Market Wrap

For two weeks, buyers had absorbed… repeated probes under support. No probe broke lower. Tests of resistance weren’t breaking higher, either. But with the high’s retest outstanding, resistance was holding because of weak hands. That’s not who deserved being rewarded. Buyers deserved it, and they finally were.

Pattern points… (Setups and technicals)[pay]
The attraction back to 1419.00 — the two-week old gap open above prior highs — was finally neutralized soon after Thursday’s open. Closing more than a couple of points above it would have put into play 1428.00. It was tested by late-morning.

Actually, Thursday afternoon ranged relatively narrowly at 1428.00-1431.00. Of course, most ranges would be relatively narrow when compared to the size of Thursday morning’s 21-point surge. Trapped shorts that faded the morning’s rally were squeezed into and out of the futures close up to 1432.25. But 1428.00 was essentially still being tested.

Reversing immediately from a new high close would leave unfinished business above back to Thursday’s 1431.00 close. Gapping down under a relevant level, like 1419.00, would leave that gap outstanding above for some time. But not reversing down through Friday’s open would be more vulnerable to extending higher intraday.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Friday morning’s Employment Situation report probably must react down sharply through the opening 15 minutes of volatility or else marginalize sellers through the noon hour. Any dip shallower than 1421.00 would be likely to recover, or else unlikely to produce a durable downleg.[/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.

More bad news thrown at… the market, more sell-offs and swings. But essentially, no more than noise. Wednesday’s range held intraday, but probably won’t do that again one day before Friday’s big data.

Pattern points… (Setups and technicals)[pay]
For all of Wednesday’s drops and plunges, none fully retraced Tuesday afternoon’s surge. Its singular upleg from 1399.00 to 1408.00 has been retraced several times back down to 1400.00-1400.50. But no lower.

The timing and structure of Wednesday afternoon’s surge already suggested that its sponsorship was strong hands. Extending higher is not he proof — although the effort is pointless otherwise. So long as the 1399.00 origin of Wednesday afternoon’s surge is not retraced, there remains potential to for another upleg.

Actually, 1399.00 was probed already, overnight before Wednesday’s open. Overnight retracements are irrelevant. Another fresh low Wednesday night need not recover before Thursday’s open, and still be able to recover intraday. The trick would be in quickly rejecting any lower low.

That having been said, the preference is not to probe lower lows again, at all. The pattern gets difficult to track bullishly from too much lower. Avoiding a fresh low requires probing a lot of overhead resistance at 1405.00 and 1407.00.

[/pay]What’s Next… (Outlook and opportunities)[pay]
A lot of news comes pre-open Thursday. The market has been reacting down to bad news, but only temporarily. Not rallying sharply on any positive surprise would be a concern.[/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.

Tuesday’s probe under Friday’s… low was recovered into positive territory. But only temporarily, thanks to an afternoon surge back up to Friday afternoon’s highs. All to close essentially flat on the day. Have sellers tried everything to retake control, and when will buyers exploit that?

Pattern points… (Setups and technicals)[pay]
Tuesday afternoon’s 9-point surge had a credible origin. A 1399.00 buy signal crept higher to only touch the no-bias environment’s 1401.00 upper-limit, breaking above it just late enough to avoid being “no-bias trending.”

The surge’s sponsorship had three strong-handed qualities: The patience of its origin, its 9-point productivity, and overbought RSIs at its 1408.00 high. But The 9-point surge did not dip back down to test a single pullback limit, preventing buyers from being refueled.

The rally did not resume. It did retrace down to 1402.75, where the bias environment was exited, which was as deep as possible without invalidating its earlier recovery. That was recovered back to 1406.50, after the cash session close, which was too late to be sponsored by strong hands.

[/pay]What’s Next… (Outlook and opportunities)[pay]
By the way, the dip down to 1402.75 also retraced a healthy 61.8% of Tuesday afternoon’s surge. Between that, and the surge’s three strong-handed qualities, it would not be surprising to reward buyers by extending higher overnight. By the same token, it would also not be surprising to punish buyers for not extending higher overnight.  [/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’s a holiday weekend, so there… is no Saturday Strategy Session. Please don’t hesitate to make stock analysis requests in the comments section of this blog post. Oh, and have a Happy Labor Day!

Pattern points… (Setups and technicals)[pay]
One day after another, the week continued testing and retesting 1411.00 resistance. And every test was still failing. Finally, Thursday gapped down to 1402.25 and stayed down. Then Friday gapped right back up, again testing 1411.00. Which held. Again.

Actually, 1411.00 was tested before the open. Its late-morning retest followed an interim dip to 1397.00. So, actually, 1411.00 resistance held two more times on Friday.

1411.00‘s repeated tests as resistance during the past two weeks continue to behave as distribution. But its reactions down do not. Thursday’s gap down wasn’t likely to extend. In fact, Thursday’s sellers gained no traction for their effort. But after Friday’s retest of 1411.00, its reaction back down into Thursday’s range could have extended — and did not.

Another break lower would be just as capable of extending down. But two failed attempts to break lower should be rewarded with fresh highs back above 1411.00. The only question then would be whether 1419.00 holds as resistance, or breaks higher to test 1428.00.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Globex opens normally Sunday night, and trades through Labor Day morning until 11:30 ET. Some of the above scenario could play out then. Alternatively, more counter-trend action could mark time until Tuesday morning. But keep in mind that a break lower would be just as capable of extending down.[/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.

Thursday’s gap down… tried to extend lower. Instead, it was retraced back up to its opening print. Not that buyers gained any traction for their efforts, but neither did sellers. At least, not Thursday’s sellers…

Pattern points… (Setups and technicals)[pay]
Thursday’s sellers gained no traction since the morning low held as support. That doesn’t prevent Friday from extending Thursday’s decline. But it does require the decline to begin by gapping down. Not gapping down at Friday’s open would be unlikely to extend the decline before Friday afternoon.

Friday afternoon has become vulnerable to trending down. Wednesday’s 3-Day Weekend indicator triggered by proxy at Thursday’s open. It triggered a late bearish signal. This suggests that price will trend down into and out of the weekend.

Triggering late makes any signal less reliable, including the 3-Day Weekend indicator. Any bearish consequences would be marginalized if Thursday’s session were rejected by gapping back up above Tuesday-Wednesday’s lows.

[/pay]What’s Next… (Outlook and opportunities)[pay]
A week’s worth of attention has been given to Bernanke’s keynote speech Friday morning. Thursday’s late 6-1/2 point plunge reflected the pessimism discounting his remarks. [/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.