bearish signal. At least three days of uptrending wasn’t rejected. So, there’s that.[/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 is extending higher… then Wednesday’s open will need to compensate for the delay of not having been signaled at Tuesday’s close.

Pattern points… (Setups and technicals)[pay]
Not all battles in the market are between strong hands and weak. More often, they are between weak hands and weaker. The trend may be up intraday, but it is a corrective bounce that will ultimately resolve down. An attempt to reverse the bounce might be stronger hands retaking control, or it might be weaker hands that believe wrongly the bounce already ended.

Tuesday afternoon’s drop-off was the latter, weaker-handed sellers attracted by the noon hour’s narrow ranging between 1448.75-1450.50. Their dip down to 1446.25 probed the bias environment’s lows after the final hour was already entered. That’s weak-handed sponsorship, and it failed.

Meanwhile, the rally’s sponsorship isn’t much stronger. It did bounce all the way back into the 1448.75-1450.50 range when the position-squaring window started. Waiting so long to probe back above 1448.50 was too late to signal higher targets in-play. A blip-up to fresh highs at 1451.50 after the cash session close was retraced back down to 1448.75, so no”hold-long” setup could be contemplated.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Just extending higher at Tuesday’s open already made Monday’s rally unlikely to end before Wednesday morning. So, initial selling pressure would suggest the rally was going to extend beyond Wednesday, to at least retest prior highs. The most bearish setup may be to trade only flat, until strong-handed sellers would be credible. [/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 bigger downleg was avoided Monday… then the bounce should extend higher Tuesday without delay. Especially if it is a detour that eventually resolves down, whether or not the detour were to probe fresh highs.

Pattern points… (Setups and technicals)[pay]
Closing above both the noon hour high and the prior session’s high, with unfinished business above, is a “hold-long” through the close setup. It is a little compelling for not appearing in an uptrend — a multi-session low printed Friday, and an even lower low overnight. If valid anyway, the bounce should extend at least through Wednesday morning.

The unfinished business above is Monday afternoon’s 1437.50 bias-up target. Its 1431.00 bias-up signal was not at all productive during the bias environment, and was nearly rejected at the bias environment’s exit. Nearly rejected doesn’t equate to being ejected.

But the target was attacked to within 1 point. Its test overnight or Tuesday morning would be quite capable of launching a downleg. Otherwise, extending higher would next targeting 1446.75-1448.50.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Monday’s closing action trended up, and the afternoon’s 1429.00 low printed before the last hour. Gapping down under it would trigger a “session-long decline. Monday’s positive close must be rejected immediately Tuesday just to resume the decline. Not rejecting it would be bearish.[/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 bounce was a correction… then Friday’s drop is just one lower close away from confirming a bigger drop underway. Friday’s close was a new low for the decline, and Friday’s low was a new intraday low. But Wednesday night’s Globex low still offers a challenge sellers.

Pattern points… (Setups and technicals)[pay]
Friday afternoon’s timing windows offered a great example on how not to launch a rally.

The bias environment exit was still testing the noon hour’s high, despite having probed above it. Then the final hour’s entry was testing the bias environment’s high, despite also having probed above it. Not probing above either would have been more bullish — or, at least, allowed for a bullish setup — for keeping the buying pressure in reserve.

Instead, buyers expended energy without gaining traction, indicating that they were weak hands. Then the 3:10-3:20 window did the same. Potential to rally up to 1427.50 was replaced by the likelihood of resuming the decline.

Except that the close was nearing. So, although the 1420.50 session low was revisited, that wasn’t until after the cash session close. And it was not a fresh low. If the decline were going to extend down to the 1400.00 area, then it should do so without delay Monday. Gapping open above the afternoon’s 1426.00 high would instead trigger a session-long rally.

[/pay]What’s Next… (Outlook and opportunities)[pay]
A special note about this weekend’s Saturday Strategy Session: There might not be one next weekend, and there definitely is not one the following week. So, if you have stocks, or in-depth questions about methodology, or just want to get you charting fix, then be sure to join us at 9:30am ET.[/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.