Market Wrap

What the #%&@ was that?!… Tuesday’s late 1212.75 buy signal was not triggering convincingly. It finally did catch, as the session’s last half-hour began. This is not a reliable window for a valid breakout, which didn’t prevent a productive 6-point surge, but it prevented the surge from  gaining traction. So it was retraced, back to its 1212.75 origin, and then to 1203.75.[pay]

Pattern points… (Setups and technicals)
My next higher objective above 1193.00 is 1226.00-1228.00. It may be refined down slightly to 1225.00. I wonder whether it should be refined to something under 1218.75?

The reason I ask is because Tuesday’s late surge was retraced so substantially after touching 1218.75. Its cash session close equated to 1210.50, which does not give rise to my question. This is still above Monday’s prior high, a second consecutive higher close that confirm that the momentum of Monday’s close above 1193.00 remains intact.

But futures dipped much further down to 1203.75. This is back under Monday’s high, and also back under Aug 17’s prior high, after probing above each. Globex is slightly weaker, and not rejecting the extra selling.

A hold-short through the close could not be considered Tuesday since RSIs had become oversold. At 1210.50. That didn’t prevent sliding another 7 points. Unless rejected Wednesday by opening above at least 1208.00-1209.00, without taking RSIs overbought, a test of 1193.00 would be likely next.

What’s Next… (Outlook and opportunities)
For now, I am giving the rally a benefit of the doubt. Tuesday’s cash session close above Monday’s high is the determining factor. But not rejecting any or enough of Tuesday’s drop at Wednesday’s open would at least expect a deeper dip — whether its purpose were to refuel buyers, or to end the corrective bounce… Market Wrap was recorded, and you can view it 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.

The week began the way it had ended… with a wide intraday range probing fresh highs into the afternoon. Low-volume, pre-holiday trending isn’t very credible for being a durable upleg. The only question is how productive it can be before failing. [pay]

Pattern points… (Setups and technicals)
Straight up rallies like Monday don’t reverse down on a dime. That means the rally is likely to extend higher, and also means that immediately reversing down would very likely recover.

Nothing about Monday’s open would have turned me bearish unless  1188.50‘s retest had held. Nothing about Monday’s close would turn me bearish unless 1193.00 were rejected – broken on a closing basis, preferably through Tuesday’s close. If 1193.00 were in fact broken Tuesday, then it would likely be a close under 1193.00.

Otherwise, the next higher objective is 1226.00-1228.00. Monday’s close was still testing the afternoon’s 1206.75 bias-up target, without closing decisively above it. An immediate pullback is possible, but not required. However, 1206.75‘s test into the close should launch either an immediate pullback, or extend the rally at a much steeper pace.

Price action trended up into Monday’s close, and the afternoon’s 1199.75 low printed prior to the last hour. So, gapping down under 1199.75 could trigger a session-long decline. No other sell signal should gain traction without first probing fresh highs.

What’s Next… (Outlook and opportunities)
The post-close Market Wrap was recorded, and its link 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.

Turnabout is fair play… So, recovering Friday’s opening plunge seems only right after rejecting Thursday’s opening surge. Actually, no. One of those episodes cleared the way for a bigger move in that direction — the other refueled it. [pay]

Pattern points… (Setups and technicals)
Friday morning’s fireworks were only Friday morning’s fireworks. The noon hour’s 1171.00-1179.00 range held tests through the afternoon. One brief dip attacked 1166.00, where RSIs diverged positively there to launch a recovery. Closing back at the range’s upper-end positioned the market for more fireworks Monday morning.

Either Friday’s late dip refueled buyers for another run at Thursday’s opening surge, or else it cleared away support to allow a retest of Friday’s lows.

Maintaining a probe above Friday’s ~1180.00 high would be attracted higher to test Thursday’s 1182.25 opening gap. Normally, overbought RSIs that formed during Thursday’s opening 15 minutes of volatility wouldn’t require a retest. But 1188.50 high should be retested anyway if touching 1182.25 doesn’t react down immediately. While any close above 1185.00 would target 1193.00, I would expect much of that distance to be covered well before the close.

Otherwise, at least a retracement of Friday morning’s rally would be underway. Almost any dip remotely targeting Friday afternoon’s ~1166.50 low would also probe under Thursday afternoon’s 1165.60 high. Below it is an air pocket with room down to 1151.00. Not much other support exists down to 1139.00, which is also a price attraction. Closing any lower would put into play a new downleg.

What’s Next… (Outlook and opportunities)
Saturday’s Strategy Session was interesting. Thank you to its attendees for their great questions and comments. The recording’s link is now available in the sidebar or 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.

Any more Buffets out there?… Any more private pools of $5 billion? No? That’s too bad. There are plenty of BankAmericas (BAC). Even BAC is still a BAC. While its winning session may have bought some time, it created an Island that will have to be retested by a new downleg eventually. [pay]

Pattern points… (Setups and technicals)
Now the question is whether the S&Ps opening surge up to 1188.50 will be retested, too. The open’s extra optimistic rally was reversed well into negative territory at 1157.00 and 1153.00. Early. There was more than enough time to extend down, but Wednesday’s 1153.75 low held its test as support.

Perhaps a break lower was only delayed, with sellers paralyzed by anxiousness ahead of Bernanke’s Jackson Hole speech. After all, buyers didn’t exploit the hesitation with a rally.

Wednesday’s low happens to be the last low prior to Thursday’s high. Closing under it would have signaled the trend changing to down. Three separate timing windows Thursday were positioned to break under Wednesday’s low, but did not.

A much lower close Friday is needed to signal the trend reversing down. Otherwise, a shallow dip could still recover and retest Thursday’s 1182.25 opening print – perhaps also 1193.00.

What’s Next… (Outlook and opportunities)
Friday morning’s two big news events are post-open — econ report at 8:55, and release Bernanke’s Jackson Hole statement at 10:00. The opening print could be within Thursday afternoon’s 1154.00-1165.00 range. If so, trending attempted in one direction would likely retrace back into the range, and probably reverse through it more durably. [/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 bullish Jobless Claims report Thursday could leverage Wednesday’s two positive surprises (Durable Goods and FHFA Housing Price Index) by establishing a trend. But higher claims would suggest Wednesday’s econ reports were outliers, and undermine the session’s rally. [pay]

Pattern points… (Setups and technicals)
The timing of Wednesday’s late breakout suggests it was sponsored by weak hands, making it unlikely to gain traction. That didn’t stop it from being productive, so long as stronger sellers didn’t step in. And they didn’t. The break above 1166.50 nearly touched 1177.00.

Congestion at the late rally’s high overlapped 1174.00 and 1175.00 – the morning’s high and the next higher objective. Without closing decisively above either, the late rally was only a retest of both. Closing above them would have been bullish, but unlikely considering the breakout’s weak sponsorship. Closing below them without actually touching would have been bullish, but impatient buyers stretched the rubber band tighter.

Already, the breakout has been retraced back to 1165.50. That’s not deep enough to flush out the weak sponsorship. And it’s too early. Resuming the rally without dipping further and longer would only find another temporary upleg. Extending down far enough to launch a bigger upleg would be exposed to sellers gaining traction instead.

What’s Next… (Outlook and opportunities)
1163.50 and probably also 1160.50 should be touched before a rally would be credible for extending higher to 1185.00 and possibly 1193.00. Probing under 1159.75 would become vulnerable to a bigger drop targeting 1146.00 and potentially 1139.00. [/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.