Market Wrap

Wednesday’s about-face was more impressive… than its overall range. But that was pretty impressive, too. Its last upleg suffered the same fate as its overnight drop — too much, too soon.[pay]

Pattern points… (Setups and technicals)
Oversold RSIs at Wednesday’s 1155.00 low require a retest. So does overbought RSIs at its 1196.25 high. The low’s test launched a 41-point rally. The high’s test launched a 14-point dive. A great example that overbought and oversold RSIs can launch significant moves before their retests are fulfilled.

Each reaction to overbought and oversold RSIs is sponsored by weak hands. Again, the low’s buyers sponsored a 41-point rally, and the high’s sellers sponsored a 14-point dive. Another great example that weakness is relative.

Overbought and oversold RSIs are not timing indicators. They only provide context to better understand the reaction’s sponsorship. The rally’s short-squeeze characteristics, the late drop’s plunge… this range will be traveled again, soon.

Meanwhile, Wednesday’s Expiration Indicator is suggesting a downward bias into and out of the weekend. The size of Wednesday’s intraday rally was irrelevant, only that its 1196.25 high was well-positioned to close above last week’s high. It didn’t, and the size of its reaction down was irrelevant, except that it closed under each support it tested.

What’s Next… (Outlook and opportunities)
In either setup, a retest of Wednesday’s 1196.25 high, perhaps even up to 1201.50 is still possible. Gapping up strongly, and surging quickly to fresh highs would be capable of extending sharply higher intraday. Any lesser opening strength could still retest 1196.25, perhaps even 1201.50, but their reaction down would be likely. Simply sliding, or breaking under 1176.00 through any relevant timing window, could trend down sharply intraday.[/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.

Remember how Monday’s surge borrowed… buying pressure from Tuesday’s session? Tuesday’s session suffered the consequence by not extending beyond Monday’s post-close high. Even a deep overnight dip could only recover, but not refuel. But Tuesday did not reverse down, making a big resolution likely. [pay]

Pattern points… (Setups and technicals)
Monday’s late surge had poked into Friday’s range. The surge was largely retraced before Tuesday’s open, which then recovered to probe Monday’s 1165.75 post-close high.

And that was basically it. The balance of the session essentially ranged around 1165.75, between Friday afternoon’s 1155.00 high and Friday morning’s 1169.00 high. So, Monday’s late surge wasn’t rejected, but it wasn’t much more productive.

And buyers did not gain traction for their efforts. The afternoon’s probe above Friday morning’s 1169.00 high was retraced to close under the morning’s 1168.00 high. Extending the rally any further Wednesday would all but require the open to gap up.

That doesn’t mean sellers exploited the opportunity. They could have gained traction by closing back under 1163.00-1164.00 — but a dip under it to 1158.50 was recovered to close at 1167.00. That dip did test afternoon lows through the 3:10-3:20 window. So, a lower open could melt down quickly, especially if the lower open followed fresh highs overnight.

What’s Next… (Outlook and opportunities)
It’s Wednesday of expiration week, so we’ll be talking a lot about Wednesday’s Expiration Indicator. When it does trigger a setup at the close, it can be very predictive of price action into and out of the weekend… Click here for Tuesday’s post-close Market Wrap recording.[/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.

If you don’t like this market… then stick around a few minutes, and a different market will appear. Sunday night’s gap down to new relative lows, then sharply lower lows overnight, produced a steep rally into the open. That didn’t prevent another sizable sell-off, or its recovery to fresh highs. Hopeful bulls might find only one thing lacking — spending any relevant time in positive territory. [pay]

Pattern points… (Setups and technicals)
Monday’s sessions — both overnight and intraday — neutralized a lot of selling pressure. From Friday’s late sell signal under 1149.00 targeting fresh lows under 1141.00, to a retest of last Tuesday’s 1133.50 low down to 1126.25 (down to 1123.50). And that was all before the open. Intraday lows fell only to 1129.75.

