Market Wrap

What’s rare than a natural disaster?… A natural disaster that has market relevance. Reactions to it can be relevant, but only because it tends to be exaggerated. Selling that might have happened later is accelerated, along with other selling that wouldn’t have happened at all. An artificial downleg sponsored by weak hands becomes easy prey. [pay]

Pattern points… (Setups and technicals)
The easy prey can extend too far too quickly, and itself become easy prey. Tuesday’s 8-1/2 point spike down to 1138.00 was consolidated, retested, and then reversed to 1159.00-1160.00. That’s a lot of buying energy to expend, spanning the session’s entire last 60-90 minutes.

That included a test of last Thursday’s 1159.75 opening print that had gapped down 30 points. It is natural resistance. And it was still being tested at Tuesday’s close, instead of being recovered cleanly. Meanwhile, RSIs were diverging negatively.

Closing at resistance essentially requires the trend to extend higher without delay, if were going to extend higher at all. Extending the rally into Wednesday morning could reach 1165.00, probably 1173.50-1175.00, and possibly 1185.00.

Reversing down without extending any higher would not be done simply. An immediate break or overnight dip could test 1150.00 as support. A downleg could still recover from anywhere above 1145.00-1146.00.

What’s Next… (Outlook and opportunities)
Tuesday’s late extended surge was fueled in part by artificial buying, covering the artificial selling. But there can be more, and probably will be through Wednesday morning, so long as the open is not selling off considerably. And it should be one or the other – opening only flat-to-weaker is unlikely… The post-close Market Wrap is linked 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.

Wednesday’s Expiration Indicator kept a downward bias… on Friday afternoon and Monday morning price action. It’s interesting that gapping up umpteen points impede the indicator’s influence. [pay]

Pattern points… (Setups and technicals)
But its influence ended there. A new rally leg could have begun, even if only to retest the overnight rally’s high. Instead, a late dip retested the morning’s 1119.00 low. So, an afternoon rally would have been justified, but didn’t happen.

Meanwhile, both the morning and afternoon triggered bias-up. And both bias-up targets were met. Yet price action reacted only down from each target, back under their bias-up signals. Buyers gained no traction for their efforts.

Finally, Monday afternoon’s retest of the morning’s low was itself a knee-jerk reaction to late-breaking GS news. If not for its blip-down, the session’s last 60-90 minutes would have traded entirely within the noon hour’s range.

What’s Next… (Outlook and opportunities)
Monday’s afternoon’s 1119.00-1133.50 range will likely contain Tuesday morning’s range if pre-open action isn’t trending already. That may seem wide, but both sides of the range need not be touched. Recovering 1125.00-1127.75 could extend higher through the morning to threaten Friday’s 1153.25 high in the afternoon. Otherwise, a break under 1118.50 would target a retest of Sunday night’s 1111.25 low, and then lower… Click here for Monday’s post-close Market Wrap recording.
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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.

Deja vu, all over again… This week’s Expiration Indicator triggered at Wednesday’s close, after the morning’s probe into positive territory had failed. It signaled a downward bias into and out of the weekend. Friday morning’s probe into positive territory also failed. As if the setup wants to remind us it’s in charge… Don’t forget about tomorrow morning’s Strategy Session at 9;30am ET. [pay]

Pattern points… (Setups and technicals)
One sticking point to the sell-off’s durability is the overbought RSIs at Friday morning’s 1153.25 high. It wasn’t a reaction to news and it happened during a timing window. While it did indicate the pattern was vulnerable to reversing down, that reversal should be retraced.

If any day can be dismissed for odd behavior, it is expiration. It wouldn’t be the first time. But we’ll still keep in mind the potential attraction back up to 1153.25. For now, that reversal won the day, all 34 points of it, back down to 1119.00.

The cash session’s 1119.75 close was under Thursday’s lows. And Thursday’s lows already chipped away at support from the prior week’s lows (by retracing 61.8% of the consolidation). Friday was a breakout, needing to be confirmed by a second consecutive lower close Monday.

What’s Next… (Outlook and opportunities)
Speaking of Monday… While new lows are likely intraday, a new low close is not assured. Even if new lows intraday were to test the 1077.00 crash low (neutralizing its attraction), a recovery into the close would still be possible. Recovering 1134.25 through the open and 1143.50 through the morning would signal that expiration’s downward bias had ended already. [/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.

Did Thursday’s drop get ahead of itself?… Multiple setups have been predicting bearish behavior, and expiration could be exacerbating the setups and Europe’s news. If that explains the drop’s abnormal size, then it would mean the drop is valid, and not artificial.[pay]

Pattern points… (Setups and technicals)
If Thursday’s gap down triggered a “session-long decline”, then it fulfilled every intraday characteristic. Supports failed to hold, resistances did, and the last hour contained the session low. Here’s another interesting characteristic – the following session tends to probe lower lows.

That would seem to undermine the potential of extending higher.  So would Thursday’s close.

The late 14-15 point bounce off of the 1128.25 session low already expended a lot of buying energy. And the cash session close was still testing 1140.00 instead of clearly recovering it, so the bounce’s buyers failed to gain traction.

Nevertheless, overnight action could test 1148.00 resistance just as noise. A durable bounce would not be signaled without also recovering 1150.25 through a relevant timing window.

Similarly, Thursday’s close did not react down clearly from 1140.00. So, a drop has room down to 1134.25 before signaling the decline’s resumption. And according to Wednesday’s Expiration Indicator, that’s more likely, with or without an interim bounce.

What’s Next… (Outlook and opportunities)
Thursday’s recovery back above the morning’s 1131.00 low cost sellers their traction. But buyers didn’t gain any without recovery the noon hour’s 1148.00 highs. Unless Friday’s open were to gap beyond either, then Friday’s close should be between both.

Opening within the 1131.00-1148.00 range could still attempt to trend beyond it. But the trending would likely fail and retrace if it were to originate from between 1131.00-1148.00… Thursday’s Market Wrap recording is linked 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.

Wednesday morning’s probe of fresh highs… was rejected. But recent support held. Guess what that says about expiration’s bias… A recording of the post-close Market Wrap is linked here.[pay]

Pattern points… (Setups and technicals)
Wednesday’s initial 1198.00 buy signal quickly fulfilled the morning’s 1205.75 bias-up target, and peaked. The morning was exited back under 1198.00. New highs were both probed and rejected, all during the morning’s bias environment.

This follows Tuesday’s two bias-down signals, both having fulfilled their own bias-down targets. If that really cleared the decks of sellers, then Wednesday morning’s rally should not have been retraced. And it should not have been rejected into negative territory.

Nonetheless, sellers were marginalized by holding the test of 1184.00 support through the afternoon bias environment lapsing. Sellers were marginalized, and yet the balance of the session couldn’t gain traction on three separate probes above 1190.50. Sound familiar? That’s similar to the morning rally’s problem.

Oversold RSIs at Tuesday’s 1177.50 low still require a retest. The sentiment extreme at Wednesday’s 1181.50 low should be retested, too. Both retests are likely next so long as Thursday’s open isn’t rallying back above Wednesday’s highs.

What’s Next… (Outlook and opportunities)As for the balance of the week, Wednesday’s session of expiration week can predict bias through Monday morning. And Wednesday’s session probed two prior session highs without closing above either one. There is potential for a detour to probe fresh highs Thursday, triggered above 1199.00. But closing under 1184.00 should trend down into the weekend, and out of it. [/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.