Market Wrap

Tuesday night’s rally seemed… to prove out the bullish scenario that was created by Tuesday’s close. Wednesday’s close was similar, also recovering from a test of relevant support. If the second time isn’t a charm, then it can be an utter failure.

Pattern points… (Setups and technicals)[pay]
Wednesday’s recovery stopped short of touching the open’s 1339.50 high. Its reaction down to 1330.50 stopped appropriately short of triggering a hold-short through the close. A very last-minute surge barely closed the cash session at 1333.50 before extending up to 1335.50.

The bullish template considers the recovery’s premature peak as being pessimism, which is potentially bullish from a contrarian perspective. The reaction down was designed to keep buying pressure pent-up and available to resume the rally Thursday. After another overnight rally, Thursday’s open could be testing 1346.00.

RSIs diverged positively at 1330.50 support as the position-squaring window lapsed at 3:52. The closing surge already reaped the benefit of that setup. The surge is equally vulnerable to being retraced overnight or to simply extending higher. No matter how deep, an overnight dip should be quick, and quickly recovered, or a bullish open Thursday would become unlikely.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Fresh lows overnight under 1330.50 is not required, but it would likely recover, and its recovery back above 1333.50-1335.50 would be very bullish. Look out below otherwise. Fresh lows under 1330.50 that don’t recover by the open — well before the open — would suggest that Wednesday’s rally had failed to gain traction. And that’s not a suggestion the market can handle right now.[/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.

I had noted Monday afternoon… that the eventual retest of its low would compensate for the delay. That compensation could have been less had it happened intraday. It didn’t happen until Tuesday, so the compensation — and the delayed drop — was greater.

Pattern points… (Setups and technicals)
Like Monday afternoon, Tuesday’s signals did not reflect strong-handed buyers. Oversold RSIs at the afternoon’s 1323.75 low produced a bounce during the last half-hour up to 1335.00, but it was still doomed to failure — the oversold RSIs require a retest, probably down to 1321.25. But that bounce did have one potentially bullish accomplishment.

More on that in a moment…

Reaction to AAPL’s miss triggered a plunge down to 1321.25.

Okay, now more about the potentially bullish accomplishment of Tuesday’s close.

The required retest of Monday morning’s 1332.00 low had targeted 1330.50, and possibly 1328.25. As this test was delayed into yet another timing window, there became room down to 1327.50. After testing them all (down to 1323.75) the cash session closed back above them at 1333.50.

In other words, a big cluster of targets held through the close. Day-to-day sellers gained no traction for their effort. This doesn’t preclude probing fresh lows, nor does it preclude fresh lows from gaining traction — but fresh lows would find more difficulty gaining traction.

Similarly, intraday buyers gained no traction for their late-afternoon effort. They may already have suffered the consequence by reacting down on AAPL’s earning. The next lower target was 1321.25, and the reaction to AAPL just touched it. If this isn’t a meaningful low, then the downleg from Thursday’s high is about to extend by a multiple.

What’s Next… (Outlook and opportunities)
In the Market Wrap I noted that since Tuesday’s late buyers did not gain traction, extending its last-minute bounce Wednesday would require gapping up sufficiently. That, or recovering from fresh lows, preferably after fulfilling the next lower target (like 1321.25), which could be done overnight. Lower lows could test 1318.00 and then 1314.00. A gap up must recover 1342.50 to be credible for extending higher

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 Expiration Indicator had any effect… on Monday’s session, it was mostly overnight. Sharply lower lows at the open may have been a function of the same strong hands distributing — the morning’s recovery did not probe above the open’s highs, that came later.

Pattern points… (Setups and technicals)[pay]
Despite recovering from 1332.00 up to 1348.50, buyers gained no traction for their efforts. Probing above the noon hour’s 1342.75 high required either exiting the bias environment at 2:30 above it, or entering the final hour above it. Both were still testing 1342.75.

