Market Wrap

Happy Anniversary, got you back on my mind… The 24-year anniversary of 1987’s so-called “Black Monday” was anything but. It was not a crash, nor was it black. It wasn’t even a Monday. Perhaps the afternoon’s steep, relentless slide was an homage, reliving some of the original excitement on a much smaller scale. If not, then it might be the beginning of another crash-like sequence.

Pattern points… (Setups and technicals)[pay]
Despite being probed as resistance, 1221.25 was not recovered through any relevant timing window Wednesday. Friday’s close was still in the process of testing it, as was Tuesday’s close (it was never touched Monday).

1221.25-1222.00 was the next higher objective  put into play upon recovering 1182.25 for two consecutive sessions. Now has 1221.25 has held as resistance for two consecutive sessions.

Wednesday’s Expiration Indicator suggests a downward bias into and out of the weekend. This does not prevent intraday rally efforts — even to test 1230.00. A close above 1221.25 would be unlikely.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Having closed Wednesday under both 1221.25 and 1215.00, immediately recovering 1221.25 at Thursday’s open could reject Wednesday’s signal. There is plenty of news among econ reports and earnings to try to make it happen.[/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’s opening dip seemed aggressive… But that was before the afternoon short-squeeze. Absorbing the fresh lows could have launched a rally. Perhaps it did. But the rally has already met with much resistance, similar to Tuesday morning’s support.

Pattern points… (Setups and technicals)[pay]
Tuesday morning’s failure to trigger bias-down was assumed then to have ended the drop from Friday’s close. There was potential that the drop had refueled buyers for a domino effect targeting 1215.00, the gap back to Friday’s 1221.25 close, a retest of Sunday night’s 1230.00 highs, and then 1245.00.

By slicing to and through the first three attractions in a singular upleg, the last hour’s surge may have undermined its ability to extend up to 1245.00.

Closing above 1221.25 would have made 1245.00‘s test likely. The cash session close was still testing 1221.25. Just closing above  1215.00 at least keeps alive potential to retest 1230.00, where Tuesday’s highs were overbought.

Testing 1245.00 would be even likelier to hold as resistance since Tuesday’s lows left outstanding a test of 1185.00. And when 1185.00 is retested eventually, it will be done by a new downleg, and not in order to form a bottom.

[/pay]What’s Next… (Outlook and opportunities)[pay]
After trending up into Tuesday’s close, gapping down under the afternoon’s 1205.50 low would signal “session-long decline.” That may be the only way to trend down prior to retesting the 1230.00 area.[/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.

The 1221-1222 target seems credible… especially after Monday’s big reversal down rejected it. Sunday night’s highs were rejected, too, but not yet back under a prior low. So, its retest cannot yet be discounted.

Pattern points… (Setups and technicals)[pay]
Post-close action has already extended Monday’s drop under its 1194.00 low to test the next target area at 1187.00. The repeated testing of 1195.00 produced obligatory bounces. But there was no bullish reason to have returned to 1195.00 — which was tested late Thursday — after probing new highs in the interim.

It is a little late now (since there is a break lower after covering this in depth during Market Wrap) to dwell much on how revisiting 1195.00 meant the market intended to probe lower. The only question was whether a bounce could develop first. But there was no question that not bouncing would mean gapping down.

It is a little early now to assume Tuesday’s open will indeed gap down. An overnight recovery is plausible. Opening in positive territory would essentially target 1215.00, if not also new highs at 1230.00 and 1245.00. But opening under 1187.00 could find an air pocket below down to 1179.00 before even slowing.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Breaking under 1187.00 through any relevant window would find little support below. And breaking 1187.00 support through the close could seal a top. But beware the rally’s resolve to defend this critical support, since the two-week old rally’s health depends entirely on holding 1187.00.[/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.

Now, that’s cutting it close… The rally’s next higher objective at 1222.00 was attacked to within 3 ticks after Friday’s close. It was well-deserved, having recovered from a late 6-point dip to 1214.00, and from the morning’s 10-point dip to 1207.00. Nothing pessimistic there — and that’s the problem.

Pattern points… (Setups and technicals)[pay]
Friday’s post-open dip was an excellent case study of the benefit to identifying weak-handed sponsorship. The dip eventually probed under the key 1209.00 bias support. The tests originated too late to be strong hands, so 1209.00 ultimately held.

But that’s not the lesson.

More important is what happens after weak hands have finished trying, after they have failed. Recall that holding 1209.00‘s test kept alive potential for reversing back up to test 1221.25-1222.00. Strong hands did not have to retake control. The failed sell-off simply created a void to gravitate higher.

Friday’s actual high was 1221.50. This was a post-close retest of 1220.00‘s prior high that had printed a half-hour earlier. Between the two highs was a dip to 1214.00. That’s a 13-point round-trip in 30 minutes. Nothing pessimistic there.

And that’s the rally’s problem.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Or, part of its problem. Two other parts are technicals (RSIs diverged negatively into the close) and price (fulfilling the 1221.25-1222.00 objective). The rally’s non-problem is timing. New high closes on Friday’s very rarely reverse down immediately. At least, not durably.

After trending up into Friday’s close, Monday’s open gapping down under Friday afternoon’s 1210.25 low would trigger a “session-long decline.” Any shallower pullback would likely recover to probe higher highs, next targeting 1228.00 intraday. Closing any higher could put into play 1245.00. [/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.

Thursday’s recovery from session lows… failed to close positive. Tempered enthusiasm, or tired buyers?

Pattern points… (Setups and technicals)[pay]
Wednesday afternoon’s reaction down from testing 1215.00 had extended down after the 1201.50 cash session close to the 1197.50 futures close. That eventually extended down to 1190.00 overnight and then to 1185.25 intraday.

That’s a lot of selling pressure to expend in reacting down from 1215.00 resistance.

All of it since Wednesday’s close was absorbed Thursday. A relatively brief 20 minutes did probe about 1 point higher than Wednesday’s 1201.50 cash session close. Thursday’s futures close recaptured 1197.50.

That’s a lot of buying pressure to expend in absorbing 1215.00‘s reaction down.

An immediate rally would retrace well into Wednesday’s range to 1206.00 or 1209.00, or above Wednesday’s 1216.00 high to 1222.00, which would help to form a more durable top. Alternatively, a break under 1195.00 would target the 1191.00 area and either recover to test 1222.00, or else extend down into a bigger correction.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Thursday’s close was essentially unchanged, making trending difficult to start for a Friday without doing so immediately and decisively. Almost anything resembling a flat open could still trend intraday, but not without retracing entirely. And this being a Friday, the morning’s bias is likely to persist well into the noon hour.[/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.