Market Wrap

It’s difficult being bearish… when sellers keep failing to exploit opportunities to regain control, expending energy without gaining traction. They can retake control, and might do it Thursday, but they haven’t yet, and didn’t do it Wednesday.

Pattern points… (Setups and technicals)[pay]
Sellers have failed at attempts both large and small. The larger failures include not trending down Wednesday. This was in spite of an overnight drop having extended Tuesday afternoon’s slide. The open’s gap down was positioned to form an Island reversal pattern out of Tuesday’s session. Recovering instead reflects weak sellers.

Wednesday’s sellers were confined to the afternoon’s no-bias environment, and even a last-minute dip originated too late to be sponsored by strong hands. It’s difficult taking these sellers seriously.

Fresh highs could be avoided Thursday in the same way they could have on Wednesday, by breaking low enough through the open. Back under 1393.25-1394.25 would be a good start to rejecting Wednesday’s recovery. Otherwise, any shallower opening dip or any opening strength is likely to test 1406.00-1407.00 before sellers can retake control.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Thursday’s econ calendar is essentially Jobless Claims. And it is its only real chance this week to impact the charts. Any strength it might produce won’t have another econ report Friday to reinforce its sponsorship. Meanwhile, the weekend’s illiquidity will start coming into view by noon Thursday.[/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 session-long rally setup… was fulfilled. The entire session remained in positive territory and no prior low was broken. However, the session high did not print during the final hour, which was not optimal. Was selling pressure that substantial, or will Tuesday’s high be probed with a vengeance?

Pattern points… (Setups and technicals)[pay]
Like the final hour’s session high print, session-long rallies have another element yet to be seen: The following session tends to probe higher highs. Not just pierce the prior highs, but actually try trending higher. And like the other missing element, this is also not a requirement, only a tendency.

I wouldn’t even be bothering with any potential for fresh highs, if the setup had failed to produce its two required elements (trading exclusively in positive territory, without sellers gaining traction). The setup was valid, so it can still probe fresh highs.

Trending attempts above Tuesday’s highs would become less likely if not being attempted into Wednesday’s open. And there is potential simply to gap down and extend Tuesday afternoon’s drop. Especially since Tuesday afternoon’s drop was more than noise, having exited the bias environment under the noon hour low, and entering the final hour under the bias environment low.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Tuesday’s sellers didn’t gain traction, because the morning’s 1397.50 last relative low was not broken through the close. It was still being tested, and it was later probed down to 1395.75. Gapping down Wednesday under at least 1393.50 would make Tuesday’s session an Island, and reverse momentum down sharply. Otherwise, almost any shallower opening weakness — if any, at all — would be likely to probe Tuesday’s highs. [/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.

The week began promisingly… before the prior week had ended. Fresh highs were probed on Friday. Sunday night probed higher highs. And then Monday’s open surged yet higher. Those elements on Mondays tend either to extend the rally at an accelerated pace, or else to reject it altogether. But this Monday only ranged narrowly.

Pattern points… (Setups and technicals)[pay]
Monday morning’s bias-up signal triggered at 1390.50 was not invalidated. Its 1396.25 bias-up target became “unfinished business above.” Pessimism probably prevented its test. Three consecutive timing windows hovered just 3 ticks under it — the morning’s bias environment, the noon hour, and the afternoon’s bias environment.

Pessimism can be bullish from a contrarian perspective. The position-squaring window doubled down on the pessimism by sliding 4-5 points back down to the open’s 1389.75 low. The pessimism would triple down by gapping open Tuesday under “lower prior highs” like 1382.00.

Opening under 1375.00 would undermine the potential to probe fresh highs before reversing down. Otherwise, the potential remains alive to probe fresh highs up to 1406.00-1407.00.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Without much if any trending Monday, Tuesday’s session is vulnerable to the same false trending setup. More than just probing a fresh high or low, actual trending (a series of rising or falling tops and bottoms throughout a timing window) would be vulnerable to reversing into a more substantial and durable trend in the opposite direction. [/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.

Did it, or… didn’t it? New high closes on Fridays all but ensure trending further. Friday’s futures close was certainly a new high, but does it ensure trending any higher?

Pattern points… (Setups and technicals)[pay]
Friday’s late dip under 1387.25 triggered a sell signal that would have been very productive if triggered one hour earlier. And exiting a bias environment under 1385.00 would have signaled a much bigger break lower underway. Break too late under 1387.25 only tested 1385.00. The cash session closed at 1387.25.

1387.25 was last Monday’s prior high. Even then the late break lower touched the prior Friday afternoon’s 1384.75 high as support. It was too late for any closing bounce not to be interpreted as still testing prior highs.

Extending higher would next target 1406.00-1407.00, and potentially 1428.00. Any new highs — even that much higher — could still reverse down sharply. Another refueling dip from this area is unlikely, since that was the purpose of this week’s pullback. Speaking of which, the most recent new attraction below is Thursday’s oversold RSIs at 1350.00 low.

Fresh highs could be probed Sunday night and rejected without requiring a retest intraday Monday. Regardless, another pullback has to 1370.00 before suggesting a reversal down was delayed by the Friday afternoon’s thin participation.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Don’t forget about the Saturday Strategy Session, linked from the blog’s sidebar. We’ll discuss the bigger picture — like the paths higher or lower, the oddity of two consecutive “moments of truth” — and offer instant analysis of your stock requests. [/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 close ultimately held… a test of what would define a pullback from Monday’s high. It was the deeper of two pullback limits. Recovering back above the other would now suggest the pullback had ended. Otherwise, that probably wasn’t a pullback.

Pattern points… (Setups and technicals)[pay]
Thursday afternoon’s 13-point rally peaked at 1362.50 into the futures close. However, buyers gained no traction for their effort. The cash session close was contained solidly within 1360.00-1361.00, essentially an “equilibrium” close that neither recovered nor rejected the relevant level.

Oversold RSIs at Thursday’s 1349.25-1350.00 noon hour low require a retest. Its test down to 1348.25 is likely to be Friday morning’s objective if the does not recover immediately above 1366.00-1367.00. That would be the bullish scenario, to quickly neutralize the unfinished business below, and then rally through the afternoon.

Since Thursday’s close recovered back above the morning’s lows, sellers gained no traction for their efforts, either. And at least avoiding a close under 1360.00-1361.00 prevented putting into play a lower target. The rest of the bullish scenario still requires closing back above a relevant level, such as 1366.00-1367.00.

The bullish scenario’s early stage looks a lot like the bearish scenario. Failing to hold above Thursday’s lows through Friday’s open would likely trend down into the afternoon. “Lower prior highs” at 1338.50 and a gap back to 1333.00 would attract sellers into and out of the weekend.

[/pay]What’s Next… (Outlook and opportunities)[pay]
This being a Friday, the morning’s bias signal is likely to persist through the noon hour. Equally important to the Employment Situation report’s reaction will be how much of it is absorbed or extended into the open.[/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.