Market Wrap

Wednesday’s rally didn’t wait long… to exploit the drop’s target having been met. It didn’t wait for an accumulation pattern to form. So, its recovery may be short-lived.

Pattern points… (Setups and technicals)[pay]
Wednesday’s late pre-open surge to 1239.75 wasn’t likely to gain traction, having broken above a multi-hour range so near the open. It only stretched the rubber band tightly for rejecting both bias-up parameters. And that put into play 1217.00.

1217.00 was met with no further delay. Was that a sort of inversion of the pre-open surge? Similar to the morning’s too-late breakout attempt, the post-open plunge stretched the rubber band pretty tightly, too.

The afternoon’s attempt to trigger a bias-down barely failed. And that was exploited easily, substantially, and well into the last half-hour. Perhaps the 1217.00 target neutralized much more selling pressure than anticipated. Regardless, the afternoon’s recovery also exploited the morning’s steep, deep sell-off. So, just how durable it is remains to be seen.

The morning’s renewed bias-up target would have been 1241.75, which held its test Wednesday afternoon. But just rallying through the afternoon’s bias environment already suggested the market’s intent is to fill the gap(s) back to Monday’s 1247.25/1249.50 close.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Thursday’s open were to gap down sharply to reject its recovery above Wednesday afternoon’s 1229.50 bias-up signal. Any less weakness would still be likely to recover, and at least to fill Monday’s closing gap.  [/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 morning’s plunge… was an excellent example of a market getting ahead of itself. It was an excellent example of a market absorbing a shock to the system. Of their many lessons, one was that these factors can lead to a choppy session.So, it was, unfortunately, an excellent example of both.

Pattern points… (Setups and technicals)[pay]
Oversold RSIs at the morning’s 1227.50 low had required a retest. It could have been retested that morning — during the same timing window — and held as support to launch a rally. Instead, time passed while impatient buyers became trapped to help fuel a bigger downleg.

We discussed several intraday indications that buyers weren’t gaining traction for their efforts, despite making those efforts. Their contribution to the bearish cause went only so far, as the 1222.25 low held for a close at 1225.00. Closing any lower could have merited holding short through the close.

Nothing is preventing the decline from extending down overnight, and sharply. But nothing is preventing a bounce, first, either. So long as bounces now hold 1230.25 and 1232.50, at some stage 1217.00 should be tested. Under 1213.00 would suggest the decline’s pace was accelerating.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Having missed an opportunity for a second consecutive close above the rally’s 1245.00  objective, there is now potential for reversing the trend down. Two consecutive closes under 1221.25 would make a complete, eventual retracement back down to 1068.00 only a formality. A bigger multi-session bounce could still develop. [/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.

Weekend squabbling over the EFSF… resembled a GOP candidate’s tax plan. Merkel said , “Nein, nein, nein,” and Sarkozy said, “E-neuf, e-neuf, e-neuf.” Sunday night’s open gapped down nine points (okay, almost eight, to 1226.75). None of which mattered, not ultimately, as the rally resumed up to 1252.50.

Pattern points… (Setups and technicals)[pay]
The rally’s next higher objective above 1221.75 at 1245.00 was tested.  This is despite no two consecutive closes above 1221.75 putting it into play. Closing decisively just once above 1232.50 would have sufficed, but Friday’s close above 1232.50 was too late to be decisive.

That didn’t prevent the rally’s resumption or 1245.00‘s test, but it does underscore the sponsorship’s impatience.

1245.00 was also the morning’s renewed bias-up target, and it was tested soon after being put into play. This necessarily tested the overnight high’s 1242.75 Globex trend extreme to neutralize its attraction, too. None of which attracted stronger sellers.

The last half-hour’s two dips attacked 1245.00 to within 1-2 ticks without touching it, which reflects more excessive optimism. But it held, so sellers remain patient.

Nevertheless, a second consecutive close above 1245.00 would next target 1265.00 and potentially 1280.00. Closing under 1226.00 would trigger a new downleg, confirmed under 1221.00-1222.00. Any shallower pullback would undermine sellers from gaining traction

[/pay]What’s Next… (Outlook and opportunities)[pay]
While a gap down is always possible, almost no gap down Tuesday would be able to gain traction for a more substantial downleg. A durable immediate reversal down wouldn’t be very immediate at all, and would require expressing just a little more optimism Tuesday 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.

Saturday Strategy Session reminder… Its link is in the blog’s sidebar (it’s not in the daily chartroom), and you may login up to an hour prior to its 9:30am start.

Pattern points… (Setups and technicals)[pay]
Clearly, the most interesting thing about Friday was its exclusive ranging in positive territory. Not just positive, but above prior highs. Not probing above prior highs, but gapping up.

All the more interesting is this bullishness occurring within the context of Wednesday’s distributive Expiration Indicator. It suggests that price action will trend down into and out of the weekend. Friday morning’s gains were not inappropriate to the signal, so long as Friday afternoon had retraced it — preferably also reversing back into negative territory.

Obviously, that was not the case. Of course, the afternoon’s buyers only repeated what the morning’s buyers had done. All of it, rallying right back up to the morning’s 1235.75 high. This came after missing the opportunity to decisively reject the afternoon’s bias-down. And 1232.50 wasn’t even touched again until 7 minutes prior to the close, Friday’s close — expiration, no less — which undermines its ultimate recovery.

1232.50 is relevant because its recovery would almost equate to to consecutive closes above 1221.25. And that would put into play the next higher objective at 1245.00. But 1232.50‘s last-moment recovery is suspect. Not rejecting it immediately Monday would suggest 1245.00 will be tested, regardless.

[/pay]What’s Next… (Outlook and opportunities)[pay]
When the Expiration Indicator doesn’t influence Friday, it tends to influence Monday morning with a vengeance. If Friday afternoon’s buyers and 1232.50‘s recovery were just noise, if the afternoon’s bias-down is unfinished business below, then Monday’s open should probably gap down under the afternoon’s 1221.75 low to trigger a session-long decline. Opening at or above 1224.00-1226.00 would likelier recover to resume rallying.[/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 narrow gain seems odd… when compared to the range’s width, and to its fluctuation from positive territory to negative and back to positive again. Expiration is vulnerable to unusual volatility when greeted like this.

Pattern points… (Setups and technicals)[pay]
Thursday afternoon’s rally didn’t accomplish anything not already done that morning. At least, not durably. The morning’s tests of 1212.00 were probed up to 1215.50, only to close back under the morning’s 1211.00 high.

Buyers gained no traction for their efforts. Not for the opening strength, since probing above it later held as described above. Not for the intraday recovery from fresh lows, which was retraced back under the recovery’s initial 1211.75 close after probing it up to 1215.50.

In the Market Wrap (linked from the sidebar) I demonstrated an “uptrending pivotal support” off the morning’s lows. It has been tested twice, most recently into the close. That second test tends to break lower, and breaking a pivotal trendline essentially leads to retracing to and through its origin. So in this case, breaking under the trendline’s prior touch at 1206.50 would target 1196.50 and 1192.50.

This being expiration, beware of unusual behavior, like extending Thursday’s recovery despite its sponsorship not gaining traction. But the Expiration Indicator still suggests a downward bias into and out of the weekend, so any strength Friday should be limited to the morning.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Friday morning’s bias tends to persist through the noon hour. A bias-up could extend to test 1230.00, despite its likelihood of failure from there. A bias-down could do significant damage before noon.[/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.