Market Wrap

Tuesday’s bias-up signal was… invalidated by exiting the bias environment back under it. Then despite not triggering the afternoon’s bias-up, the morning’s bias-up target was met at Tuesday afternoon’s high. That’s not a bad characterization of the session’s ongoing disconnect.

Pattern points… (Setups and technicals)[pay]
Three more useful characterizations of Tuesday’s session are its failed sell-offs, its probe of fresh highs, and those fresh highs not gaining traction.

The overnight drop from 1280.50 down to 1267.50 was recovered in time to avoid a gap down, which sellers needed to retake control. The morning probed Monday’s highs up to 1284.50. But each of the afternoon’s timing windows overlapped the morning’s 1284.50 high.

That last point wouldn’t be so relevant, if not for each of the afternoon’s timing windows also probing its own fresh high. This is distribution. It is not a sell signal.

A distributive rally can extend indefinitely. Closing Tuesday under the noon hour’s 1283.00 high would have signaled the rally’s end, but that was avoided.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Similar to Tuesday’s open, sellers could be marginalized for much of the day — and for another 10 points — if they don’t retake control through the open. Retaking control at the open could allow sellers to quickly retest this week’s 1262.00 low.[/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.

Well, that was interesting… Plunging overnight to within 1 point of the next objective, retracing it all into the open, fluctuating widely between the two, and then closing essentially unchanged. A rally would be premature, but the burden of proof is on sellers.

Pattern points… (Setups and technicals)[pay]
Monday’s open gapped up in a downtrend, but was then reversed to new trend lows. Closing back above the morning’s high would have formed a “pivot reversal” setup. And that could have ended the decline.

But pivot reversals are unlikely to form without also retesting any overnight low. And there is still unfinished business below at the 1262.00 “new Globex trend extreme” which requires an eventual retest intraday. Rallying before then could be productive, but only temporarily.

Being unlikely to form a pivot reversal, Monday afternoon’s recovery attempt did not close above the morning’s high. It did not even close positive. No pivot reversal formed. Still, closing above the noon hour’s high did prevent sellers from gaining traction. So, resuming the decline all but requires gapping down.

Not gapping down Tuesday would be likelier to retest Monday afternoon’s 1279.25 high. Any further delay in resuming the decline could gain traction up to the 1295.00 area. Otherwise, a retest of the 1262.00 low —  probably down to 1259.50 — could hold, but it would be vulnerable to breaking lower.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Monday afternoon’s attack on the overnight low did not neutralize its attraction. And it didn’t form any more durable support. But the pattern will be difficult to recover if tested from above. Maintaining a probe of fresh lows through a relevant timing window could force the decline to extend considerably. [/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.

It took only one week… for the corrective rally to peak, and only three days to plunge through prior lows. It wouldn’t be wrong to prepare for the drop having fallen too far, too quickly, making it vulnerable to a bounce. But the rush to exit ahead of the weekend — in fact, ahead of Friday afternoon — is more than a little alarming.

Pattern points… (Setups and technicals)[pay]
Friday’s close narrowly missed signaling to consider holding short. The afternoon’s 1276.00 bias-down target had been thoroughly tested, chipping away at its support. But impatient buyers kept up appearances and held off fresh lows

Until the cash session closed.

Literally.

The next 2 minutes probed fresh session lows down to 1274.25 before bouncing. Futures closed by sliding again to 1273.50. But 1276.00‘s prior low had not been probed yet 3 minutes before the cash session close, so its later plunge was too late to trigger my hold-short setup.

None of which prevents extending down sharply Sunday night and Monday. There are plenty of reasons for starting the week by gapping down. But there is also a vulnerability to massive, weekend coordinated intervention, which would have immediate effect. Temporarily, since bottoms don’t happen on Fridays, but massive.

Meanwhile, the next lower objective under 1290.00 is in-play at 1261.00. And it could be met very quickly, if it is going to be met at all. Two years since calling for a thousand-point plunge, is it time for a 2400-point down day, yet?

[/pay]What’s Next… (Outlook and opportunities)[pay]
Saturday Strategy Session is at 9:30am ET. Its link is found in the blog’s sidebar (not held in the chartroom). Bring stock requests, and a cushion to sit on.[/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 lows fulfilled the… last element likely from Wednesday’s “session-long decline,” by trending to new lows intraday. Wednesday night’s rally didn’t prevent it, after all, only refueling sellers. Now the question is whether Thursday’s rally back above Wednesday night’s highs has only refueled sellers, too…

Pattern points… (Setups and technicals)[pay]
Apart from being follow-through from Wednesday’s “session-long decline” setup, Thursday’s 1297.25 low fulfilled a lot of selling pressure. RSIs diverged positively, and being too early for the balance of the session to trade out at the lows, a 22-point rally probed 1318.00.

Had that buying pressure remained pent-up, recovering only 1308.50, then a bigger rally Friday would have been all but assured. Perhaps not a direct path higher, given that the Employment Situation report is released pre-open. But 1308.50 recovery would have been enough to trap shorts without expending all available buying pressure.

At least 1318.00‘s last-minute test did react down. In fact, the cash session’s close only touched 1308.75, and only futures dipped further to 1306.00. The new weakness is not enough to have refueled buyers again, but it discounted some pessimism ahead of Friday’s report. If another bounce can gain any traction, it could extend the corrective rally to 1346.00.

[/pay]What’s Next… (Outlook and opportunities)[pay]
So, Friday’s report is being greeted essentially at equilibrium, no likelier to react initially in one direction than the other. Overbought RSIs at Thursday’s high require a retest — “required” because of how rarely it is not retested. Those rare exceptions tend to be for a much greater cause, which in this case would be to trend down sharply.[/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 “session-long decline” setup… was fulfilled. All bounces were absorbed, tests of support eventually failed, and the session low printed during the last hour. In fact, the close ticked down to new lows. And the session following a session-long decline usually does something else specific, too…

Pattern points… (Setups and technicals)[pay]
Session-long declines are typically followed by probing lower lows the following day. Not simply as noise around the prior close, but actually trending down through a timing window.

At least the afternoon’s 1307.50 bias-down target remains outstanding to help attract price down. That could be met overnight, since Wednesday’s futures close already slid under the 1312.25 cash session close to 1308.00. Regardless, the delay in testing the target — more so, the detour up to 1317.00 —  makes fresh lows likely also to visit 1301.00. Almost any bullish scenario would require gapping up above 1318.00.

Reacting down to 1308.00 suggests the corrective bounce off of 1290.00 was influenced by its 1332.00 bounce limit. The bounce has likely ended. But at least a lower close Thursday is needed to confirm momentum has reversed down. Look out above if fresh lows are reversed into positive territory coming out of the noon hour.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Accelerated breakouts among currencies Wednesday still need confirmation from a second consecutive higher close Thursday. And being Thursday, that would be terribly vulnerable to extending sharply and substantially into and out of the weekend. Memories of October 1987 come to mind (James Baker on the Dollar: “…let it go”). If Thursday doesn’t confirm Wednesday’s break, then all asset classes would become vulnerable to reversing their recent trending. [/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.