Sellers didn’t regain traction through the 3:10-3:20 window, and the afternoon’s 1346.25 bias-up target remained outstanding. A surge up to 1348.50 fulfilled it. But it also gained no traction.

Buyers don’t often gain traction from negative territory, and Friday’s close was 1358.50. Closing above 1346.50 could have triggered a multi-session rally, and that signal would have been very surprising. A multi-session rally signal is now off the table.

So, a lot of buying pressure has been expended, neutralizing several retracement objectives above, without putting into play any higher objectives. Holding short overnight was avoided by the last half-hour ranging around 1346.50 instead. It did break lower to 1343.25, but not until within 3 minutes of the close.

Unfinished business below at 1332.00 remains outstanding nonetheless. Rallying above 1349.25 through Tuesday’s open would extend the detour back up to Friday’s “higher prior lows” at 1357.50.

[/pay]What’s Next… (Outlook and opportunities)[pay]
A brief fresh high overnight testing 1349.25 remains possible. Its rejection back under 1345.50 would signal a downleg ready to begin. Regardless of the timing of its origin, a valid downleg at this stage should begin by being steep and substantial, or it may not be valid.[/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… begins at 9:30am ET. Its link is found in the blog’s sidebar. See you there!

Pattern points… (Setups and technicals)[pay]
Thursday night’s sell-off didn’t extend very much lower Friday. But it maintained breaks under relevant supports. Friday afternoon’s probe of fresh lows didn’t extend lower at all. But it didn’t recover above a relevant resistance.

It’s not excessive pessimism if sellers gain traction for their efforts. A deep sell-off could fail to gain traction if a probe under relevant support isn’t maintained through a relevant timing window. Friday’s shallow extension down gained ground and gave back nothing. It is probably not finished.

Friday’s decline also left outstanding unfinished  business below at the afternoon’s 1353.50 bias-down target. And having fulfilled the first half of Wednesday’s Expiration Indicator Friday afternoon, Monday morning should also be characterized as a downward bias.

It is interesting that intraday RSIs avoided becoming oversold except for one time, during the noon hour’s attack on the 1357.00 target. RSIs diverging positively on its retest did not produce a bounce through the close. The drop’s sponsorship hasn’t broken a sweat.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The next lower attraction at 1353.00-1355.00 is familiar. Too familiar. Its utility as support is now limited only to overnight activity. There is no bullish reason to revisit it. Not already recovering through the open from its overnight test would likely extend down considerably intraday.[/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.

Perhaps the rally was inhibited… by anxiousness ahead of post-close earnings announcements like MSFT, IBM and GOOG. The fresh high wasn’t rejected, not yet. But it can’t afford to rest on its laurels up here, because the high’s freshness will wear off soon.

Pattern points… (Setups and technicals)[pay]
Thursday’s theme was weak-handed buyers. The pre-open test of 1375.00 prior highs avoided gapping up above Wednesday’s 1370.50 high. The post-open surge up to 1373.75 that reversed into negative territory under 1368.00. The noon hour’s new high at 1376.00 that was retraced by the noon hour’s exit.

Not gapping up — despite having rallied into position earlier — also prevented turning Wednesday’s Expiration Indicator bullish. Only from being passively bearish to passively bullish, but buyers nonetheless failed to exploit the opportunity.

All the while, unfinished business above was neutralized at he recent 1375.00 “new Globex trend extreme” and at its 1375.50 pre-open test. Perhaps Thursday’s 1376.00 Lunch Hour high will was only a momentum peak, still needing to withstand a retest Friday. Regardless, closing beyond either end of Thursday’s range should trend in that direction.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Gapping out of Thursday’s narrowing range isn’t likely to extend durably. And gapping open Friday isn’t any likelier than any other day. For the same reason, trending can gain traction. And this being a Friday, the morning’s bias signal is likely to persist through the noon hour. Quickly reversing initial trending can be substantial with the weekend fast-approaching.[/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.