Market Wrap

What is this target made of… steel? The next higher objective was met Thursday morning at ES 1311.00. It held several retests throughout the day. But all that time avoiding higher highs also avoided launching a downleg.

Pattern points… (Setups and technicals)[pay]
1311.00‘s test was put into play by closing Wednesday above 1296.00. A second consecutive confirming close above 1296.00 is now irrelevant, since its 1311.00 target was met already. More important is that 1311.00‘s intraday test held as resistance through the close.

1311.00 held as resistance despite being tested relatively early in the session. It was retested at least twice more throughout the day, during two more timing windows. No more trending was required, but any one of the tests was cleared either to extend higher, or to reverse down — and all attempts to reverse down were recovered.

Friday’s open must essentially gap to and through Wednesday’s 1303.50 close to avoid probing fresh highs, targeting 1313.75 and 1316.75. The rally could extend even higher by extending above 1319.00 through a relevant timing window.

Wednesday’s Expiration Indicator still allows for Friday morning weakness before marginalizing sellers Friday afternoon and Monday morning. By the same token, Friday morning strength could fulfill the signal simply by maintaining the morning’s gains.

[/pay]What’s Next… (Outlook and opportunities)[pay]
I’ll send another reminder about this during the day, but don’t forget about the Saturday Strategy Session at 9:30am ET.[/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.

Extreme volatility before Wednesday’s open… was repeated intraday, probing either end of the wide overnight range. The probe above its upper-end gained traction, and extended higher. And if not rejected immediately Thursday, then…

Pattern points… (Setups and technicals)[pay]
A retest was required of Tuesday’s pre-open 1302.50 “new Globex trend extreme.” Its retest was likely to visit 1305.00, too. But 1305.00 was only met within 3 ticks.

That’s close enough to take a sell signal if triggered. Speaking of which, I calculated one at 1302.00, which was pierced repeatedly by 1 tick. It never broke lower, but its reaction has not recovered to fresh highs. A break under 1302.00 overnight would still be valid.

1302.00‘s break overnight is needed to invalidate a couple of buy signals. One is the close above 1296.00, which puts into play a test of 1311.00. More influential is close above prior highs on Wednesday of expiration week, which would dictate trending up into and out of the weekend. That would be likely to exceed 1311.00.

1296.00‘s recovery can be invalidated by maintaining an open back under it Thursday. Wednesday’s Expiration Indicator can be rejected by opening under a prior low like 1295.00 — but under 1292.00 would be clearer. A post-open bounce could still fill the gap back to Wednesday’s 1303.50 close, which would form a more durable top.

Any shallower opening weakness, or none at all, would be bullish for extending the rally higher. A deeper dip Thursday afternoon would still be possible, but it would likely resolve up to new highs.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Be sure to note that the Expiration Indicator tends to predict Friday afternoon and Monday morning price behavior. Price action between now and then may differ from the signal. [/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.

Starting off the week with both… a bang, and with a whimper, the open gapped up sharply and the session sold off. It all developed above Friday’s cash session highs, but also under overnight highs, so neither buyers nor sellers gained traction for their efforts.

Pattern points… (Setups and technicals)[pay]
Tuesday’s close held 1288.00, whose break would have targeted 1285.50 and 1282.00-1283.25. There is also a requirement to retest oversold RSIs at Tuesday’s 1286.00 low. But while any or all could still be tested overnight, they could also be recovered before the open. So, no “hold-short through the close” was signaled.

A recovery would be motivated by the attraction to 1289.50-1291.50. Its relevance last week is already persisting into this week. Tuesday’s 1296.25 opening gap wants to be retested, too, and the 1302.50 overnight high is a “new Globex trend extreme” that requires an eventual retest.

But just failing to close above 1296.00 despite testing it suggests the context is distributive. Any rally efforts will likely fail, possibly while neutralizing attractions above. Testing the attractions below first would help fresh highs to extend, not with any requirement.

Gapping up Wednesday would leave outstanding the gap back to Tuesday’s 1289.00 close, if not also a retest of 1286.00‘s oversold RSIs. Regardless, gapping up Wednesday could still extend higher, for at least long enough to retest 1302.50.

[/pay]What’s Next… (Outlook and opportunities)[pay]
But for the lack of fresh afternoon highs, Tuesday’s session was “ineffectual optimism.” Gapping up, probing prior highs, ranging exclusively in positive territory…. but closing under prior highs and under the noon hour’s lows. Buyers expended a lot of energy, even during the post-open slide in avoiding negative territory. Strong-handed buyers don’t typically appear from out of nowhere.[/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 had room up to 1291.00… without buyers gaining traction for their efforts. The cash session close equated to 1290.75. Friday’s open gapped down to 1282.00, and session lows tested 1273.00.

Pattern points… (Setups and technicals)[pay]
The big question is whether Friday’s recovery attempt succeeded where Thursday’s recovery had failed. Namely, was the close high enough to absorb another downdraft, or to avoid it altogether.

Nope.

Friday’s close did recover back above 1282.00-1283.25 — into the session’s last hour, no less. That’s the good news. It’s also the bad news. Late Friday recoveries are tenuous. Firming 3 points into the cash session close then surged 7 points post-close to 1289.50 resistance. Its test held.

Other good news: Friday’s dip to 1272.75 did neutralize the attraction back down to the prior week’s 1277.50 “lower prior highs.” It also filled the outstanding gap at 1275.50. Closing higher Tuesday would be bullish, but not until then.

One more pair of good news / bad news is Friday’s “ineffectual pessimism.” The open gapped down, prior lows were probed, and the entire session was spent in negative territory — yet the session closed above the morning’s highs. If only the afternoon had probed the morning’s low, then sellers would be trapped. Instead, buyers may have been satisfied.

S&Ps downgraded half the Eurozone Friday, while the Euro closed at prior lows around 1.2670. Closing back above 1.2750 and 1.2824 Thursday risked stretching the recovery too far too soon. Obviously it did. Withstanding the weekend’s news to close positive after fulfilling the 1.2650 target would be very bullish. Otherwise, only bearish.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Gapping down 10-13 points Monday Tuesday would reject Friday’s closing rally back under its afternoon low. And that would trigger a session-long decline. Just breaking back under 1282.00-1283.25 would reject Friday afternoon’ fresh session highs. But firming above 1289.50 through the open would extendn higher, to retest 1296.00,.[/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.

Another failed sell-off?… Wednesday wasn’t just another morning dip under relevant support that held through a relevant timing window. There were two or three failed probes that morning. A new trend, or more of the same?

Pattern points… (Setups and technicals)[pay]
In fact, each failed probe was rewarded by returning back into Tuesday’s range. But buyers never exploited the opportunities. Even a last half-hour probe to new session highs was retraced back into Wednesday’s range.

The worst case scenario is not being on the wrong side of a trade. At least that will eventually suggest switching sides. The worst case scenario is a market that doesn’t trend.

I don’t think that will be the case here. Last week already ranged sideways. This week’s sideways ranging should be uncomfortable and try to break one way or the other.

Wednesday’s ranging offered further potential for that break to be lower. At least, initially. Whether as a temporary dip that recovers to resume the rally, or as the beginning of a larger decline, a test of 1277.00-1278.00 remains likely so long as Thursday’s open doesn’t surge to fresh highs.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Keep an eye on the reaction to pre-open news items. If this market wants to trend, then it should be underway already 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.