Market Wrap

Anxiousness into FOMC erased… overnight gains. Anxiousness after FOMC probed overnight lows. That combination isn’t typically reversed back up immediately. But it had better reverse up soon to avoid trending much lower first.

Pattern points… (Setups and technicals)[pay]
Tuesday night’s rally suffered the same fate as Sunday night’s rally, peaking into the following session’s open. Monday’s peak came after the open, while Wednesday’s peak came just before. It’s the same result: retracing all of the overnight rally.

Wednesday’s retracement pushed a little deeper, and was likely to trend down further overnight. Closing under 1372.25 and 1371.00 made the intraday 1367.75 low likely to be probed, down to 1366.00-1367.00 or to 1360.00-1361.00.

Attraction under Wednesday’s low — likelihoods of gapping down Thursday — must hold 1375.00 as resistance. Opening Thursday back above 1378.00 would rob the decline of its traction, and above 1381.00 would reverse momentum up.

Friday’s late surge from 1372.25 may have skewed the downleg that could have begun then and there, delaying its timing. Or, the late surge may have skewered the downleg, by creating room to absorb selling pressure before extending the rally.

[/pay]What’s Next… (Outlook and opportunities)[pay]
This week’s highs don’t require a retest, but the trend has not yet reversed down. If Thursday’s open does not settle the “skewed or skewered” debate, then Thursday’s close should.[/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 last-minute 4-point plunge… fulfilled unfinished business below. The plunge began within 3 minutes of the cash session close. So, Tuesday’s close should be retested eventually, even if Wednesday’s open were to gap up or down sharply.

Pattern points… (Setups and technicals)[pay]
And Wednesday’s open is likely to gap up or down sharply. The afternoon’s 1373.00 bias-down target had become “unfinished business below” requiring a test. That requirement was fulfilled at the close. There was no time to react up from 1373.00 or to extend down below it. Wednesday’s open is likely to compensate by gapping sharply.

Gapping up above the 1378.50-1380.50 prior high is as likely as gapping down under 1366.00-1367.00. There is a small chance of ranging sideways, regardless of the low’s extreme RSIs. In either case, the gap back to Tuesday’s 1373.50 cash session close will probably want to be filled.Tuesday’s close is essentially “equilibrium” for closing at a target or other relevant level. The next two trending attempts should alternate direction and retrace entirely, before a third gains traction. At least one of the first two trending attempts should be very productive — sizable, but failing to exceed a prior high or low through a relevant timing window.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Plenty of other econ reports are due Wednesday’s morning. Posturing ahead of the afternoon’s FOMC policy statement into the noon hour will help to reveal the ultimate reaction’s direction. So would previous trending attempts, including 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.

After ruminating on it all weekend… Monday’s session chose not to reject Friday’s late surge. Sunday night’s dip retraced 61.8% of it, resolving in a probe of new highs. Does not rejecting the surge equate to confirming it? Not quite yet.

Pattern points… (Setups and technicals)[pay]
The rally’s problem is not that it hasn’t extended higher. It isn’t even much of a problem that the attempt to extend higher failed. The problem is that the attempt to extend higher Monday morning came after a sufficient retracement of Friday afternoon’s surge, and yet Monday morning’s rally was retraced, too.

Not immediately rejecting Friday’s late surge gave it the potential to extend higher. That’s what led to Monday morning’s rally. Not extending higher after an entire session does suggest a deeper pullback is needed first. That’s where Monday’s close left us. Extending higher Tuesday without a deeper pullback would be premature.

Monday afternoon’s relatively narrow range extended through several timing windows. This makes the rejection of Monday morning’s fresh high less likely to reverse straight down. Another probe above Friday’s 1384.25-1385.00 highs cannot be discounted — perhaps up to 1390.50 — but it would be vulnerable to reversing down more durably. Sellers must retake control pretty much at Tuesday’s open to avoid probing fresh highs.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Monday’s close produced a fourth retest of 1381.00-1382.00 for the afternoon. This “ineffectual optimism” is treading water, but it’s not ready to plunge just yet. And if it does plunge first, then we’ll probably find the water isn’t terribly deep — perhaps down to 1366.00-1367.00 or to 1361.00-1362.00. [/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 I’ve said it once… then I’ve said it a thousand times. Friday trending is nearly impossible to reverse. It doesn’t always extend, and it can often retrace. Friday is a Newtonian object in motion. An equal and opposing force would still trigger a reversal, but Friday reversals all but require an opposing force.

Pattern points… (Setups and technicals)[pay]
And Friday’s rally met no opposing force. In fact, just as an inflection point at 1372.25 was ready to at least contain the rally’s momentum, a headline accelerated momentum upward. That’s the opposite of an equal and opposing force.

The headline’s knee-jerk reaction surged up to 1384.25. The surge developed exclusively during a single timing window, and its later retest up to 1385.00 was only noise. Reacting down to 1379.50 confirmed the retest had held, and closing under 1382.25 suggested the current sponsorship was fulfilled.

Closing under 1378.50 would have been a compelling hold-short setup. Closing above it doesn’t preclude gapping down significantly Monday anyway. A probe of fresh highs could be bearish only if rejected aggressively. That’s too late for an intraday setup, so triggering a two-day reversal setup Monday may be the only way to prevent extending next to much higher highs.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Join us for the Saturday Strategy Session where I’ll describe that bearish setup’s parameters, its potential limitation down to 1363.50, and the alternative path higher to 1406.50-1407.25. It begins at 9:30am ET, and you’re welcome to request instant-analysis of your own stock picks.[/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.

Wednesday night’s rally did not… extend much higher intraday. Only high enough to fulfill the buying pressure that produced it, and to neutralize the attractions above. The next move won’t end so quickly.

Pattern points… (Setups and technicals)[pay]
Thursday’s close continued this week’s tradition of last half-hour rallies sponsored by weak hands. This one was attracted higher by unfinished business above at the afternoon’s 1357.25 bias-up target. It was tested up to 1358.75.

The 1355.00 close was back under the morning’s 1357.00 high, proving that its earlier probe was sponsored by weak hands. Not only did 1357.25 react down, but so did the test of “higher prior lows” probing back into last Friday afternoon’s range.

The rally off of this week’s lows was always expected to be only a correction before resuming the decline. Its potential objectives for a correction have been fulfilled, but not exceeded through the close. Friday morning’s initial trending normally should persist through the noon hour. This one could persist through Tuesday’s open.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Thursday’s late weak-handed test of the bounce’s target can be reversed without new sponsorship for a decline. But it can be extended only with new sponsorship for a rally. Any less strength than gapping up strongly Friday would be likely to resolve down, and probably already falling quickly before 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.