Market Wrap

Monday’s probe under Friday’s lows… remained under pressure long enough to leave unfinished business below. Between that and the gap back to Tuesday’s close, rallies would be suspicious.

Pattern points… (Setups and technicals)[pay]
Overbought RSIs at Monday afternoon’s 1371.75 high initially inhibited the afternoon’s bounce from being rejected to resume the decline. The afternoon’s bias environment had been exited above the noon hour 1367.00 highs, which also suggested that sellers may be marginalized.

But a late dip tested 1365.00 into the cash session close anyway, and fell to 1363.00 before the futures close. The overbought RSIs printed above the afternoon’s bias-up signal, during a no-bias environment, undermining its ability to undermine sellers.

Regardless, it’s still a very bearish scenario, likely to resolve down and resume the bigger decline. Monday afternoon’s overbought RSIs could be neutralized by testing 1371.75 overnight, and already be in decline at Tuesday’s open.

The likely alternative to rallying at Tuesday’s open would be gapping down to last Tuesday’s 1353.50/1357.00 close(s). Not gapping down Tuesday, and not yet retesting 1371.75 above, could trend up to 1375.00 or higher through the morning.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Attempts to renew the decline could be tried indefinitely, but typically two or three consecutive tests of support rally into at least a brief detour above. Time is growing short for the current attempt to resolve down without producing a bigger bounce. [/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.

Friday the 13th wasn’t… lucky for longs. The open’s gap down confirmed that Thursday’s probe above prior highs had failed. The gap down also triggered a “session-long decline” setup. And all of Thursday’s rally was retraced. More to come?

Pattern points… (Setups and technicals)[pay]
A “hold-short through the close” was not compelling, since Friday’s late drop fulfilled its 1366.00-1367.25 objective. And not only because the objective was fulfilled, but because it then held as support (a last-minute post-close spike to 1363.75 was irrelevant).

Closing under 1366.00-1367.25, or never even touching it, could have encouraged holding short through the close. Instead, fulfilling selling pressure makes the pattern vulnerable to a significant bounce. Too much of a vulnerability to too big of a bounce to justify the risk.

To be sure, the downside is potentially quite substantial. Almost any opening weakness Monday would be likely to test at least 1357.00. It could be tested by gapping down, and the open could gap down to and through 1353.50-1355.00.

While gapping 10 points down is likely, there is potential to gap up 10 points since so much selling pressure was fulfilled. The risk:reward is not attractive enough. Sunday night’s open should go a long way to settling the difference.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Join us if you can for the Saturday Strategy Session at 9:30am ET. We’ll discuss the market’s bigger picture, specific setups that developed during the week, and then take stock requests. [/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.

Friday the 13th?… Don’t forget about Saturday the 14th, for our weekly Strategy Session. It begins at 9:30am ET, and its link is in the blog’s sidebar.

Pattern points… (Setups and technicals)[pay]
Closing above 1380.00 Thursday would have been constructive for a bigger corrective leg. Wednesday’s rally had a similar opportunity to close above 1369.00, but failed. Clearly that didn’t prevent a bigger bounce, like Thursday’s rally to 1386.25. But it does tell us the move is still likely a correction before resuming the decline to new lows.

So, was Thursday’s close above 1380.00? Not clearly. Prior to the last touch of 1380.00 as support, the intraday high had been 1383.00. Every higher high retraced back under it, including the last surge to 1386.25. Opening Friday under 1380.00 would confirm it had held. But the open must surge from 1383.00 to even begin signaling its recovery.

Extending higher would next target filling the gap back to 1390.00. This would be interesting, since closing above the 1386.00 area would almost invalidate the trend change signal. Unfinished business below at the gap back to Tuesday’s close suggests otherwise, so almost any probe above Thursday’s highs is likely to close negative Friday.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Meanwhile, since Thursday’s closing action trended up, gapping down under the afternoon bias environment’s 1379.50 low would trigger a session-long decline. New lows for the week are not required, but there is surprisingly little support on the way back down there.[/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 gap up tried… extending higher intraday. But buyers never gained traction, and the balance of the session was essentially biased downward. That’s not bullish.

Pattern points… (Setups and technicals)[pay]
Sellers never regained traction after Wednesday’s gap up. Will buyers be rewarded for that?

Several intraday dips under relevant support were recovered through relevant timing windows, preventing their sponsorship from gaining traction. There was the opening hour’s two dips to or through 1366.25, and then the morning bias environment exit’s dip to 1364.00. Later, 1364.00 low was tested during the 3:10-3:20 window, and still being tested into the close.

Sellers just couldn’t gain traction for their efforts.

This template normally rewards buyers by producing fresh highs. The morning’s 1370.50 high was too shallow to qualify. There is nothing unordinary about not rewarding buyers — it’s just not usual.

Buyers can’t afford to hesitate after gaining no traction Wednesday, holding a probe above the 1369.00 area prior highs, closing back under 1366.00, and leaving a gap outstanding back to Tuesday’s 1353.50/1357.00 close.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Resuming the decline abruptly from Wednesday’s inside day — gapping down back under Tuesday afternoon’s 1360.00 area highs — would still make for an ugly morning. But gapping down too much more could also make the ugly morning more easily recoverable.[/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… The morning’s steep slide went on to probe fresh lows during the afternoon’s bias environment. Without any interim correction, i.e. refueling. This is not the stuff of a bottom

Pattern points… (Setups and technicals)[pay]
The only bullish scenario is temporary. After fulfilling the afternoon’s 1353.00 bias-down target, there was no durable reaction up. Two false breaks above 1356.25 failed to gain traction before reacting down. More so, the session’s last 60-90 minutes failed to break out from the afternoon bias environment’s range. The consolidation may be basing.

That’s the bullish scenario. And then, only temporary. Whether peaking quickly at 1366.25-1367.50, or extending up to 1374.00 — assuming that it ever exceeds 1361.00 — new lows are all but required.

Meanwhile, closing Tuesday under 1354.25-1355.00 would have been compelling to consider holding short. In fact, it was probed down to 1353.50 at the cash session close. Futures recovered to almost 1359.00 into the futures close. A corrective bounce would get a benefit of the doubt if Wednesday’s open were to gap up above 1359.00.

Regardless of the size of an overnight bounce, Tuesday’s cash session close makes it vulnerable to reversing entirely into negative territory before Wednesday’s open. Otherwise, gapping up would leave outstanding a gap back to Tuesday’s close, attracting price back down.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Thank you again for your patience with Tuesday’s chartroom issue. A new machine is on-line, and prior data files will be available before the open.[/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.