Market Wrap

Skipping a beat… While Thursday afternoon’s rally proved to be sponsored by weak hands, Friday morning’s sellers did not prove to be stronger hands. The first premise wasn’t proved until the following morning. Will stronger sellers appear Monday?

Pattern points… (Setups and technicals)[pay]
Buyers gained traction Friday by closing above the morning’s high in positive territory. That’s the cash session close, which equated to 1392.00. That’s not to say that the next move is up — the afternoon’s bias environment was entered at 1392.00.

The afternoon’s 1393.00 high represents the maximum retracement from Friday morning’s 1380.50 low back to the 1395.25 overnight high. That is, the maximum retracement without triggering a new buy signal. Holding its test as resistance suggests the next move will be back down. (Futures surging to close at 1394.50 does not count.)

There is an attraction above at the afternoon’s 1396.25 bias-up target. It is not “unfinished business” since it was produced by a late signal, but it still remains relevant. (Perhaps that’s why futures surged into the close.) And there is still the not-small matter of retesting Monday’s 1408.00 high up to at least 1410.25.

Oversold RSIs at Friday’s low require a retest of 1380.50. Presumably that would at least touch the morning’s invalidated 1379.50 bias-down target. An immediate drop Monday morning — preferably a gap down — would be optimal both for neutralizing the attraction below, and for starting the week with the slingshot stretched back. Otherwise, that unfinished business below would remain outstanding until after extending back to last week’s 1408.00 highs.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Don’t forget about the Saturday Strategy Session at 9:30am ET. I’ll review the bigger picture, and offer instant analysis of your stock picks.[/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.

Deja vu, all over again… Plus ca change… Last Wednesday’s close was testing 1389.25 as resistance, trying to recover it to avoid a bearish signal. Thursday’s close was also trying to recover 1389.25, whose recovery could have been bullish. The next day’s open can still predict the next several sessions, but not the eventual resolution…

Pattern points… (Setups and technicals)[pay]
The first overnight test of 1387.50 produced a bounce to 1391.00. Its pre-open test down to 1386.00 reacted up similarly. Both the morning and afternoon drops through 1387.50 to test 1383.00 were recovered to 1389.00. That’s a lot of volatility, not to mention being so far below Wednesday’s close.

But the cash session open and closing prints were both essentially 1387.50.

1387.50 was the drop’s next lower objective if 1395.25 failed to hold. Wednesday did not close under 1395.25, so 1387.50 was never actually put into play. That made its sponsorship a little suspicious. Regardless, the sponsorship was unable to produce a close under 1387.50.

Still more signs that this drop from Monday’s 1408.00 high may be sponsored by weak hands, which would make it a temporary pullback.

But the drop is nonetheless productive. A late bounce into Thursday’s close extended 2-4 points above a 1385.25 normal retracement, late enough for the buying to be considered noise. And there was already no bullish reason to revisit the morning’s 1383.00 low without also visiting 1380.00. So, almost any weakness Friday should include new lows.

Rallying overnight could test 1395.25-1397.25 resistance — then either react down to fill the gap back to Thursday’s open, or else extend higher to form a temporary Island out of Thursday’s range.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Since Thursday’s second low launched only an obligatory bounce, the most bearish scenario would leave unfinished business below while refueling sellers — like rallying throughout the morning, and extending higher Monday to fulfill the high’s retest. 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.

The drop from Monday’s high… may have been sponsored by weak hands. It has not extended down in two days since then, but it has not been recovered. The weak-hand perspective has inhibited me from participating in most sell-offs, which was especially frustrating Wednesday. So, Thursday’s action should catch…

Pattern points… (Setups and technicals)[pay]
1395.25 support was ultimately tested Wednesday morning. And it held, which made the difference between maintaining the potential to retest Monday’s 1408.00 high. Despite recovering to repeatedly test 1401.00 resistance, a 4-point plunge prevented a “hold-long” through the close from being considered.

But the late plunge’s origin confined it to the session’s last 30 minutes. Timing suggests that its sponsorship was weak hands. So does the futures close, which extended down past the 1397.25 cash session close to touch 1396.00, and then bounce back to 1398.25.

Avoiding a break under 1395.25 also suggests the plunge’s sponsorship was weak hands, and another opportunity to refuel buyers. But the plunge did position the market where even the slightest weakness Thursday could break under 1395.25 to end the potential for fresh highs.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Rejecting Wednesday’s late plunge would help to confirm it was sponsored by weak hands. Immediately recovering or gapping up above 1400.50-1401.00 should suffice, preferably testing it as support after probing higher overnight. Otherwise, opening under 1395.25 would mean the dips since Sunday night have not been refueling buyers.[/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 Monday’s sell signal… determined its sponsorship was weak hands. That did not mean its break couldn’t be productive. As they say, once we had determined the break’s context, we were only haggling over price…

Pattern points… (Setups and technicals)[pay]
Weak-handed sellers can still be productive, they just can’t be durable. The drop from Monday’s high had all the indications of being sponsored by weak hands. That did not prevent it from extending down. Regardless of how far down the drop extended, its recovery was likely, because it was the product of weak hands.

The 1405.25 sell signal that triggered Monday afternoon had potential down to 1401.00. It extended to 1391.75. The signal’s extra productivity did not change its context. It’s not surprising that the extra drop was retraced entirely back to 1401.00.

No “hold-long” through the close was considered Tuesday since 1401.00 held as resistance. Even then, there is room for noise around 1401.00 up to 1402.25, and its recovery would have confirmed the recovery’s momentum remains intact.

The gap back to Monday’s 1404.25 close does not require being filled, since ti formed by gapping under a prior low. But it is the next attraction higher, on the way to 1310.25, so long as 1396.00-1397.50 holds as support.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Tuesday’s relentless trek higher keeps it vulnerable to being retraced, especially since its close held 1401.00 resistance. But a late dip did fail to gain traction, so the recovery is more vulnerable to extending higher. The shallowness of the recovery’s origin could make it difficult to maintain a retest of the highs.[/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.

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Pattern points… (Setups and technicals)[pay]
Perhaps the only thing bearish about Monday’s close was it failed to recover back above the afternoon’s 1404.25 bias-up signal. That’s not very bearish, and other bullish elements remain intact, so not rallying Tuesday would be very bearish.

Just entering the session’s last hour above the 1405.00 prior low meant a later dip’s sponsorship was probably weak hands. Closing above the 1403.75 overnight high also suggests that sellers didn’t gain traction.

There are attractions above. Most notable is the afternoon’s 1410.25 bias-up target, that has now become “unfinished business.” Meanwhile, a pullback is underway targeting 1402.25, and potentially 1401.00.

Tuesday’s open must break cleanly under 1401.00 to begin signaling momentum has reversed down. Otherwise, fresh highs could test 1410.00 before finally reversing down.

[/pay]What’s Next… (Outlook and opportunities)[pay]
At least a retest of Monday’s 1408.00 highs — presumably to also test Monday afternoon’s 1410.25 bias-up target — remain outstanding. Like Monday, an open under a prior low is needed to reverse momentum 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.