Market Wrap

The potential limit to a corrective bounce… was tested Tuesday morning. It was retested Tuesday afternoon. And its test held. Either the corrective bounce has ended, or it is about to extend higehr.

Pattern points… (Setups and technicals)[pay]
The potential for containing the corrective bounce off of 1290.00 was 1330.00-1332.00. Its resistance was probed by Tuesday morning’s rally up to almost 1334.00. An interim dip to 1322.00 was recovered to pierce 1334.00. The cash session close equated to 1331.50.

So, Tuesday afternoon’s buyers accomplished nothing that had not been accomplished already that morning.

The afternoon bias environment’s exit was still testing the noon hour’s 1325.75 upper-end. The session’s last hour was entered while still testing the afternoon bias environment’s 1326.75 upper-end. A buy signal at 1324.25 was very productive, but only grudgingly.

So, Tuesday afternoon’s  gained no traction for their efforts.

Still, closing above the noon hour’s high does keep open the door to extending the rally. Any higher close Wednesday would put into play 1346.00. Any reversal down would be suspicious until breaking under 1322.00.

[/pay]What’s Next… (Outlook and opportunities)[pay]
“Wednesday Wreversal” is so-named for its vulnerability to robbing initial trending of its momentum, and reversing the market more substantially in the opposite direction. Whether a probe of fresh highs that reverses down sharply, or an opening dip that recovers to resume the rally, watch the timing windows for confirmation.[/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.

Please have a safe and happy Memorial Day weekend… I will be monitoring Sunday night’s action through Monday morning in the Chartroom, and will comment as necessary.

Pattern points… (Setups and technicals)[pay]
Pre-holiday illiquidity strangled Friday morning’s volatility, as many U.S. traders stretched a three-day weekend into four. The relatively narrow range was nonetheless very choppy. For all that it was, it was not accumulation.

A test of the morning’s 1313.00 bias-down signal  was put into play by holding a test of the 1320.75 bias-up signal. It was left intact by not exiting the morning’s bias environment back above 1320.75. It was fulfilled by exiting the afternoon’s bias environment under the noon hour’s 1317.25 low.

In fact, the session’s last hour was entered under the afternoon’s 1315.25 bias environment low. And then the 3:10-3:20 timing window trended down to fresh session lows. The reaction up from testing 1313.00 down to 1312.00 was recovered up to 1316.50. That was still not accumulation, and sellers gained traction for their timing, but did not close under a prior low.

It is possible to dismiss Friday’s price action for being little more than noise ahead of the holiday weekend. Thursday night’s rally to almost 1330.00 was much more relevant. It would suffice as the peak of the correction from 1290.00. The alternative to avoiding a retest of 1330.00-1332.00 would be to resume the decline without delay, likely by gapping down sharply. So, absent a gap down, a retest of 1330.00-1332.00 would be likely.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Don’t forget — There is no Saturday Strategy Session on holiday weekends. Please don’t hesitate to make any chart analysis requests in the chartroom Sunday night or Monday.[/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 day, another dive recovered… from under 1312.50. That can be bullish — if it is exploited before buyers run out of energy to absorb another dip.

Pattern points… (Setups and technicals)[pay]
Four of Thursday’s opening hour checkpoints each overlapped 1317.00, the equivalent to Wednesday’s cash session close. This market did not want to trend. Attempts to trend intraday were returned to 1317.00, as last as the last hour.

But what matters most is the close. And Thursday was the third consecutive close back above 1312.50 after probing below it intraday. Buyers deserve a reward for absorbing the dips.

Oh, wait. Buyers already rewarded themselves.

That buying pressure could have remained pent-up overnight to help resume the rally Friday. But the last half-hour’s surge through 1312.50 extended 7 points to 1319.25 into the cash session close, and another 4 points to 1323.25 into the futures close.

Despite Thursday’s premature surge, there remains potential for extending the corrective bounce to 1332.00. But extending the bounce should not require another save from under 1312.50.

[/pay]What’s Next… (Outlook and opportunities)[pay]
This being a Friday, the morning’s bias is likely to persist through the noon hour. This being a 3-day weekend, liquidity is likely to evaporate quickly after mid-morning, which is not conducive to trading.[/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.

Will the real sponsorship please stand up?… Tuesday afternoon’s drop had found new sponsorship. Wednesday afternoon’s rally suggested that Tuesday’s drop was weak hands, after all. Perhaps they’re both weak into the weekend…

Pattern points… (Setups and technicals)[pay]
Tuesday’s last-minute recovery back above 1312.50 had suggested the afternoon’s sellers were weak hands. Wednesday’s recovery back above 1312.50 suggests the same of the morning’s sellers. The first recovery obviously doesn’t prevent another round of intraday selling, but there is no bullish reason for another dip.

So, Wednesday’s close ahead of a 3-day weekend does not offer an overtly bullish signal, essentially since no prior low was tested. Only relevant support was tested, twice, and held. If that was artificial selling pressure — selling that was accelerated or fabricated to avoid the holiday weekend’s impending illiquidity — then it should be finished.

Any further selling Thursday would suggest declining into the weekend. And as with Wednesday’s open, extending higher would be likely to begin by gapping up Thursday.

[/pay]What’s Next… (Outlook and opportunities)[pay]
To reiterate: Wednesday’s 3-day weekend indicator was neither bearish nor bullish. There is a basis for being bullish, not only for having recovered twice back above 1312.15, but for completing that sequence through Wednesday’s close. Rejecting this recovery immediately at Thursday’s open would still be bearish.[/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 attempt to extend… Monday’s rally was retraced entirely. But it wasn’t retraced under a prior low. The eventual resumption of the recent decline is still a question mark…

Pattern points… (Setups and technicals)[pay]
A quick 10-point oversold bounce retraced 61.8% of Tuesday afternoon’s late drop to 1307.50. It peaked upon testing 1317.50, which was both the noon hour and afternoon bias environment’s lows. Holding that “higher prior low” until its 3:10-20 break had suggested any sellers would be weak hands.

So it is interesting that the bounce managed to close back above 1311.50-1312.50. Closing under it would have signaled the correction from Friday’s low had ended. Perhaps it has. Tuesday’s late decline had an opportunity to signal as much, but did not.

At least Tuesday afternoon’s sellers left unfinished business below. Oversold RSIs at the 1307.50 low require its retest. Extending higher first would be that much likelier to fail that much sooner. Gapping up above Tuesday afternoon’s 1323.00 high would target 1330.00-1332.00.

But retesting 1307.50 first overnight would be vulnerable to resuming the decline until 1311.50-1312.50 were recovered, and then 1315.50-1316.50. There is no requirement to resume the decline, and most of this week’s bias signals have been only grudgingly bullish.

[/pay]What’s Next… (Outlook and opportunities)[pay]
I occasionally refer to “Wreversal Wednesday,” for the day’s propensity to reverse a morning trend back in the opposite direction. That description could apply to Tuesday’s pattern. Regardless, beware of early trending Wednesday that doesn’t exceed a relevant level through a relevant timing window.[/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.