Market Wrap

Thursday’s gap up tried to invalidate… Wednesday’s Expiration Indicator, but failed. There should be no second bite at the apple, unless the second bite were going to succeed.

Pattern points… (Setups and technicals)[pay]
After rejecting Thursday’s opening gap up, the balance of the session did nothing predictive. And that, in itself, is bearish.

The balance of Thursday’s session ranged sideways exclusively in positive territory. Combined with gapping up, and probing a prior high, sessions can’t behave much more optimistically. Except for one thing — actually closing above a prior high.

Instead, Thursday’s session was essentially “ineffectual optimism.” A lot of energy was expended to avoid negative territory, but buyers gained no traction for their efforts. This is essentially bearish.

I qualify the bearish ineffectual optimism as “essentially” because the morning’s high was never probed and rejected again. The setup is vulnerable to a wildcard, and Expiration is the biggest wildcard (quadruple witch, no less). Immediate strength above 1216.50 at Friday’s open would be credible for gaining traction to probe fresh highs.

Otherwise, the likelihood is for immediate weakness under 1208.00 if not also under 1204.00, and for that immediate weakness to trend down.

[/pay]What’s Next… (Outlook and opportunities)[pay]
High-profile econ reports are rare on expiration sessions, but CPI is due before Friday’s open anyway. Any trending underway after its knee-jerk reaction is absorbed would be likely to persist through 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.

NDX has already filled Nov 30’s opening gap… S&Ps are 61.8% of the way back to Nov 29’s close. Meanwhile, the Dow has barely probed under Nov 30’s open. To the degree that there is any optimism, it is narrowly focused on the “bluer chips.” Wait until that focus is lost, too.

Pattern points… (Setups and technicals)[pay]
Monday’s renewed trend change signal was confirmed Tuesday, and extended lower Wednesday. A big enough bounce maintained through Thursday’s close could still trigger its own reversal up. Meanwhile, any bounce is expected to resolve down in new lows.

Wednesday’s Expiration Indicator probed new lows and closed under prior sessions’ lows. This suggests that big hands are posturing bearishly for trending down into and out of expiration weekend. Like the trend reversal signal, a bounce is possible, but likely to fail.

The moves next objective is to probe under 1200.00, touching 1197.75. No pattern has put it into play otherwise. Testing it and recovering from it could launch a corrective bounce into Friday morning. Closing under it would trigger much lower targets. A probe under 1200.00 is likely, probably before a bounce, and its test would present a major near-term decision for trending.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Not extending down early enough Thursday under 1204.00 could bounce instead up to 1216.50, or even up to 1227.25 and 1230.50. Gapping up above 1214.00-1216.00 would also threaten to invalidate the bearish Wednesday Expiration Indicator. The trend is otherwise 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.

Tuesday afternoon’s slide probing Monday’s low… seems to have compensated for delaying the test from Monday afternoon. Perhaps, but the attraction below has been neutralized nonetheless. The question is how much chart damage was done in the process.

Pattern points… (Setups and technicals)[pay]
Actually, there are two questions. The one posed above, whether Monday and Tuesday’s decline has damaged the chart, and whether Wednesday’s session can fix it.

Thursday’s trend change wasn’t confirmed Friday. Monday’s drop reinstated it and Tuesday’s drop confirmed. Tuesday’s confirmation was optimal, closing under both Thursday’s low and Monday’s. Except for not gaining traction on its first attempt, the trend change signal has every reason to succeed.

So, invalidating the trend change signal would be that much more bullish.

The confirmed trend change signal provides context. Immediate weakness Wednesday would be vulnerable to extending the decline, at an accelerated pace. The decline’s next lower objective is to probe under 1200.00.

Interim strength would be vulnerable to reversing back down sharply. Bouncing first could extend up to 1227.25, and there is room under extreme circumstances to test 1240.00. But closing above 1240.00 and 1244.00 would instead invalidate the trend change, just in time to trigger a bullish Wednesday Expiration Indicator.

[/pay]What’s Next… (Outlook and opportunities)[pay]
A bullish Wednesday Expiration Indicator could also trigger from bouncing after probing under 1200.00. And it’s possible for the indicator not to trigger at all, which would still default to the trend change 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.

Friday’s rally was already suspicious…before Monday’s open gapped down under most of it to reject it. Now a similar question should be asked of Monday afternoon’s rally.

Pattern points… (Setups and technicals)[pay]
Monday’s close back under 1240.00 reinstates Thursday’s trend change signal. It has yet to be confirmed by a second consecutive lower close Tuesday, preferably under Friday’s ~1225.00 low.

A lot can happen before Tuesday’s close.

Monday’s bounce tested and reacted to resistance both at 1227.25 and 1230.50. It could extend further to 1234.00, or even test 1240.00 (although preferably not), before resuming the decline.

Monday’s open triggered a “session-long decline” setup that says the morning’s low must be broken. Normally that is done during that session’s last hour. The alternative is often at the following open. It is not a requirement, and its attraction to new lows will be irrelevant after Tuesday morning.

Ignoring the attraction below, and/or recovering to close above 1240.00, would have very bullish consequences.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Meanwhile, Monday’s sellers did not lose traction, since the late bounce did not recover above Thursday’s new relative low close. There is no requirement to bounce any further, and there was never any requirement to bounce at all. Back under 1227.25 and 1225.00 would start to reject it. New lows under 1221.00 would next target 1213.50. But above 1234.00 would be vulnerable to a bigger bounce.[/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.

Last reminder: Saturday’s Strategy Session begins at 9:30am. Its link is found in the blog’s sidebar.

Pattern points… (Setups and technicals)[pay]
Thursday’s close under 1240.00 signaled a trend change. As with all signals, it still required confirmation by closing under 1240.00 for a second consecutive day. Problem. Friday’s last touch of 1240.00 was during the morning’s bias environment.

Bigger problem. Futures ended Friday testing 1254.00.

Thursday’s signal can still be confirmed by proxy, essentially by triggering the signal again — and also by confirming it for a second consecutive session. One difference is that the second consecutive confirming session must actually trend down.

Breaking lower immediately through 1240.00 Monday could be credible for resuming the decline. It wouldn’t be difficult — the timing of Friday’s probes above 1248.00 all avoided a relevant timing window. Also, some portion of Friday’s rally was the product of covering shorts ahead of the weekend’s illiquidity. The bigger challenge would be in maintaining such a break, and then repeating it.

Otherwise, the door is open to filling the gap back to Wednesday’s 1259.00 futures close, and to retest Thursday’s 1266.00 pre-open high, neither of which requires a retest. But they’re retest following such a deep retracement could extend up to 1274.00.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Friday’s cash session close equated essentially to 1249.00. Post-close action jumped up to the afternoon’s 1252.50 prior high. That premium alone might have forced price down Sunday night, but then S&Ps spiked up to new session highs at 1254.00 before settling.This might absorb a lot of selling pressure, but a break under 1249.00 would be credible for extending 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.