Market Wrap

A different kind of “Freshman 10″… Be sure to join us in the Chartroom at 6pm ET Thursday for an introductory workshop. We’ll review the 10 important concepts and uses of my service.[pay]

Pattern points… (Setups and technicals)
It has been considered daily whether there were any outstanding punitive consequences to last Wednesday’s Expiration Indicator. Its downward bias through Monday morning had only retraced Thursday and Friday’s gains back to Wednesday’s close. The slope was pretty significant, but it still left something to be desired. Wednesday’s slope was pretty significant, too. I would now consider the indicator’s influence to be moot. But it does feel like it is still trying to compensate for the delay.

Wednesday’s close was in the process of testing a relevant support. Between that, and its sharply oversold RSIs, holding short through the close could not be signaled. This doesn’t prevent trending down further, and without delay. But for the signal’s purpose — identifying situations likely to gap down much more than they are prone to gapping up — Wednesday’s close did not qualify.

Notice on the above chart that Wednesday’s close was in the process of testing the 1157.25 61.8% retracement of the Labor Day week’s swing. This is natural support when tested from above the swing’s interim high. There is still room down to 1146.25 to drop further without yet requiring a probe under the pattern’s lows —  confirmed under 1140.25. But now that the 61.8% retracement has been tested, not closing under it Thursday would rob sellers of their traction.

A new downleg at this stage of this pattern would likely contain the required retest of 1077.00‘s “new Globex trend extreme.” Closing above 1171.00 would suggest that a correction had just run its course, with fresh highs targeting at least 1221.00.

What’s Next… (Outlook and opportunities)
Price hasn’t budged much in the several hours since dipping to 1155.50 into the futures close. A lower low touched 1154.50, even further below the 1159.25 cash session close. This action, or lack of it, suggests the market is very much interested in the global reaction to Wednesday’s plunge. [/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.

First impressions are always the best… Somebody should have told the market that this morning. Its opening drop was recovered to fresh highs — at least, to retest Friday’s prior highs. But that was all retraced back to the morning’s low for no net gain for the day. And any attraction above had been neutralized. [pay]

Pattern points… (Setups and technicals)
Tuesday’s last timing window trended down throughout. The afternoon’s bias environment started lapsing after 2:30, and the attack on 1214.00 slid to 1195.00. That’s nearly 19 points, in 90 minutes.

The slide’s sponsorship would have to be pretty pessimistic. Yet, the low stopped 1 tick short of touching the morning’s 1194.75 low, whose oversold RSIs had required its retest. That is in spite of having come within 3 ticks almost 45 minutes earlier.

Impatient buyers prevented neutralizing the oversold RSIs in all that time. This is not the stuff of a durable bottom. It’s not likely to be resolved like Monday’s bearish close, by dipping sharply overnight and then recovering before the open. But it won’t take much downward pressure after Wednesday’s open to trigger an attack on 1190.00.

Meanwhile, there is no unfinished business above. Other than some potential for a bounce to test 1205.00 resistance, no further strength is likely without putting into play 1221.00. Closing under 1187.00 could set a very negative tone through Friday morning.

What’s Next… (Outlook and opportunities)
Freshman 10: Have you set a reminder for Thursday’s special introductory workshop at 6:00pm ET? You don’t have to be new to get plenty out of it… Market Wrap: Don’t forget the post-close recording is now found in the sidebar, beside the Market Tour. [/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 Expiration Indicator’s vengeance… was somewhat benevolent. Wednesday’s close was retraced entirely. So, ultimately no rally since then gained traction. And the delay was compensated for by aggression. But Monday’s gap down and briefly lower low didn’t quite satisfy the “downward bias” that was signaled. [pay]

Pattern points… (Setups and technicals)
Monday’s 3:10-3:20 window (highlighted green) contained a probe to fresh session highs, and not also a retracement back under prior highs. At that point, no drop before the close could gain traction. A drop could be noise only, limiting it to retracing the last upleg (circled green).

That’s a lot of room. The probe of fresh highs at 1203.75 had originated at 1188.25. A lot of selling pressure could have been expended, sponsored by weak hands since it wasn’t going to gain traction.

