Market Wrap

1222.00, or not 1222.00? That is the question… Two consecutive closes Monday and Tuesday above the 1182.25 objective put into play the 1222.00 objective. Not closing Tuesday above Monday’s high undermined the rally’s momentum, if not its objective. This concern seemed moot when Wednesday’s gap up to new highs extended higher.

Pattern points… (Setups and technicals)[pay]
It’s not just whether 1222.00 will be met before retesting prior lows. But whether this leg now underway will reach 1222.00 before experiencing its own correction, or reversal. The afternoon’s 1215.00 bias-up target fulfilled a lot of buying pressure, judging by its reaction down to 1203.50 into the cash session close.

Its extension down to 1196.50 into the futures close went further, threatening to reverse momentum down. The  afternoon’s session high was already rejected by the cash session closing back under the morning’s high, and under the noon hour ‘s  low. This robbed the rally of its momentum, forming the basis of a trend change.

But the morning’s low held, so a trend change signal still needs a lower close Thursday. Probing fresh highs Thursday without gapping up would be likely to hold, and to reverse down, presumably from testing  1222.00.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Freshman 10 Workshop Thursday… Whether new to the service, or seasoned, you are welcome to join me in the chartroom Thursday eventing at 6pm ET for an introductory workshop.[/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.

Freshman 10 Workshop Thursday… Whether new to the service, or seasoned, you are welcome to join me in the chartroom Thursday eventing at 6pm ET for an introductory workshop.

Pattern points… (Setups and technicals)[pay]
Tuesday was a relatively tight trading range by any measure, let alone for an entire session. Tests of  Monday’s 1192.50 high each reversed to test 1187.00. The actual range wasn’t much wider. This process repeated itself four times.

The session did not want to trend.

There was no unfinished business above — the morning’s 1192.50 objective had been neutralized — but no sell signal developed into a downleg. Two other buy signals produced 2-3 point moves, but also avoided developing into an upleg.

Tuesday’s 3:10-3:20 window trended down through relevant support (1190.75 and 1189.50), then printed a fresh afternoon low into the bottom of the hour. Often, this setup will extend down into the close. On Tuesday it only prevented another bounce from gaining traction.

Tuesday was the second consecutive session to close above 1182.25. Its close was still in the process of testing the first session’s 1190.75 close. That doesn’t conflict with 1182.25‘s recovery, but it doesn’t confirm it, either.

[/pay]What’s Next… (Outlook and opportunities)[pay]
A post-close gap down extended to fresh lows at 1185.00. Gapping down under 1182.25 would almost require extending down to Friday’s 1164.50 “lower prior highs.” Gapping down under Monday afternoon’s 1177.00 lows would make 1164.50‘s test likely to break lower. Otherwise, 1182.25‘s second consecutive recovery should extend the rally to 1222.00, whether or not first dipping down to 1164.50.[/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.

It is difficult to push a stone uphill or downhill… when it is on a level surface. Monday’s surface was leveled by low volume, and 1184.00 was tested at 10:30, noon, 1:20 and 2:30. Even a late drop to 1176.75 retraced back to 1184.00, and through it to 1192.25… Then, back down to 1184.00?

Pattern points… (Setups and technicals)[pay]
I had noted earlier Monday in the blog that the intraday pattern — a failed Ascending Triangle — tends to be recovered entirely after breaking lower. It is depicted in the Market Wrap but it is moot now since the recovery already happened.

In other words, the pattern’s attraction back up to its 1187.00 has been neutralized.

Another pattern in-play was the retest of Sep 27’s “pivotal high” — the ~1187.25 intraday high prior to its 1190.00 actual high. Testing one all but assures testing the other. Its retest is completed, and its attraction is moot.

But Sep 27’s retest is still interesting. The interim dip between retesting a pivotal high and its actual high can predict the potential for extending higher. And Monday’s interim dip between testing Sep 27’s highs was shallow, only piercing Sep 27’s interim low. Buyers barely refueled.

And now those poorly refueled buyers are already neutralized.

And a lot of buying pressure was expended in the process. Monday’s late buy signal at 1180.75 is similar to last Tuesday’s 1074.00 signal. Each triggered in the last half-hour, reversing an afternoon dip with a steep surge to fresh session highs. This is not the first time since last Tuesday. The rally seems not to have attracted new sponsorship.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The rally should extend higher without delay if it intends to extend higher at all, or without first consolidating.  Closing under 1182.25 Tuesday would signal that the rally had ended. And while awaiting a new accumulation pattern to form and trigger, it would be vulnerable to launching a downleg. Closing under 1182.25 could already be well on the way back down to last week’s lows (and lower). [/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.

Despite futures closing 4-1/2 points higher than cash… SPY isn’t reacting down much after the close on news of Moody’s warning of a Belgium downgrade. And that’s after Friday’s intraday drop absorbed bad news on Italy from Fitch. If the corrective rally’s top is in, then it should be obvious quickly to avoid extending higher.

Pattern points… (Setups and technicals)[pay]
The 20-point pre-open spike up was retraced entirely during the morning’s bias environment, i.e. by 11:30. The noon hour reversed back into negative territory almost 10 points more. The afternoon’s bias environment bounced back to unchanged.

Exiting Friday afternoon’s bias environment back above a prior high can be vulnerable to a short-squeeze into the close. It took awhile and several attempts, but 1154.25 finally triggered a 10-point surge. That reacted down in a 15-point plunge.

1161.00 had been the rally’s next higher objective above 1143.50. It was attacked to within 2 ticks Thursday. A close above it Friday could not have been easier. Yet 1161.00 resistance held two separate, prominent probes, and also closed negative. So, Friday’s buyers gained no traction for their efforts.

Sellers didn’t gain traction either — closing under 1143.50, not above it, would have signaled momentum already reversing down. Maintaining a break beyond either end of Friday’s 1144.00-1165.00 range is likely to extend in that direction.

[/pay]What’s Next… (Outlook and opportunities)[pay]
A relief rally after no weekend default would run into difficulty at Friday’s 1173.75 pre-open high. Rejecting its test early could reverse down sharply. But not rejecting its test — not trending down under Friday’s lows, would likely resolve up.[/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.

Pavlov’s dogs weren’t fully conditioned… not on the way down. We’ll soon see whether two consecutive uptrending sessions are sufficient to bring out early buyers — without having to feed them.

Pattern points… (Setups and technicals)[pay]
Thursday’s pre-open probes above 1143.50 were corrected by the morning’s dip to its 1129.50 target. A rally entered the noon hour probing fresh highs, and barely looked back intraday on the way to 1160.50.

Its final surge was yet another last half-hour oddity, suggesting the same sponsorship since Tuesday’s low. Greeting Friday’s Employment Situation report from above 1154.25 was likely to absorb any initial negative knee-jerk reaction. The timing of the final surge that actually did recover 1154.25 does undermine its credibility.

Regardless, a decline probably has one opportunity — maybe two — to gain traction.

One bearish option is to gap down under the afternoon’s 1145.50 low, which would trigger a “session-long decline” since Thursday’s close trended up. The other bearish option is to reverse down from probing fresh highs, preferably after dipping under 1154.25. Otherwise, sellers could be marginalized for the day.

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