Market Wrap

Last Thursday’s plunge undermined… the attraction back up to last Tuesday’s high. This Tuesday’s pattern may have launched a retest. If that’s not obvious Wednesday morning, then it better be obvious Wednesday afternoon. Otherwise, another plunge may be coming.

Pattern points… (Setups and technicals)[pay]
Tuesday morning’s low was another reaction down from a failed rally attempt. One important difference was this one fulfilled its target. The same 1303.25 target put into play Monday afternoon. The same 1303.25 target the overnight action could have fulfilled.

Its reaction up caught, and extended up to 1318.00.

The bigger picture’s premise going into the morning’s drop remains unchanged coming out of it. A multi-sessioon rally may be underway, targeting a retest of last week’s 1357.00 high, and higher.

A caveat — One day does not a bottom make, especially when it did not probe under the prior day’s low. But that could speak to how the rally resolves, without preventing a rally.

Another caveat — Closing above 1315.00 would have been bullish, instead of its last-minute probe down to 1313.25. But that did not trigger a sell signal.

So long as 1312.50-1315.00 holds as support, and launches another upleg, buy signals would be credible for extending higher. Back above 1318.00 through Wednesday’s open, for instance, could marginalize sellers for the day. But not rallying through Wednesday’s open may be unable to avoid retesting 1297.25-1300.50.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Tuesday’s last-minute action dipped under 1316.00 to attack 1313.00, but still closed and settled at 1315.00. Back under 1310.25 would suggest a retest of this week’s lows in-play. Extending higher overnight through 1318.00 would be credible for extending higher, with room to absorb dips down to 1316.00.[/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.

Monday’s drop resumed Thursday’s effort… or, ended it. In any case, a lot of selling pressure has been expended to retest prior lows — not yet breaking them, and not yet signaling the trend has reversed down.

Pattern points… (Setups and technicals)[pay]
Monday afternoon stair-stepped higher to 1310.25 from the 1302.50 noon low. But buyers gained no traction for the effort. That wouldn’t necessarily be bearish, except that buyers tried.

The noon hour’s 1306.00 high was probed by 3 points during the bias environment. Yet, the bias environment was exited back at the noon hour’s 1306.00 high. The bias environment’s 1309.00 high was attacked by a 3-1/2 point surge into the 3:20 window’s exit, but not exceeded until later.

Diving to almost 1305.00 through the cash session close proved that buyers gained no traction for their earlier efforts. Since it wasn’t for lack of trying, that is potentially bearish. Resuming the decline at Tuesday’s open would be likely to extend down.

Otherwise, buyers can still gain traction immediately Tuesday despite not gaining traction for their efforts Monday. Gapping up, preferably above 1315.00, would get every benefit of the doubt for resuming Friday’s recovery effort.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Recovering overnight from attacking Monday’s 1302.25-1303.25 lows (or from probing lower to 1300.50 or to 1297.25) would help to greet the day with even less ballast preventing lift-off. But overnight bounces that are rejected through Tuesday open would keep alive the decline’s momentum.[/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.

Despite Friday’s bounce… it remains to be seen whether Thursday’s relentless sell-off was nevertheless sponsored only by weak hands. Friday’s bounce was belabored, productive only during the least liquid period, and ultimately held a test of resistance.

Pattern points… (Setups and technicals)[pay]
Did the morning’s headline barrage upset out timing windows? Two Fridays earlier, a Presidential press conference’s delay interfered with the 10:15 bias timing window. It did not prevent the expected bullish resolution, retracing all of the prior day’s drop.

Price will go where it needs to go. But without being sponsored by strong hands, that destination is vulnerable to failure. In fact, all of that prior weak-handed rally was itself retraced immediately the following Monday. This bounce could still extend higher, first.

Friday’s bounce recovered to test Thursday afternoon’s 1329.00 bias-down target. It was probed momentarily by nearly 3 points. But the cash session close equated to 1329.00. A post-close dive that touched 1325.00 was otherwise irrelevant.

A retest of last week’s 1357.00 high would be optimal before a durable downleg can begin. If sellers aren’t probing under a prior low at Monday’s open, then Friday’s bounce is probably already extending higher.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Saturday Strategy Session starts at 9:30am ET. Click here to enter, or find its link in the blog’s sidebar. See you there?[/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.

Was it Moody’s post-close downgrades… hanging over the market’s head all day, that caused its session-long decline? Probably not, since there hasn’t been much of a relief rally since then. And when the market ignores unfinished business above, usually it is being overwhelmed by something substantial.

Pattern points… (Setups and technicals)[pay]
Thursday’s drop was a 38.2% retracement of the rally from June 4’s trend low. It was a 61.8% retracement of the leg from June 12’s last relative low. Either is natural support. And neither is represents a trend change.

Sellers throughout the day broke under relevant support levels too late to be considered strong hands. Obviously that doesn’t impact productivity, but it should produce as steep of a recovery.

If there is a recovery.

Closing at natural support does not equate to closing above resistance. Momentum has not reversed up. Extending the current drop instead should be at an accelerated pace, and be more sizable than Thursday’s leg.

3-minute RSI ignored three consecutive positive divergences Thursday, extending down without producing any significant bounce. This can mean the market is in touch with much bigger selling pressure coming down the pipeline.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Thursday’s low tested “lower prior highs,” and held. No meaningful intraday bounce refueled the drop. Perhaps the weekend’s impending illiquidity accelerated or encouraged selling that would have happened later or not at all. If that’s not enough to flush out all available selling pressure, then an even uglier day may lie ahead Friday.[/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.

FOMC days can be very volatile… with wide-ranging moves that make sense waiting for patiently. As was expected, trending was unlikely to gain traction Wednesday, but not for lack of trying. Three big swings finished the day essentially unchanged from Tuesday’s close.

Pattern points… (Setups and technicals)[pay]
Overbought RSIs at Tuesday’s 1357.00 high still require a retest. Tuesday afternoon had attacked it. Now Wednesday’s overnight recovery attempt, and the FOMC reactions first recovery, have also come close without retesting.

Since sellers did not gain traction for their delay, the eventual retest should easily probe through the 1357.00 objective. Its minimum test has been expected to touch 1359.75, if not also 1361.50, but now 1364.00 has become much likelier.

Probing fresh highs Thursday — satisfying that much buying pressure and neutralizing the attraction above — would be vulnerable to reversing down through the close. Extending higher would put into play 1375.00 and 1386.00. In any case, in any sequence, closing under 1336.00 would reverse momentum down.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Thursday’s econ calendar has been taking steroids in preparation for this day. Four high-profile items are due simultaneously at 10:00. The Jobless Claims reaction may have already offered clues to sentiment. Multiple big intraday trending is less likely than Wednesday, but there should still be plenty of volatility.[/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.