But a dip into the close tested 1197.50, only a 38.2% retracement, supported by impatient buying. A 61.8% retracement down to 1194.00 would have been healthier. And since the late upleg originated too late to be a durable recovery, holding a test of 1194.00 as support would have been bullish by starting another breakout attempt.

Recovering from a fresh low Monday afternoon (circled red), instead of from a higher low, would have reflected “ineffectual pessimism.” And that could have launched a durable upleg. But the pattern is vulnerable to reversing down Tuesday and resuming Sunday night’s decline.

Monday’s late upleg might yet become more productive into Tuesday. Filling the gap(s) back to Friday’s 1209.50/1211.75 close (highlighted yellow) is not required, but it is not prohibited. It would be bullish if exceeded through a relevant timing window, and bearish if not.[/pay]

What’s Next… (Outlook and opportunities)
NEW: Freshman Ten. Beginning this Thursday (not Wednesday) I will launch an introductory workshop designed for newer subscribers. But all subscribers will want to check it out. Our agenda includes ten items that we discuss at different times throughout the week. This week’s will begin at 6pm ET… Market Wrap: The daily post-close recording is now linked permanently from the sidebar, next to Market Tour.

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.

Did expiration give cover… to bad stuff coming over the weekend? Or, has the Expiration Indicator inverted?[pay]

Pattern points… (Setups and technicals)
Friday’s expiration ticked higher into the close, similar to Thursday’s close. Not to new highs, unlike Thursday, but above most prior highs. Although the cash session close was 1209.50, futures ticked higher to 1212.75.

The higher futures close would be irrelevant to my analysis on any day, and more so on expiration. The cash session close wasn’t very relevant, either – when the afternoon’s bias environment started lapsing at 2:30, I had noted that this pattern on a normal Friday would have already signaled trending was done for the day.

But that’s of no interest, or of substantially less interest, than how this may affect the Wednesday Expiration Indicator. Perhaps its downward bias prevented a rally Friday afternoon. It wouldn’t be the first time that Friday afternoon was not biased per Wednesday’s indication. These exceptions are rare, but Monday mornings have then tended to trend down with a vengeance.

Monday’s open can gap up, considerably, and then trend down sharply to fulfill the indicator. In fact, after last month’s expiration trended down into the weekend, Monday’s opening gap up retraced it all, and yet reversed back down to that Friday’s low.

Regardless, I would consider buying if Monday’s open — gap up, or not — is still not trending obviously down coming out of the open’s 15 minutes of volatility. While Friday’s session essentially closed above 1201.50 without still overlapping it, gapping down under 1201.50-1202.25 would still trigger a session-long decline.

What’s Next… (Outlook and opportunities)
Friday’s Market Wrap is linked here… Don’t forget about Saturday’s Strategy Session, linked from the blog’s sidebar. It starts at 9:30am ET.[/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.

A funny thing happened on the way to… a bad day. Coordinated intervention triggered a surge to fresh highs. It helped more than the Euro. Exceeding 1276.00 through Wednesday’s open had put into play targets up to 1201.50. It was still being tested at Thursday’s close.[pay]

Pattern points… (Setups and technicals)
1201.50 was also Thursday afternoon’s bias-up target. It was met just before the afternoon’s bias environment started lapsing at 2:30. The balance of the session ranged around it. In fact, the session’s final bars were still overlapping it. The cash session close was 1202.75.

In other words, 1201.50 held its test as resistance. A post-close spike up to new highs tested 1205.50, but that was too late to be relevant.

There is room for noise around 1201.50 to 1195.00-1205.25 without yet extending higher or rejecting it. Extending higher through the close would target 1224.00 and 1230.00. Breaking lower would target new lows for the week under 1130.00.

Thursday’s close trended up. So, a “session-long decline” setup would trigger by gapping open Friday under Thursday afternoon’s 1194.25 low. A session-long rally setup cannot trigger, but it may seem like it if the morning’s bias-up signal were triggered —  any trending underway at expiration’s open is very difficult to reverse intraday.

What’s Next… (Outlook and opportunities)
Friday is Quadruple Witch expiration. Don’t forget that my Expiration Indicator is expecting a downward bias into and out of the weekend — specifically, Friday afternoon and Monday morning. That’s going to be difficult if Friday’s open doesn’t absorb buying pressures, leaving it to Monday morning to make up for the delay with a vengeance. [/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.