Market Wrap

What goes up early… can avoid coming back down. Reactions down from Thursday’s pre-open rally behaved as as expected, holding support before extending to higher and higher highs. But was it the product of bullish accumulation, or lack of liquidity?

Pattern points… (Setups and technicals)[pay]
This morning’s post-open reaction down from the 1246.25 bias-up target formed a sloppy pattern. I almost can’t call it a pattern. This is normal for pre-holiday weekend trading.

Sponsorship for trending is difficult to generate, almost as difficult as reversing any initial trending. The reaction down from Thursday’s initial trending never turned negative before reversing up to higher highs. But that doesn’t mean the rally had strong sponsorship — only that counter-trend sponsorship could not form.

Even when trending stops, this environment may be unable to reverse it. Thursday afternoon’s 1246.00-1249.00 range lasted almost 3 hours, and was barely ever threatened.

Friday won’t be much different, not in principle. Early trending, or lack thereof, will be difficult to change. Thursday’s last-minute action did suddenly leave a narrow range, probing fresh highs, and fulfilling buying pressure. This setup could have been rejected harshly if it had appeared earlier. It must be rejected almost immediately Friday to trigger any reliable downleg.

[/pay]What’s Next… (Outlook and opportunities)[pay]
This being pre-holiday, volume should evaporate quickly and greatly by late-morning. Trending is still possible, and the market will be vulnerable to steep moves and wild swings.[/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.

Sound and fury… signifying almost nothing. Tuesday’s overnight surge to 1249.00, and Wednesday’s drop to 1223.00, each probed interesting territory. But the afternoon’s recovery back up to Tuesday’s 1237.00 highs was still being tested at the close. Once again, neither buyers nor sellers gained traction for their efforts.

Pattern points… (Setups and technicals)[pay]
Neither buyers nor sellers gained traction for their efforts. The big difference in this regard between Tuesday and Wednesday was that sellers never really tried. Oh, sure, Tuesday’s late blip under 1233.75 did trap some shorts. But its reaction up ultimately trapped longs at session highs.

So, once again, there is no requirement to trend either up or down. Trending in either direction is likely to begin by gapping. And regardless of how it were to originate, a trending attempt’s minimum objective would be to test the 1249.00 prior high or 1223.00 prior low.

Gapping down far enough could be even more bearish. Since Wednesday’s closing action trended up, gapping down under the afternoon bias environment’s 1227.00 low would trigger a session-long decline.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Regardless, breaks under 1225.00 and  1221.00 through relevant timing windows are needed for signaling that momentum has actually reversed down. There is no requirement for the balance of the week to produce any more substantial trending, as Monday’s impatient surge is inhibiting a more substantial Christmas rally.[/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 low fulfilled a big, BIG target… This, we already knew. Without any other refueling, a rally began immediately overnight and extended higher throughout Tuesday. Wednesday’s close could predict even more to come, or a reversal back toward the lows.

Pattern points… (Setups and technicals)[pay]
Clearly, Tuesday’s rally expended a lot of energy. A lot of energy had been expended already before Tuesday’s open. That is not a sell signal, nor does it prevent extending higher.

The question is whether the buying pressure gained traction for its effort. It is possible to be too productive. Probing a resistance without also closing above it robs buyers of their traction. Closing above a probed resistance gains traction.

Tuesday’s intraday rally tested several relevant resistance levels. The opening 15 minutes peaked at 1227.25, the noon hour tested the afternoon’s 1231.00 bias-up signal, and the last several minutes probed the 1236.75 bias-up target.

1236.75 was the proverbial bridge too far, since its reaction closed back under the two prior highs. Leaving no unfinished business above, buyers gained no traction for their efforts.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Sellers never gained traction either, so the rally can try to extend Wednesday — but extending a rally without traction essentially requires gapping up. Higher highs would target the 1244.00-1246.00 area. A pullback has room down to 1231.00 before targeting Tuesday’s 1227.25 opening peak.[/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.

Big, BIG target met… at Monday’s lows.And it was met too late to entice counter-trend buying. Is that the only reason for not reacting up? If not, then much lower lows lie dead ahead.

Pattern points… (Setups and technicals)[pay]
The objective of last week’s trend change signal was to probe under 1200.00. The specific target of last week’s distribution patterns was 1197.75. Last Wednesday night’s weakness momentarily touched 1198.00. Its reaction up became two days worth of testing 1220.00 resistance. Three days, counting Sunday night’s rally.

Anyway, the bearish Expiration Indicator forced Monday morning’s drop. And it extended down to fulfill both the probing under 1200.00 while testing 1197.75 down to 1195.50.

Monday’s close was still in the process of testing 1197.75. A second consecutive lower close under Monday’s 1195.50 low would put into play the next lower objective at 1170.00. This would not preclude an interim intraday bounce Tuesday to test 1204.00.

Recovering 1204.00 through a relevant timing window Tuesday would start to form a bottom. A subsequent dip could still retest Monday’s 1195.50 low — and probably would — but its test would likely hold as support if 1204.00 had been recovered through a relevant timing window.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Regardless of Tuesday’s pattern, lower lows can be probed overnight without gaining traction. Not probing a lower low overnight would make fresh lows very likely Tuesday.  While the decline may yet extend down, closing strong enough Tuesday could trigger a Christmas rally..[/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 overnight rally seemed… a bit bullish. Friday’s gap up seemed bullish, too. But the market’s bearish context is just that — not preventing rallies, but dictating their resolution.

Pattern points… (Setups and technicals)[pay]
Several factors continue to make the current trading range likely to resolve down. The most interesting is Wednesday’s Expiration Indicator, which suggested that strong hands were distributing into the weekend. Thursday and Friday’s gaps up would have suggested otherwise, had they been maintained or extended up. But they were retraced.

Friday’s lows, relative to Thursday’s lows, also make the current range likely to resolve down. Each session bottomed in the 1208.00-1209.00 area. Repeatedly. Perhaps the area could have launched a durable rally after Thursday’s testing, perhaps even after a retest Friday. But Friday’s repeated retests through multiple timing windows has only chipped away at the area’s support.

Finally, a unique expiration characteristic also points downward, if only because it restricts the upside. Mondays following expiration tend to duplicate Friday’s behavior. And Friday’s behavior was biased down.

So long as Monday’s session doesn’t rally from its opening print, new lows remain likely — whether to test last week’s 1298.00 low, or to trend lower. Gapping up would still be vulnerable to trending down, but only to test prior lows.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Don’t forget about Saturday’s Strategy Session at 9:30am ET. Its link is in the blog’s sidebar.[/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.