Market Wrap

Day-one of an upcrash? Or… was Monday’s 25-point rally the corrective bounce of an ongoing decline. Regardless, there is unfinished business below at Friday’s 1292.50 and 1290.25 cash session and futures session closes, not to mention Sunday night’s 1287.25 “new Globex trend extreme.” And now a lot of buying pressure has now been expended.

Pattern points… (Setups and technicals)[pay]
Monday’s gap up was not above Friday afternoon’s high, making the session-long rally unusual. But the rally was due to sellers not retaking control, and not from buyers gaining traction. Both bias signals were triggered last-minute or later.

I over-estimated the depth of Monday morning’s false break lower, which prevented participating much earlier in the rally. But that also speaks to the impatient buying that limited pullbacks.

Anyway, the afternoon’s 1312.50 bias-up target was eventually tested to the 1315.50 upper-end of its noise range. But not until after the close. And that was too late to be rejected, and to signal momentum reversing back down. It was also too late to signal that Monday’s buyers gained traction for their efforts.

But it was enough for the burden of proof to be more so on sellers. Extending higher Tuesday could potentially test 1332.00. Attempting to resume the decline would have to negotiate 1304.50-1306.50 support before assuming a retest of the lows was underway.

[/pay]What’s Next… (Outlook and opportunities)[pay]
As with Monday’s open, sellers not gaining traction through the open could prevent them from gaining traction until much higher levels. Even then, dips could prove to be no more than refueling buyers unless relevant support were broken through relevant timing windows.[/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.

Three words: Saturday Strategy Session… It starts at 9:30am ET, linked here or in the sidebar. We’ll discuss the market’s next move, and what it should look like. Then I’ll offer “instant analysis” of your stock requests. Join us if you can — there is no weekend session next week.

Pattern points… (Setups and technicals)[pay]
1290.00 was put into play by closing under 1332.00, and it was met at Friday’s low. It was too late to be rejected, making the pattern likely to extend to 1260.00-1261.00.

New trend lows on a Friday afternoon already suggest lower lows to come Monday. And proving the influence of Wednesday’s bearish Expiration Indicator on Friday afternoon makes it likely also to influence Monday morning.

It is possible that Friday’s new low accelerated selling that might have happened Monday, in order to avoid the weekend’s illiquidity. If so, then Monday’s open should gap up Monday above 1305.00 or 1310.50, which would target 1332.00.

Regardless, any bounce is only temporary, and no bounce is required at all. Expirations don’t contain trend extremes, so any bounce should fail, and the trend is otherwise likely to extend down.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Mathematically, the market is only getting closer to a bottom. Even if that were 100% certain to happen within the next two days, it could happen anywhere in a wide and painful price range. Just a word of caution that there should be plenty of upside when the market does turn, so it isn’t necessary to chase the low tick. [/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 overnight bounce refueled sellers… to produce yet another new trend extreme. This one fulfilled its required intraday retest without much delay — only another brief refueling bounce. Bounces are getting shallower, and briefer. Have buyers become more patient, or broke?

Pattern points… (Setups and technicals)[pay]
I do not doubt the street’s desire to have priced Facebook into a rally. So, Thursday’s sharp decline to new lows should be considered evidence that the market cannot be manipulated.

I don’t doubt that the deal’s underwriters might have reduced their selling pressure. This might have had the same effect of making price rise. But this would presume that nothing else would encourage selling. Apparently, something did.

Meanwhile, Wednesday’s Expiration Indicator was actively bearish. It indicated that big money intends to distribute both into and out of the weekend. Of course, it is possible that the substantial decline since triggering the signal may have accelerated that selling pressure forward already, leaving little selling pressure by Friday afternoon. So, be aware that window could invert. Look out below if it does not.

Other than gapping up Friday above 1317.00 resistance, 1298.00 support is probably the next opportunity to delay testing this leg’s 1290.00 target, by inserting a counter-trend bounce. It was attacked to within 3 points after Thursday’s close. Regardless, I do still expect 1290.00‘s eventual test, and its eventual break, next targeting 1260.00-1261.00.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Being a Friday — expiration, no less — the morning’s bias signal is likely to persist through the noon hour. As difficult as it is to stop early trending, it is also difficult to start it. [/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 morning’s rally was as impressive… as Tuesday night’s new low. And it was just as durable, which is to say, it was retraced entirely. But unlike the overnight low, the bounce’s high does not require a retest…

Pattern points… (Setups and technicals)[pay]
Once Tuesday night’s sellers had formed a “new Globex trend extreme” at the 1321.00 low, they could allow a corrective rally. New Globex extremes are almost historically mandated to be retested intraday. Meanwhile, they offer context to an interim bounce, defining it in advance as being only a correction.

This might seem irrelevant now, since the corrective bounce has been retraced already back under Tuesday’s close. But it could not be more relevant. The bounce was retraced only back under Tuesday’s close, and not yet back to 1321.00. The low was not much further below at 2:30 than it was at 4:00. Impatient buyers  caused the delay. This is just a different version of the detour rally’s optimism — a sizable detour that has refueled sellers yet again.

Wednesday’s Expiration Indicator was actively bearish by closing under support in a downtrend. It can still be rejected by Thursday’s open gapping up above Wednesday afternoon’s ~1332.00 high, if not also above Wednesday’s ~1340.00 high. Any shallower opening strength would be likely to peak much sooner, and to fall much harder.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Retesting the 1321.00 new Globex trend extreme down to 1318.00 could launch another bounce, even overnight. But I would not look for any productive bounce without first recovering 1327.00. Meanwhile, two consecutive closes under 1332.00 have officially put into play 1290.00.[/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.

Tuesday’s low was 20 points… under the overnight high. It could have been much deeper. But each intraday probe into negative territory was recovered until the afternoon bias environment began lapsing. And that kept its loss mostly to single digits. The second consecutive session of new trend lows had little else holding it up.

Pattern points… (Setups and technicals)[pay]
Tuesday was also the second consecutive close under last week’s range, confirming Monday’s breakout. At least a third lower close is required, not necessarily consecutive on Wednesday.

There was nothing bullish about Tuesday’s last hour ranging under 1331.00, under all prior lows. But this did deny us the luxury of a “hold-short through the close” signal. There is still a likelihood of extending down, when the confirmation session breaks late to new lows.

More so, extending down overnight would be likely to accelerate into Wednesday morning. Whether it can be called “capitulation,” or the other “c” word, the “hope springs eternal” rallies have probably ended.

If any more optimism needs to run its course, then it should be only temporary. Unless Wednesday’s open were back above Tuesday afternoon’s 1338.00-1340.00 highs, the trend remains down, next targeting 1290.00.

[/pay]What’s Next… (Outlook and opportunities)[pay]
FOMC Minutes are due in the afternoon. Any stress ahead of its release should help to accelerate any trending in the morning. [/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.