Market Wrap

Another “hope springs eternal” bounce… resolved down nonetheless Monday. Opening price action had offered three separate elements confirming sellers were the strong hands. That didn’t prevent a corrective bounce, but it meant its sponsorship was weak hands. In fact, post-close action has already fulfilled the 1332.00 target to within a tick…

Pattern points… (Setups and technicals)[pay]
1332.00 remained outstanding at Monday’s close, and the close was under prior lows. So, holding short through the close was somewhat compelling. But there is still no greater likelihood of extending down below it.

Testing 1332.00 forcibly Monday morning would have been vulnerable to extending down, since initial trending during that first window tends to attract sponsorship. Testing 1332.00 at all late Monday afternoon would have been vulnerable to extending down, since that is a difficult window to attract counter-trend sponsorship.

But now testing 1332.00 overnight or early Tuesday could launch sizable corrective bounce back into last week’s range. Already, its test right after Monday’s close has reacted up 3 points. And it is not yet considered a “new Globex trend extreme” that would require being tested intraday. Recovering 1346.00 Tuesday could start to trigger a bigger rally.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Regardless, Monday was a breakout from last week’s range. A second consecutive lower close Tuesday would confirm. While only one more lower close would fulfill the setup’s minimum objective, we would assume that 1290.00 was also in-play. Not confirming the breakout, after testing 1332.00, could form a bottom.[/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 that a Friday, or March?… The session began with a bang, rallying sharply out of overnight lows. Then the afternoon whimpered lower, retracing back into the overnight range. If the weekend’s impending illiquidity couldn’t leverage an oversold market to rally, is the market really oversold?

Pattern points… (Setups and technicals)[pay]
Friday’s cash session began with a relief rally, because the Thursday’s post-close panic selling wasn’t gaining traction. That could have evolved into a monstrous rally to new relative highs. After all, the week’s sizable and lengthy intraday sell-all recovered to close back above 1349.75. If sellers couldn’t exploit the new bad news, they could get crushed.

In fact, sellers were crushed, by a surge from 1345.50 to 1363.25, testing the week’s prior highs. And it was a Friday, with two days of impending illiquidity. Any whiff of fresh highs could trigger the mother of all short-squeezes.

But there was no fresh high, only an entire afternoon for sellers to push back. And buyers had just expended a lot of energy to quickly rally from the range’s lower-end to its upper-end. So, Friday’s cash session ended with a drop back toward the lows, touching 1349.75.

1349.75 was still being tested at the close. Its reaction did not recover above any prior high or low. A decisive close would have put into play 1332.00, but we’ll assume it is in-play so long as Monday’s open doesn’t recover any relevant resistance. Otherwise, a strong enough open could still trigger a corrective bounce.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Don’t forget to join us at 9:30am ET for the Saturday Strategy Session, linked here.[/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 gap up tried… to fulfill mainstream expectations for a short-squeeze. Its potential was deconstructed in the morning’s First Trade blog post. But the open challenged Wednesday’s high anyway. Wednesday’s high won, and the session only ranged sideways.

Pattern points… (Setups and technicals)[pay]
My fear was that Thursday’s session would range choppily, absorbing the recent shock to the system. That’s what we got, with only a several smaller moves. They were accompanied by some less reliable setups that did play out, and a couple of false breaks that did not.

Usually, one session is enough to absorb the prior sessions’ cumulative shock.

In fact, the volatility may have already resumed into Thursday’s futures close. The afternoon’s 10-point slide to a fresh low under 1352.00 was retraced to 1354.50 at the cash session close, and then up to 1358.50 several minutes later.

Thursday’s session was “ineffectual optimism” — gapping up, spending the entire session in positive territory, and probing prior highs before closing under the morning’s high. So, immediate weakness at Friday’s open would be likely to trend down, presumably resuming the decline targeting 1332.00.

Otherwise, recovering 1356.75 through the open would be unlikely to resume the decline before late-afternoon, if at all before next week. And above 1360.50 would target 1366.00 or 1369.00.

[/pay]What’s Next… (Outlook and opportunities)[pay]
As always, the post-close surge was irrelevant. But unlike most instances, we already know that. JPM has announced a significant mark-to-market loss, taking S&Ps down 10 points to 1348.25.[/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.

The decline resumed after… Tuesday’s close, and extended sharply lower through the morning. Although it didn’t extend down intraday, the decline has not been invalidated. But it is running out of time to resume trending before the weekend’s impending illiquidity encourages shorts to cover.

Pattern points… (Setups and technicals)[pay]
At the risk of being redundant… Yet again, buyers failed to gain traction for their efforts Wednesday. The morning’s dive to test 1339.50 launched a rally to attack 1357.00. Its pullback to 1348.50 was recovered to almost 1361.00 in the afternoon. But the close fell back under the morning’s high. The last round of buyers was weak hands.

Not that sellers were any stronger. They did succeed in keeping the session in negative territory, but without resuming the decline. The session’s last three timing windows repeatedly traded back to and through 1353.00-1357.00. The ranging was supported by 1349.75. Closing under it would have put into play 1332.00. But it was only touched just after the cash session close.

Nothing is preventing the drop from resuming Thursday morning. But only a gap up above 1360.00 would be credible for extending higher intraday.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Interesting econ reports, ranging at trend lows, impending illiquidity… Thursday should be fun. But it wouldn’t be surprising for a relatively narrow range to develop, especially if a no-bias were signaled.[/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 rallying sharply… off session lows, Tuesday’s session confirms that the decline has resumed. It does not preclude there being another corrective bounce. But it does require any bounce to fail, and to ultimately probe new lows.

Pattern points… (Setups and technicals)[pay]
Tuesday’s bias environment was exited above the noon hour’s high, and the session’s last hour was entered above the bias environment high. None of this required the bias environment’s recovery to extend higher. But it made the pattern less likely to reverse down. Momentum took care of the rest, adding another 8-10 points.

The recovery’s 1362.00 high ultimately probed above Monday’s 1359.75 “higher prior lows.” Still being tested through the close, Monday’s resistance was not recovered. Similar to Monday, Tuesday’s buyers gained no traction for their effort. Similar to Tuesday, Wednesday’s open must gap above resistance to extend the rally. That is essentially 1366.00.

So, while the decline has resumed, the corrective bounce has probably ended unless Wednesday’s open were to immediately recover 1366.00. Simultaneously oversold 1-minute and 3-minute RSIs at the 1343.75 low require its retest. So does Sunday night’s “new Globex trend extreme.” Look out below when their retests are underway.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Eurozone news is impacting price action, but so are US economic events. Be sure to check the calendar link.[/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.