Market Wrap

When is a recovery not… a recovery? When it fails to recover resistance that it managed to probe intraday. Such is the case with Monday’s rally from overnight lows. The open held a test of its resistance, and the afternoon held its resistance. Each was a higher high, and more higher highs may follow. But that doesn’t mean buyers are gaining traction for their efforts.

Pattern points… (Setups and technicals)[pay]
Buyers expended a lot of energy to rally from 1342.50‘s overnight low, testing 1366.00 during the open. That much strength could have been bullish, if applied more appropriately, either by delaying 1366.00‘s test, or by blowing through it.

After a pullback to 1360.00, rallying to new session highs expended a lot of energy, too. That also could have been bullish, if the probe above 1366.00 were maintained. At the very least, avoid meeting the afternoon’s 1370.50 bias-up target. Otherwise, not even probing new session highs could have been more bullish.

But the noon hour high was still being tested at the bias environment’s exit, and the last hour’s entry was under the bias environment’s high. Not only had buyers gained no traction for their effort, but they allowed a distribution pattern to form.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Monday’s late 3-point break under 1367.00 to 1364.00 barely avoided qualifying as a compelling hold-short through the close. Extending the rally through Tuesday would require gapping up above Monday’s 1370.00 high (which would also trigger a “session-long rally”). Rallying from any weaker opening strength or modest opening weakness would be doomed to failure. Meanwhile, the decline is free to resume anytime. [/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.

Saturday’s Strategy Session begins at 9:30am ET… its link is here, or in the Blog’s sidebar. Last week’s recording is still available at that page. We’ll discuss what is indicated by the week just ended, and possible paths for the week ahead.

Pattern points… (Setups and technicals)[pay]
Friday’s bias-up environment exit was within the noon hour’s range, and so was the last hour’s entry. Neither one predicted trending. The 3:10-3:20 window was similarly restrained. Each of these windows may suggest a likelihood for trending. But on Friday they only suggested complacency.

The result was an afternoon-long 4-hour trading range between 1363.50-1368.50. It is barely a Channel, resembling a Head & Shoulders although its alleged “head” is no higher than its “shoulders.” The ranging also resembles a Double Bottom, but its two “V” lows disqualify that interpretation in my work. Sometimes a trading range is just a cigar.

Whatever it was, or tried to be, Friday afternoon’s price action was not accumulation. And it probably was not a bottom.

More so, its second consecutive lower close under 1391.00 officially rejects the gaps at 1393.00 and 1408.50 that were filled. The confirmation’s 1364.50 close was quite a bit removed from 1391.00. That spread is similar to the recent 1386.00 trend change’s confirmation at 1353.50. Extending down this time probably needs to extend down without delay.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The two-week old attack on 1352.50‘s prior low held its 1355.00 target instead of generating a new downleg. Both should melt away easily when tested again, if tested again, if the trend is down. There is meanwhile room for a corrective bounce up to 1377.00 before suggesting the decline may be further delayed.[/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 Thursday’s short-squeeze. The last half-hour arrived, after already bouncing 5 points. In fact, RSI was diverging negatively at 3:30. That was an accident waiting to happen, but it was barely a fender-bender, which means…

Pattern points… (Setups and technicals)[pay]
Thursday’s low stopped 2 ticks short of meeting the afternoon’s 1384.00 bias-down target. That’s okay, it wasn’t a bias-down environment. Oversold 1-minute RSI helped price to firm, eventually surging to 1389.50.

That 10-minute surge closely resembled a short-squeeze. A short-squeeze would not have been unusual. Surely, a short-squeeze was widely anticipated, following the big intraday drop. But the squeeze began prematurely, so maybe it ended prematurely, too.

In fact, having already gained 5 points of the low before the last half-hour even began, a short-squeeze became less likely. Overbought 1-minute RSI at its 1389.50 high didn’t help, and then RSI diverged negatively.

You might think after so much build-up to this pattern, that I am about to report how successful it was. Actually, the setup’s 1388.00 sell signal extended only 6 ticks through the close. Futures eventually extended that to 3 points at 1385.00, but that’s irrelevant.

Much more interesting is that last-minute sentiment ahead of Friday’s Employment Situation report was optimistic. The momentary dip to only 1384.50, the premature squeeze, and the late shallow pullback. A favorable reaction Friday morning would still be vulnerable to reversing down.

[/pay]What’s Next… (Outlook and opportunities)[pay]
This being a Friday, the morning’s bias signal is likely to persist through the noon hour. And having closed Thursday back under Apr 4-5’s lows, almost any new rally effort requires rejecting Thursday’s drop as quickly as possible. Not rejecting it could point down sharply into the weekend.[/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 afternoon’s drop resumed… Tuesday night, into Wednesday morning. Wednesday’s morning’s drop hasn’t yet resumed, but its recovery stalled Wednesday afternoon. If the hesitation wasn’t constructive pessimism ahead of Thursday’s Jobless Claims, then resuming the drop could last through Friday morning…

Pattern points… (Setups and technicals)[pay]
Wednesday afternoon’s buyers were late, easily absorbed, or non-existent. The bias environment was exited above the noon hour’s 1398.00 high, but only momentarily. A quick reaction down remained under 1398.00 going into the session’s last hour. That action suggested the rally might not resume.

One more timing window could have behaved bullishly — probing above the bis environment’s 1399.50 high through 3:10-3:20. Hardly. The bias environment’s 1395.00 low was tested, instead.

A momentary surge back to the 1399.50 high proved irrelevant. More important was the entire afternoon having ranged around its 1397.00 bias-up signal. Buyers gained no traction for their efforts, despite rallying off of the morning’s 1391.00 target.

But since no new attack on the 1391.00 target gained traction, sellers did not regain traction. Buyers gained no traction either, so resuming Wednesday’s recovery attempt must begin by gapping up. Resuming the decline must simply probe new lows.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Only one sell signal triggered Wednesday, which was already less than optimal, and it was quickly invalidated. Almost any further upside should begin aggressively to compensate for the delay. Any weaker origin to probing 1401.00 or 1404.00 would be extra vulnerable to reversing back down. [/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 afternoon’s decline wasn’t… on the same page as the morning’s rally. Not unless the decline was all about refueling buyers. The pullback did reach the refueling point, but hasn’t yet reacted up from it.

Pattern points… (Setups and technicals)[pay]
Tuesday’s 1411.75 high left outstanding overbought 1-minute and 3-minute RSIs that require a retest. There is no timing requirement since Tuesday’s close was back under the prior consolidation’s lows (the morning’s last Rising Wedge from 1405.50-1408.50).

Tuesday afternoon’s reversal from attacking 1412.00, and its break under 1406.50, targeted 1401.00. It was the pre-close low. Probing it ahead of the close could have suggested holding short through the close. That was not signaled.

Recall the potentially bearish pattern I described in Tuesday morning’s post. It described a plateau reversing down to 1401.00. Any lower would retrace all of Tuesday’s gains from 1391.00. Meanwhile, 1401.00 could launch another rally leg.

So far, 1401.00 has held. It was probed by 1 point down to 1400.00, but not until after the cash session close. The attraction back up to the high’s overbought RSIs could help 1401.00 to launch another rally leg.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Back above 1404.00-1404.50 would suggest the recovery was underway already. Otherwise, failing to hold 1401.00 support through Wednesday’s open would target the 1391.25 origin of Tuesday’s rally. And probably resume the decline. High-profile pre-open econ reports should trigger a reaction.[/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.