Market Wrap

Sound familiar?… Wednesday’s rally left no unfinished business above, satisfying its target (1198.25). Tuesday’s rally had ended the day by testing its (1165.50) resistance. The similarity could even persist to the point of gapping up Thursday. Would that make the rally likelier to extend higher intraday, or likelier to reverse down? [pay]

Pattern points… (Setups and technicals)
There are a lot of relevant similarities between Tuesday and Wednesday’s patterns. Exiting the morning’s bias environment in rally mode, noon hour highs, fresh highs through the afternoon’s bias environment, and a last-hour pullback recovering to fresh highs.

This comparison is relevant because similar consecutive setups tend not to resolve similarly. Tuesday’s setup resolved by gapping up and extending higher. Gapping up Thursday would only increase the similarities, and would be even less likely to extend higher.

Gapping down under 1183.00 basis Dec (1189.00 basis Sep) would trigger a session-long decline. Otherwise, some sort of fresh high should print. We have been focused on 1197.00-1198.00 (1203.00-1204.00), but that could be fine-tuned to 1196.00 (1202.00). Turning negative from testing any resistance could quickly gain traction.

1201.50‘s recovery (1207.50) through a relevant window could put into play 1237.50 (1243.50). But beware too much optimism ahead of Bernanke’s afternoon speech, or the president’s evening speech.

What’s Next… (Outlook and opportunities)
The front-month rolls forward to Dec at Thursday’s cash session open. It is trading at essentially a 6-point discount to Sep, whose prices are quoted above parenthetically… Wednesday’s Market Wrap recording can be found 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.

A victory for the… bulls? A lot of buying pressure was expended Tuesday just to visit resistance, in negative territory. Unfinished business remains outstanding below. The question is whether the bounce has ended. [pay]

Pattern points… (Setups and technicals)
Friday’s close under 1193.00 had put into play a test of 1165.50. It was attacked Friday, but never touched. It was probed thoroughly overnight (if 30 points can still be considered “thorough”), but it was never touched intraday. Not until Tuesday’s closing minutes.

Leaving 1165.50 outstanding Friday meant its attraction remained intact. By the same token — the other side of it, actually — touching 1165.50 before the close neutralized its attraction. And not closing above 1165.50 means that buyers gained no traction for their effort. Buyers would have served themselves better by not probing 1165.50, or by closing above it.

Tuesday’s buyers were not strong-handed. Two intraday buy signals fulfilled their objectives, without breaking higher through a relevant timing window. Price rose by default as sellers failed to exploit their own efforts. Meanwhile, any intraday gains are undermined by the entire session forming in negative territory.

One more characteristic that undermines buyers is the 1138.25 post-open low. It stopped short of touching the 1138.00 low, the morning’s bias-down target, despite retracing an interim rally to 1153.75. Impatient buying at 1138.00 does not make sponsorship any stronger, regardless of its rally to 1165.50.

What’s Next… (Outlook and opportunities)
Gapping up Wednesday must maintain a recovery above the gap(s) back to Friday’s 1170.00/1172.50 close gain traction for a bigger rally. If Wednesday’s open is not gapping up, then it’s very likely gapping down, or reacting down from filling Friday’s 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.

Strategy Session is off for the holiday… Post any stock or market analysis requests to the comments section of this blog post. And enjoy the holiday![pay]

Pattern points… (Setups and technicals)
Friday’s close under 1193.00 has signaled the trend is reversing down. There is no unfinished business above — the 1126.00-1128.00 target was tested thoroughly, and the gap back to Thursday’s 1201.25 close does not require being filled.

A second consecutive close under 1193.00 would confirm the downleg underway. Closing immediately back above 1193.00 would invalidate Friday’s break, and probably lead to fresh highs targeting 1143.50.

The next cash session happens to follow a holiday, but Globex trades through Monday morning. A bounce to 1193.00 or 1201.25 could greet Tuesday’s open with a big gap up. It had better gain traction fast, or else risk trending back down to Friday’s 1175.00 and 1170.00 lows.

Or lower.

The next lower objective under 1193.00 is 1165.50. Its test is likely to be part of any probe under Friday’s lows, whether following a bounce or without bouncing at all. In fact, since 1165.50 was in-play Friday but left outstanding, any other day of the week would have been compelling to hold-short through the close.

What’s Next… (Outlook and opportunities)
I’ll be checking in Sunday night and Monday morning. Bias Parameters are available for Globex, and new parameters will be published for Tuesday after Monday morning’s close… Friday’s recording of the Market Wrap is 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.

If at first, you don’t fail enough… The rally’s 1226.00-1228.00 objective was retested Thursday, giving its reaction down another opportunity to gain traction. How did it do?[pay]

Pattern points… (Setups and technicals)
1226.00-1228.00‘s retest peaked under Wednesday’s 1229.75 high. But it was all the same pattern since the interim low never gained traction. Thursday’s reaction down did what Wednesday’s did not – closing back under two prior sessions’ highs, closing under a prior session’s low, closing in negative territory.

Is that enough to push momentum off the ledge?

My 3-Day Weekend indicator is intended to identify when strong-handed sponsorship has positioned for either a near-term breakout or a reversal. This week’s setup stopped short of clearly signaling at Wednesday’s close, and Thursday’s open didn’t compensate for a delay. So, Thursday’s bearish close was too late to trigger the setup.

But Thursday’s close was bearish. We just don’t have the luxury of the 3-Day Weekend indicator to offer its timing context. Gapping up above 1210.50 at Friday’s open would reject Thursday’s late-afternoon congestion — definitely possible in reaction to the Employment Situation report. That would likely delay another downleg, but its resolution is still likely down.

What’s Next… (Outlook and opportunities)
Another attack on 1226.00-1228.00 is not required, let alone another test, but another attack would be likely to probe fresh highs above 1230.00 anyway. Continued weakness could range back down to 1193.00 without actually launching a downleg. Any lower could slip sharply into the weekend… Click here for the recording of 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.

The rally’s next objective was met… and its reaction was lengthy. The question is whether selling past Wednesday’s first hour robbed buyers of their momentum, or simply refueled them.[pay]

Pattern points… (Setups and technicals)
Wednesday’s close barely avoided closing negative, but it ended under Tuesday’s high. Rejecting both would have been bearish, especially after the morning’s test of the rally’s next objective at 1226.00-1228.00. Regardless, the price action is not bullish.

At least much of Tuesday’s last-minute plunge could be dismissed for being post-close. Not Wednesday. Its post-open drop defined much of the session.

Closing under Monday’s 1208.00 high would have sealed a top — instead, 1208.00 held as support at Wednesday’s last hour low. Tuesday’s 1210.50 cash session close held two tests as support, too. And Tuesday’s 1218.75 high was being attacked at Wednesday’s close.

The session did form “ineffectual optimism.” Gapping up, probing prior highs and spending the entire session in positive territory are as optimistic as it can get. Excpet for not closing above the prior high. That’s ineffectual. Ineffectual optimism is distribution, context, but not necessarily timing. Fresh highs can be probed, but the resolution is still down.

What’s Next… (Outlook and opportunities)
Wednesday’s 3:10-3:20 window trended down, to fresh afternoon lows. this should be followed by at least one more lower low. Bouncing in the interim into Wednesday’s close suggests more than one more lower. Meanwhile, the 3-Day Weekend signal is undecided. Closing decisively above 1218.75 would have been bullish, and under 1208.00 bearish. Breaking either decisively through Thursday’s open could still qualify… Click here to watch the 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.