Market Wrap

Thursday’s FOMC news had… a tremendous effect on price. Both in terms of size (27-28) points and trajectory (90 minutes), the leg fit every definition of a “blow-off.” But that doesn’t mean it’s done.

Pattern points… (Setups and technicals)[pay]
An earlier blog post pointed out how rapidly upside objectives were being fulfilled. From same-day and thirty minutes, to fulfilling a target before it was officially triggered. That’s no way to extend a rally.

At least, not a durable rally.

Thursday afternoon’s FOMC reaction was able to create another attraction above, leaving it outstanding to resume the rally. Overbought RSIs at its 1457.25 high require a retest. A quick recovery from its reaction to 1450.50 would have peaked at 1458.00. The delay creates potential to 1462.00.

Testing and rejecting either overnight could again leave no unfinished business above. But opening much lower would likely leave outstanding a gap back to Thursday’s close, whose attraction would inhibit a decline.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Global reaction is likely overnight, extending Thursday’s rally. And it may seem like a circular argument, but S&Ps should extend higher in sympathy. There is room for a pullback before Pac Rim exchanges open. But not extending higher ultimately would suggest a bigger downdraft 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.

Without Wednesday’s last-minute surge… the session would not have made much sense. Surging fulfilled several bullish setups outstanding from the past several sessions. In the process, a lot of intraday pessimism was rejected. And a lot of upside attraction was neutralized.

Pattern points… (Setups and technicals)[pay]
Wednesday morning’s dip to 1433.00 in a bias-up environment resolved as it should, which is to reverse back up. Except that it didn’t. The reversal up touched the morning’s high, but the 1440.25 bias-up target remained outstanding. It took a retest of the low for the market to launch a surge that touched 1440.25.

Even then, 1440.25 wasn’t touched until after the cash session’s 1437.00 high. Its target is neutralized, without closing above it, so no higher target is in-play. Meanwhile, Wednesday fulfilled the third higher close that was indicated by Friday confirming last Thursday’s breakout.

There is no requirement to probe a fresh high. Reversing down would leave no unfinished business above to inhibit developing into a durable downleg. That said, a credible downleg would begin after firming intraday to fresh highs — less likely by rejecting a gap up, or by gapping down dramatically. Trending up into the noon hour would make a downleg unlikely at all.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Satisfying all motivations and attractions above Wednesday comes in time for the week’s busiest economic calendar. A calendar that includes the FOMC policy decision, and the chairman’s press conference. Thursday’s outcome could be very predictive of the next several sessions.[/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.

In the final analysis… Tuesday afternoon’s dip held relevant support, preventing sellers from gaining traction for their effort. Converting that into an immediate resumption of the rally to a new high would be credible. Not immediately resuming the rally would start to suggest a new downleg was likely, first.

Pattern points… (Setups and technicals)[pay]
Tuesday’s bias environment ranged narrowly. Its 2:30 exit was still within the noon hour’s range. A 2-1/2 point break did enter the final hour under just under the bias environment’s range. But the noon hour’s low was still being tested, and the 3:10-3:20 window did not trend down, so bearish sponsorship did not increase.

Bearish sponsorship did not increase, and yet price extended down. It extended down into and out of the close, probing under 1431.00 by at least 1 point. So, the recovery attempt is hanging on by the skin of its teeth.

Overbought RSIs at Tuesday’s 1437.50 high require being retested, presumably up to 1440.25 or 1442.50 — sooner, rather than later, assuming that 1431.00 were to hold its test as support. Meanwhile, Thursday’s confirmed breakout requires a third higher close. The only new attraction below  is the gap back to Monday’s 1428.50 close.

[/pay]What’s Next… (Outlook and opportunities)[pay]
1431.00‘s recovery through Tuesday’s open had signaled Monday’s sellers were absorbed. Failing to hold it through Tuesday’s close would have meant sellers were retaking control. Failing to hold it through Wednesday’s open would target at least 1426.00 and possible 1412.50.[/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.

By Monday afternoon, so many… consecutive timing windows had ranged narrowly, that trending was likely to begin by the close. It did, with a vengeance. But it already fulfilled its likely objective. Just a speedbump, or a bigger detour?

Pattern points… (Setups and technicals)[pay]
Monday’s final hour was entered under the bias environment’s 1434.00 low, and the 3:10-3:20 timing window extended down to confirm that sellers were going to be productive. The bias environment’s exit was still testing the noon hour’s 1434.75 low, but too many consecutive timing windows had ranged narrowly. Trending was likely to be attempted before the close.

The break was triggered under 1434.25 and its likely target was 1428.00. The target was met . Although 1-minute RSI diverged positively to avoid requiring the low’s retest, the drop is vulnerable to extending, which is often the resolution to trending that closes at its a target.

In fact, futures continued sliding to 1425.75. The next lower objective is 1423.00 and then 1419.00, so long as 1431.00 is not recovered. Recovering 1431.00 would indicate the drop had ended, and a new high close was in-play.

[/pay]What’s Next… (Outlook and opportunities)[pay]
A lower close Tuesday would necessarily be under 1428.00. That was a big target on the way up, and closing back under it would undermine the buying that had meanwhile developed above it. That should not happen —  not yet — so closing lower Tuesday would suggest that something very damaging to the chart is on its way. [/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.

Saturday Strategy Session was missed… the past two weeks. It returns this weekend, starting at its usual 9:30am ET. We’ll discuss the market’s bigger picture, and then take any stock analysis requests. Its link is in the blog’s sidebar.

Pattern points… (Setups and technicals)[pay]
Despite Friday’s session ranging narrowly, it was not a non-event. Gapping up above prior highs is not noise. As for not extending higher through any relevant timing window, those periods are noise. But any targets they create are binding, and no less required to be met than any other.

It is natural to view the sudden lack of volatility — especially at new highs — as undermining the rally’s credibility. But the prevailing trend always gets a benefit of the doubt. So, Friday’s “hurry up and stop” behavior actually undermines sellers, since the burden of proof is on them.

So, Friday’s higher close confirmed Thursday’s breakout. Now, at least one more higher close is required, but not necessarily Monday. An immediate pullback would leave that unfinished business outstanding above.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Friday’s late surge neutralized the overnight high’s “new Globex trend extreme” that required a retest. It also fulfilled the morning’s 1438.00 bias-up target that had become unfinished business above. Not extending higher at Monday’s open would suggest a deeper correction first, whether to only 1423.00 or down to 1412.50.[/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.