Monday’s session formed a potentially bullish Key Reversal. Gapping open to a new extreme in a multi-session trend, then closing in positive territory. It might even be considered a Pivot Reversal for the morning’s probe into positive territory — albeit brief, and only above the 1147.50 cash session close.

Monday’s bias-down signals left no unfinished business below. The morning’s 1144.50 bias-down signal triggered and its 1138.00 target was met. The afternoon’s 1138.00 signal was triggered and its 1131.00 target was met. Neither bias environment’s exit recovered its bias-down signal.

Each of the three bullish factors is mitigated in some relevant way. Downside objectives were not neutralized intraday, the Key Reversal formed due to dubiously late buying, and bias-down signals weren’t recovered in a timely fashion.

None of which prevents Monday’s late surge from extending higher — just not for very long if it were to extend higher overnight. The surge started too late to be the product of Monday’s accumulation, so it borrowed from future buying pressure. And borrowed heavily.

What’s Next… (Outlook and opportunities)
An opening dip to 1142.50-1144.50 could recover and extend up to 1180.00 or 1187.00. Any lower would risk a new downleg gaining traction. But initial strength would be too shallow and easily absorbed if not immediately recovering 1166.00-1167.00 through the open… Monday’s post-close Market Wrap is available here.[/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 Pivot Reversal predicted Friday’s weakness… The severity of Friday’s drop was compounded by having met and held the week’s highest calculable target at Thursday’s 1198.00 high. Will the powers-that-be keep their hands off long enough for the decline to play itself out?

Pattern points… (Setups and technicals)
Friday’s drop essentially ended at noon. It was entered at 1149.00, and the balance of the session ranged up to 1155.00 and down to 1141.00. A rally into the close ended the day ranging even more narrowly around 1149.00.

Meanwhile, RSIs never deteriorated. Repeated dips throughout the afternoon all stopped short of touching oversold territory.

Obviously, the weak open attracted selling forward that would have waited until the afternoon. And it attracted more selling that might not have been executed. Seems like a golden opportunity for a short-squeeze. But there wasn’t one – just firming up to 1147.25 at the cash session close, and then 1153.00 at the futures close.

Unfulfilled opportunities can speak volumes. Friday’s low printed during the last hour, which tends not to launch durable rallies. Friday’s cash session closed under 1149.00 to also undermine any rally effort.

Some weekend intervention could gap up Sunday and Monday’s opens to 1172.00 or 1185.00. Otherwise, the decline remains in-play. Its next lower objective is to retest Tuesday’s 1133.50 low, then 1126.25 and 1122.00.

What’s Next… (Outlook and opportunities)
Don’t forget to attend Saturday’s Strategy Session at 9:30am ET. Its link is in the blog’s sidebar… Friday’s post-close Market Wrap recording is here.

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 bounce’s highest calculable target… was met by Thursday’s highs at 1197.00-1198.00. No unfinished business was left above, and a reversal pattern triggered. What could go wrong? [pay]

Pattern points… (Setups and technicals)
RSIs were on the cusp of being overbought at Thursday’s 1198.00 high. The reaction down from there to 1176.25 gained traction by closing under prior lows. But that does not prevent a detour that probes fresh highs.

Thursday’s session formed a Pivot Reversal — its new trend high intraday interrupted a counter-trend open and close. Closing below the open tends to be even more bearish. Often, it is immediately bearish.

Occasionally, it is not immediately bearish. Delaying the next downleg too long past the open would become increasingly likely to bounce. And a bounce would be increasingly likely to retest Thursday’s highs (up to 1201.50). But the pattern would be just as likely  to fail.

Regardless of when it might begin and from where, a downleg would target either end of Tuesday’s range — the gap back to its 1158.50 close, and the morning’s excessively optimistic 1133.50 lows.

What’s Next… (Outlook and opportunities)
This being a Friday, the morning’s bias signal is likely to persist through the noon hour. So, not triggering bias-down could prevent trending down before next week. Otherwise, almost any other opening setup is vulnerable to declining into the weekend… Here’s the link to Thursday’s Market Wrap.[/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.