Market Wrap

Monday night’s rally extended higher… through the morning. It also extended higher into Wednesday afternoon, until it didn’t. All of the afternoon’s extra gain was retraced. Too much optimism ahead of Wednesday’s FOMC?

Pattern points… (Setups and technicals)[pay]
Tuesday afternoon’s bias-up signal had triggered at 1353.00, but it was invalidated by exiting the bias environment back under 1353.00, and not entering the session’s last hour back above 1353.00. That’s not necessarily bearish.

The bias environment’s exit was probing under the noon hour’s 1351.50 low. Although lower lows were avoided, the session’s last hour was entered under the noon hour’s 1353.00 high. That’s not necessarily bearish, either.

Monday morning’s eventual bullish outcome had been the product of sellers failing several opportunities to regain traction. They duplicated the failed efforts Tuesday afternoon. While the afternoon’s early buying was retraced, sellers gained no traction for retracing it.

There are still ongoing indications that this leg of the rally is sponsored by weaker hands overall. All of which is consistent with last week’s lows having been relatively shallow. None of which prevents probing higher highs (e.g. 1361.50, 1364.25), while remaining vulnerable to a sudden, steep and substantial reversal.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Wednesday’s FOMC events will dominate the afternoon. Overnight selling pressure — or into the open — may be needed to help absorb an initially negative knee-jerk reaction down. Retesting Tuesday’s 1357.00 high — even if only proving above it overnight — would make a negative reaction much more difficult to recover, if not unlikely.[/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.

Another Sunday night gap up… another Monday morning tumble. But this one recovered to probe positive territory. The question whether its recovery actually gained any traction.

Pattern points… (Setups and technicals)[pay]
Immediately recovering 1335.25 at Monday’s open would have signaled a new rally leg underway. Any resistance at Sunday night’s highs would have been irrelevant. But Sunday night’s fresh high up to 1347.50 was retraced 20 points down to 1327.50 at Monday’s open. A new rally leg would need another signal.

Not just another signal, but a bigger signal.

Monday afternoon’s range developed entirely above 1335.25. But the cash session close was still testing 1338.00, essentially Friday’s expiration close. That’s not bigger.

Buyers haven’t exploited the hesitation, other than to range sideways, no different from sellers having failed several opportunities to regain traction Monday morning. The afternoon’s 3:10-3:20 window trended down, and its 1339.00 origin wasn’t recovered (not until after the cash session close), but sellers have yet to exploit that opportunity.

[/pay]What’s Next… (Outlook and opportunities)[pay]
It’s essentially equilibrium, at a trend extreme. If buyers are gaining control, then Tuesday’s open can gap up to 1345.75 and extend through Sunday night’s highs. If sellers are regaining control, then another probe under 1331.00 should find no support. [/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 the market just signal… a detour from its unfinished business below? We’ll discuss that in detail during the weekly Saturday Strategy Session. It begins at 9:30am, and its link can be found in the blog’s sidebar.

Pattern points… (Setups and technicals)[pay]
Fridays are difficult enough to get trending started. They’re notoriously difficult to reverse trending underway. Friday’s gap up never really turned negative, and every relevant timing window avoided being entered under a relevant low, so all ties were won by higher prices.

The action leaves two big questions.

First, did the rally finally complete a bounce? Relevant resistance was met, and held. The cash session close held 1335.25 resistance, which was the afternoon’s bias-up target a 61.8% retracement into last Sunday night’s initial ranging (recall that Sunday night’s open gapped up and ranged sideways before falling). Not closing above it means no higher target was put into play.

So, extending even a millimeter higher would all but signal triggering a new rally leg.

Second, is Wednesday’s bearish Expiration Indicator relevant? It is certainly vulnerable to inverting, especially if its sponsorship is blind-sided by contrary events. That’s a cop-out. Perhaps that possibility would be considered if the signal had been actively bearish instead of passively, i.e. closing under relevant support Wednesday, instead of holding a test of resistance.

Suffice it to say, if Monday morning’s action were to tumble precipitously — presumably on news — then I would consider the bearish Expiration Indicator to have been made possible the conditions. But I would not consider the indicator predictive at this point.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Last week’s Saturday Strategy Session gamed out the potential upside patterns. We’ll revisit that this week, but also look at the downside path if sellers were to retake control.[/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.

A funny thing happened on the way… to rejecting Thursday’s probe above prior highs. Rumors of of coordinated global intervention took a perfectly fine 10-point drop, and stopped it 6 points short while reversing it into a 14-point surge. New game, or just a delay?

Pattern points… (Setups and technicals)[pay]
Since the Wednesday Expiration Indicator controls Friday afternoon and Monday morning’s bias, it is unaffected by Thursday’s late surge. Tests of prior highs remain likely to hold as resistance. And sellers should be rewarded eventually for absorbing the tests.

Gapping down under Thursday afternoon’s lows not only would reject Thursday’s buyers, but also reverse momentum down. And being a Friday — an expiration, no less — the morning’s bias would be likely to persist through the noon hour, compensating for Thursday’s late detour.

Meanwhile, so long as we’re in the neighborhood, the gap back to Monday’s 1329.50 gap up should be filled. It is only a natural attraction, and not a pattern’s requirement. But its test is likely so long as Friday’s open doesn’t reject Thursday’s breakout.[/pay]What’s Next… (Outlook and opportunities)[pay]
1329.50‘s test could be fulfilled overnight and then rejected before Friday’s open. Similarly, the late intaday surge could be retraced overnight. We’ll continue to expect a downward bias into the weekend, but that would be difficult if the morning were to rally to new 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.

Wednesday’s last-minute bounce… was the product of 3-minute RSI finally making a higher oversold low, while 1-minute RSI diverged positively. At least, that put the brakes on the decline. But it also drew a line in the sand, that should give way under only one condition.

Pattern points… (Setups and technicals)[pay]
The sponsorship of late Tuesday’s breakout was weak hands. But they at least earned control of a timing window. Typically that would mean probing fresh highs. But Wednesday’s gap down allowed them a 12-13 point rally through the morning’s bias environment.

This rally tested Tuesday’s intraday and overnight highs, without buyers gaining traction for their effort. That’s not very bullish on any given day. On Wednesday ahead of expiration, the Wednesday’s Expiration Indicator is bearish.The indicator is passively bearish. Sellers might increase their efforts going forward, but they did not apply enough pressure when it mattered in order to trigger an actively bearish signal. Assuming that the signal is productive, it may yet produce only a corrective dip to 1292.00 that refuels for a rally next week. Or, it may resume the decline to 1280.00, 1254.00 and 1225.00.

Wednesday’s signal can be invalidated by Thursday’s open immediately recovering Wednesday’s 1321.00 highs. Perhaps Wednesday afternoon’s drop was just an initial negative knee-jerk reaction to Egan-Jones Spain downgrade. Moody’s seconded after the close, and the price effect has been inconsequential.

[/pay]What’s Next… (Outlook and opportunities)[pay]
So long as 1311.00-1313.00 were to hold tests as resistance overnight, Wednesday afternoon’s decline should resume Thursday morning. Anything higher could probe above 1321.00, but still be likely to reverse down so long as 1321.00 were not recovered at Thursday’s 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.