Market Wrap

Trending up sharply overnight… expended almost all available buying pressure. Post-open action expended the rest. The question is whether sellers will exploit the situation, or just help to refuel it.

Pattern points… (Setups and technicals)[pay]
Tuesday’s cash session close equated to 1287.00. That was also the morning’s low. Closing under the morning’s low would have signaled that the day’s buyers gained no traction for their efforts. Instead, that is a borderline assumption.

We do know that buyers ran out of energy. Repeated probes above 1289.00  were all rejected. That’s what created the noon hour setup’s 4-point capitulation dive. Extending the rally requires new sponsorship — which probably requires gapping up. (“probably,” because it is only a borderline assumption that buyers gained no traction for their efforts.)

So, not gapping up Wednesday would be likelier to trend down intraday.

Overnight weakness has room down to 1281.00 before suggesting a bigger slide is underway. Any shallower dip through Wednesday’s open could be intended to refuel buyers — whether to extend the rally to 1296.00 or 1311.00, or just to retest Tuesday’s 1292.00 high.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Don’t forget this week’s unusual broadcast schedule. I will be available for about 30 minutes beyond the 2:00pm Beige Book release.[/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.

Wash, rinse, repeat… Without gapping down, can sellers hope to regain traction? Not gapping down Monday made a rally likelier than a decline. There was no decline, but hardly much of a rally. Will the same conditions apply to Tuesday’s open?

Pattern points… (Setups and technicals)[pay]
If Monday afternoon’s action did nothing else, at least it confirmed that 1277.00 is relevant resistance. Recovering from the open’s test of 1272.25 had already peaked at 1277.00. Recovering from the morning’s later test of 1270.00 finally revisited 1277.00, too.

Unfortunately, Monday afternoon’s action did nothing else.

At least 1277.00‘s retest did nothing else, too. Despite revisiting it with an hour remaining in the session, the reaction down barely tested 1275.00 as support. And now two hours past the close, 1275.00-1277.00 still contains price action.

Remember, not gapping down Monday kept alive potential to fresh highs. Fresh highs that would be vulnerable to rejection. Before I left at mid-afternoon, I pointed out a new wrinkle: Delaying a probe of fresh highs until late-afternoon would be more difficult to reject.

Consider it another missed opportunity by buyers to exploit weak sellers. Holding fresh highs through the close would have been a breakout. But buyers were too weak to do it. Potential to probe fresh highs may yet remain alive — so is the potential to reject them.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Gapping down or quickly breaking under 1271.00-1272.00 would still be credible for extending down. As seen Friday morning and now also Monday morning, not maintaining the break through a relevant window would become likely to recover.[/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’s brief probe of fresh highs… was rejected into the open, and retraced back to the origin of Thursday afternoon’s failed rally. But sellers never gained traction. Buyers never regained it, either. Oh, that’s right — it’s Friday.

Pattern points… (Setups and technicals)[pay]
I was hoping that Friday would resolve the week’s trading range. Wednesday’s pullback to test 1262.50 was retested Thursday, and Thursday’s retest tested and held all sorts of support. Although Friday’s pre-open probe of fresh highs could have gained traction, it was expected to hold the range’s upper-end.

The range’s upper-end held, and the balance of Friday’s session remained under pressure. But sellers did not gain traction for their efforts. Like Tuesday’s gap up that wasn’t rejected intraday, not rejecting Friday’s pre-open high by the close left open the potential for its retest up to 1283.50.

Likely, but not required.

Despite the potential for retesting Friday’s pre-open high, there was no “hold-long through the close” Friday. This is because the week’s trading range could still resolve down anyway, which would begin by gapping down under 1268.50. The threat of gapping down off-sets the potential for probing fresh highs.

That said, not gapping down Monday would become likely to probe fresh highs. Another probe of fresh highs remains vulnerable to peaking — just like Tuesday and Friday, except then also likely to reverse down sharply intraday.

Closing above 1283.50 and 1287.00 would simply point higher. This possibility of an extended rally cannot be discounted until sellers regain control. Not while the Euro and Dollar Index are nearing significant targets. And not with the quarterly/annual earnings onslaught about to begin.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Reminders: Be sure to join us for the Saturday Strategy Session at 9:30am ET. Its link is in the blog’s sidebar (not the daily chartroom). Also, next week’s broadcasting schedule is unusual, and my notes can be found here. [/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.

Several key attractions below were all met… during Thursday morning’s test of 1260.00. And held. Wednesday’s low, the overnight low, and last week’s lower prior highs. Then sellers were undermined by recovering 1264.75 through 10:15. “Mission Accomplished.” But what did buyers do with path open to them?

Pattern points… (Setups and technicals)[pay]
I initially underestimated the significance of recovering 1264.75, which undermined the drop’s momentum.It took the balance of the morning’s bias environment before the market figured it out, too. A last-minute surge recovered to test the 1269.75 bias-down signal at 11:30.

1269.75 was still being tested at noon. That’s not so interesting, except that the recovery extended higher anyway. It originated too late to be sponsored by strong hands. And its buying pressure at 1277.00 was met and held.

Extending higher without first correcting would only compound the problem. A correction could be completed by revisiting 1269.75 as support, or by probing below it and recovering. But extending higher first would be make the eventual retest of 1269.75 likely to break lower.

Meanwhile, some potential remains for fulfilling the session-long decline setup, which failed to produce a new low under 1260.00 during Thursday’s last hour. Exiting the morning’s bias environment above the 1269.75 bias-down signal could have negated it, but it was still being tested. Closing above 1269.75 could have negated it, but not after fulfilling buying pressure above it at 1277.00, without then closing above 1277.00. Immediately probing under Thursday’s low Friday would fulfill the setup, and compensate for the delay by trending down.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Friday’s Employment Situation report may produce a fresh high that trends up, regardless of any unfinished business below. That would account for the afternoon’s hesitation. But an overnight test of Tuesday’s 1280.00 high would become vulnerable to reversing down into and out of the news instead.[/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 fulfilled the selling pressure… that Tuesday’s session had threatened. Was it too late to refuel buyers, serving only to chip away at support?

Pattern points… (Setups and technicals)[pay]
Wednesday’s late surge did not pierce the 1273.50 afternoon high. It was only noise in the range. And it was just more ranging around the afternoon bias environment’s 1273.00 high. Buyers gained no traction for their efforts.

Of course, sellers gained no traction, either, so there is potential to probe higher highs.

Wednesday afternoon’s pattern offered bearish context. Probing higher highs overnight or intraday Thursday would likely be absorbed, and reversed down to resume Wednesday morning’s decline. But any probe up to or through 1277.00 must retrace back into negative territory through a relevant timing window for sellers to gain traction.

Gapping up above 1277.00 would be capable of probing fresh highs to at least test 1281.25. Only gapping down or immediately breaking under 1268.00-1269.00 would offer early assurance that buyers may be marginalized for the morning.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Thursday’s two pre-open reports probably didn’t inhibit Wednesday afternoon from trending. Perhaps the market anticipates some Eurozone news overnight. Regardless, I would be cautious about shorting within Wednesday afternoon’s range, at least prior to rejecting a fresh high.[/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.