Market Wrap

Good things come in little packages?…Expiration’s 6-point range did not reject Thursday’s new high, and even probed more new highs. If the first break from an extended narrowing range is false, then a shallow dip could be bullish, too.

Pattern points… (Setups and technicals)[pay]
Friday afternoon’s narrow ranging was only slightly narrower than the morning. Despite probing new highs above 1400.00, multiple intraday lows overlapped Thursday’s highs. Normally, those are potentially bearish elements, reflecting a lack of sponsorship. On Friday, it was probably just expiration.

Trend extremes rarely form during expiration. A productive pullback could still  appear, but probably only temporarily. And probably only if selling were aggressive — this pattern is unlikely to gently roll over and decline.

Wednesday’s Expiration Indicator did not close clearly under resistance, and that resistance was recovered at Thursday’s open. If it had any bearish influence Friday afternoon, it was in preventing the rally from extending higher. But Monday’s open should be immediately weaker if the indicator will have any effect.

[/pay]What’s Next… (Outlook and opportunities)[pay]
SPECIAL NOTE: I will post to the blog early Monday, but will then be unavailable through most of the morning.[/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 rejection of Wednesday’s close… may yet be rejected, too. If not, then Wednesday’s Expiration Indicator may become moot.

Pattern points… (Setups and technicals)[pay]
Thursday’s bounce was not retraced by the close. And the close was a new high. If this seems damning to Wednesday’s Expiration Indicator, it should.

The open’s immediate recovery back above 1389.00 — although not clear — had already threatened to undermine the indicator. Simply retracing the intraday bounce and closing only slightly negative would have validated the indicator’s bearishness.

But not only did Thursday’s session rally, and not only did the rally hold, but it produced a new high close.

The new high close was under the noon hour’s high. The entire afternoon essentially ranged sideways. And Thursday afternoon’s fresh high was not attempted until becoming too late to assure a breakout. These reasons leave the door open to reversing down into and out of the weekend, Friday afternoon and Monday morning. And that’s the indicator’s window, anyway.

But that argument would become even thinner if Friday’s open or the afternoon aren’t entered under a prior low.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Being a Friday, the morning’s bias is likely to persist through the noon hour. If sellers aren’t in control early, they might not retake control at all — not unless the morning only trades flat to lower.[/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.

What JPM’s dividend hike giveth… Wednesday’s reaction failed to take away. Half of Tuesday’s surge to 1391.00 was retraced at Wednesday’s low; 61.8% of the overall gain up to Wednesday’s opening high. But sellers did not regain control, and so far only threaten the rally’s momentum.

Pattern points… (Setups and technicals)[pay]
Wednesday morning’s late no-bias that triggered at 1393.50 created the objective to test the 1384.50 bias-down signal. Its attraction influenced the morning’s dive to 1387.50, but did not require being tested. It was retested anyway.

Having fulfilled its selling pressure, oversold RSIs at 1384.50 launched a bounce to 1388.25. The test of overnight lows from below, i.e. “higher prior lows,” was ongoing through the close — not clearly broken, not clearly held.

Wednesday’s Expiration Indicator would have been clearly bearish by closing under ~1387.00 and/or 1386.25, the overnight low and Tuesday’s reaction down to the bank stress test results. Even that would only suggest a downward bias into and out of expiration. A downleg is not required, but another upleg is less likely.

Wednesday’s negative close avoided confirming Tuesday’s breakout. This doesn’t prevent a fresh high close Thursday, but it should also not be confirmed Friday. Gapping up above 1389.25 would at least suggest Wednesday afternoon’s overbought RSIs at 1392.75 will be retested. Its immediate recovery at the open would reconsider Wednesday’s Expiration Indicator as having been bullish.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Housekeeping note: I will be unavailable for Thursday’s last hour, and there will be no Market Wrap.[/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.

Worried about bank stress tests?… JPM had just the solution — it increased its dividend prior to the Fed releasing test results. The market had been sitting on the precipice, quite relieved at the news. Does this action discount too much optimism ahead of the actual test results?

Pattern points… (Setups and technicals)[pay]
It’s interesting that prior to the news, S&Ps had formed all four legs of a bearish reversal pattern. It was only lacking a trigger. And that trigger had been delayed during the afternoon’s bias-up environment.

Then the 1378.00 bias-up signal was still being tested at the bias environment’s exit. That limp action was not enough to reject it at 1:20, and it wasn’t enough to reject it at 2:30. The last rejection opportunity was to enter the session’s last hour under 1378.00‘s last relative low — 1376.50. Guess what was being recovered at 3:00. (Rhetorical question.)

None of which is a buy signal, but the 1386.25 bias-up target became “unfinished business above.” A buy signal was actually triggered by recovering 1378.00, but it required a standing buy-stop to execute.

Tuesday’s 24-point session-long rally was a breakout above prior highs. Regardless of the rally’s size and duration, it has yet to be confirmed by a second consecutive higher close. Also, Tuesday’s 1391.25 high touched big resistance, the 61.8% extension from last week’s 1369.00-1333.00 pullback.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The stress test results’ immediate reaction was a spike down to 1386.25. A bounce is now attacking 1390.00. That’s relatively shallow, so it is only noise.Any higher close would target 1405.00, with potential to 1427.50. A drop has room down to 1384.25 or 1381.25 before invalidating Tuesday’s breakout attempt.  [/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.

Monday’s opening action was a battle… between weaklings. Neither buyers nor sellers actually took control. In this way, the afternoon’s bias signal mirrored the morning’s. How fitting, then, that the cash session and futures closes were unchanged from Friday’s counterparts…

Pattern points… (Setups and technicals)[pay]
The pattern is essentially unchanged from Friday, except that 1362.00 support has been much more chipped away. We’ll know that for sure, if its testing were to now produced a fresh high above 1369.00. At that point, there would be no bullish reason to revisit 1362.00.

New highs are not required before breaking under 1362.00 — there is no unfinished business above. But a failed break higher would be more bearish than simply to begin tumbling from Monday’s relatively narrow range.

Similarly, a probe of 1369.00 would not be required to fail. Fresh highs could be tested first up to 1374.00 or 1378.00.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The econ calendar heats up Tuesday, and Wednesday’s expiration signal will become relevant.[/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.