Market Wrap

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Pattern points… (Setups and technicals)[pay]
Friday morning’s drop back to 1395.75 undid the entire overnight rally up to 1406.00. A 10-point drop into negative territory could have set a negative tone for the day, especially on a Friday. But the overnight rally had created a lot of room to absorb the selling pressure.

Also, starting the sell-off from well into positive territory only allowed the no-bias signal to trigger. Triggering the signal late, invoking the grace period, undermined its 1394.50 objective.

But the 1395.75 low was accompanied by oversold RSIs. Higher oversold lows, but oversold nonetheless for the purpose of requiring a retest. Breaking back under 1401.50 at Monday’s open would target 1389.25, and potentially launch a new downleg. Otherwise, retesting 1395.75 (along with the prior Friday’s oversold RSIs at 1380.50) will probably be left outstanding while retesting recent highs.

[/pay]What’s Next… (Outlook and opportunities)[pay]
There was repeated intraday pessimism in avoiding a retest of the 1406.25 pre-open high. This level was significant for also being the morning’s bias-up target. Sellers gained no traction for their avoidance. Gapping up above Friday afternoon’s 1406.00 high could trigger a “session-long rally.” That should be fairly simple for having closed at 1403.00 — so simple, that not gapping up would be that much more 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.

Thursday’s opening drop to fresh lows… avoided trending down. But that doesn’t mean the balance of the session has reversed the trend upward…

Pattern points… (Setups and technicals)[pay]
Thursday afternoon’s rally began during the no-bias environment. But it wasn’t “no-bias trending,” since the 1392.00 bias-up signal was not exceeded until the bias environment had started lapsing. Slowly creeping up to 1392.00‘s resistance left little time for sellers to generate sponsorship.

Exiting the bias environment above prior highs signaled the buying pressure was credible for extending higher. Entering the session’s last hour above the bias environment’s 1393.75 high would have targeted positive territory above 1400.00.

That last element would have been very bullish.

That last element did not develop.

Instead, the bias environment’s 1393.75 high was still being tested at 3:00. At least 1392.00 was still holding as support to allow another buy signal. And it did trigger, by trending up to fresh highs through 3:10-3:20.

But the later pattern did not require probing positive territory, and its 1399.75 target was met at the afternoon’s high. Its buying pressure was fulfilled. This is after the earlier pattern narrowly missed triggering, at all.

Thursday’s high did stop 1 tick short of filling the gap back to Wednesday’s 1400.00 close. That tends to reflect pessimism, so extending higher immediately at Friday’s open would be credible for extending higher into the afternoon to test 1410.00. There is otherwise no bullish reason for another dip, so any immediate weakness Friday would target new lows at 1385.00 and lower.

[/pay]What’s Next… (Outlook and opportunities)[pay]
There is no requirement to trend at all from Thursday’s close, and a choppy sideways range is possible. Regardless, this being a Friday, the morning’s bias signal is likely to persist through the noon hour. [/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 drop suggests that… the retest of last week’s high is Double Topping. Only one or two more pieces of evidence needed…

Pattern points… (Setups and technicals)[pay]
Sellers behind Wednesday’s downtrending session did not gain traction, since the afternoon’s low was recovered back above the noon hour’s highs. That doesn’t mean buyers gained traction to prevent a bigger bounce. But a bigger bounce would still have to prove it is not just a temporary correction.

Despite sellers gaining no traction, a decline can be extended by gapping down. Probing under Wednesday’s low deeper than 3 points would be vulnerable to extending down another 30 points.

Even the most bearish resolution could bounce first to retest last week’s high one more time. This week’s high could be probed temporarily, too, but not without becoming vulnerable to resuming the rally.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Two days spent retracing the rally from Friday’s low, have culminated in a test of “lower prior highs” that filled an outstanding gap. And these neutralized attractions below produced reactions back above the noon hour’s high. If that is not sufficient for a bigger bounce, then big selling pressure is already coming down the pipeline.[/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.

Retesting last week’s highs… wasn’t just likely. It was likely to reveal pretty quickly whether a new rally leg was underway, or if a top was forming. Tuesday’s action offered some interesting insights…

Pattern points… (Setups and technicals)[pay]
Tuesday’s open maintained a break under its 1413.25 overnight low. This removed any attraction to the 1419.50 overnight high. It also enable putting into play a test of 1408.00. Delaying the target’s test, without using that time for a bounce that might absorb more selling pressure, the target’s test soon had room down to 1406.25.

The session closed while testing 1406.25-1408.00. The pattern’s selling pressure is satisfied. Extending down would require new sponsorship to arrive. Changing sponsorship without an interim correction tends to require gapping open.

Recovering from 1406.25-1408.00 should also begin by gapping open. This resolution might seem likelier since Tuesday’s break under the morning’s lows was too late to be sponsored by strong hands. But that likelihood for a recovery is offset by not already reacting up. Weak hands can be clever, leveraging a late break’s modest traction into a bigger drop.

Meanwhile, the retest of last week’s high has already given its first signal that buyers are not gaining traction: Probing the prior high, then closing under the prior day’s close. Closing back above the 1408.00 prior high would not suffice for reversing momentum up. So, despite still sitting above all prior lows, the burden of proof is on buyers.

[/pay]What’s Next… (Outlook and opportunities)[pay]
A gap down Wednesday has room to 1396.50 before signaling a much more durable downleg underway. A gap up could test 1412.50 resistance. These are not bias targets, but landmarks that would be relevant if tested intraday.[/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 origin of last Monday’s selling… had indicated its sponsorship was weak hands. Despite extending down so far, and regardless for how long, its high would require a retest. Its attraction has now been neutralized…

Pattern points… (Setups and technicals)[pay]
Last Monday’s selling from 1408.00 was dubious for several reasons, as were other sell-offs along the way to Friday’s 1380.50 low. Weak-handed trending attempts are likely to be retraced. This one has been, and its attraction above is neutralized.

Also, last Monday afternoon’s bias-up environment was exited high enough to consider its signal sponsored by strong hands. Its 1410.25 target remained outstanding. Its attraction above is neutralized, too.

Now the question is whether last week’s high will hold this retest. If so, we should see signs fairly quickly. Already, this upleg’s origin is oversold RSIs, its second session gapped up, and its slope is steep — all characteristics of a correction.

But new highs are not a sell signal. The rally exploited every one of Monday afternoon’s failed reversal opportunities. Closing above the morning’s high in Monday’s uptrending session means that buyers gained traction. And the test of 1410.25 high already extended another point into the 1411.25 cash session closing equivalent, and 5 points higher into the 1415.00 futures close.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Trying to shorting this upleg could be suicidal. It could remain hyperbolic through Tuesday’s open, testing 1422.00 or even 1427.50. Typically, the first reaction down is a warning that retraces for a better short-entry. Meanwhile, an immediate reaction down into Tuesday’s open could still recover from 1406.00-1408.00.[/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.