Market Wrap

Tuesday was another session under pressure… the third consecutive such session. Spending the entire session in negative territory, probing the prior session’s low. That’s a lot of pessimism. Not gaining traction would make it “ineffectual pessimism.” [pay]

Pattern points… (Setups and technicals)
Tuesday differed slightly in one way, by not gapping down like Friday and Monday. Tuesday differed slightly in another way, only the cash session close recovered back above the prior day’s low. Futures extended down.

Regardless, sellers are not gaining traction for their effort. That’s not a buy signal, the situation can persist indefinitely. Regardless, it tends to resolve violently – whether by surging to compensate for the delay, or by plunging if the delay takes too long.

A lot of selling pressure was expended Tuesday while trading almost entirely in the lower-half of Monday’s range. All that selling pressure, yet still closing above Monday’s low, and above Tuesday morning’s low. RSIs diverged positively into the futures close, but that doesn’t prohibit another probe to fresh lows, even if only a detour.

What’s Next… (Outlook and opportunities)
Wednesday’s open has the same template as Tuesday. It is likely to gap up, and gapping up would be likely to trend intraday. Not gapping open would be likely to trade throughout the morning within Tuesday’s range. But unlike Tuesday’s template, an intraday probe of fresh lows down to 1319.00-1321.00 could trap shorts to launch a bigger upleg. [/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.

Now, that’s a pullback… Monday’s reaction to the weekend’s ongoing debt debate may have trapped shorts to fuel a bigger rally leg. But if that isn’t obvious early Tuesday, then a deeper pullback is underway. [pay]

Pattern points… (Setups and technicals)
The problem with last week’s rally was its magnetic attraction to resistance. Tuesday and Wednesday’s closes traded out while testing 1323.50 resistance. Thursday and Friday’s closes were still testing 1341.00 resistance.

Holding resistance does not end a rally. But neither does it refuel the rally. That’s what happens when closing lower, after recovering from a test of support. That’s what Monday’s Trading Plan described. And that’s what Monday’s session did.

Plunging overnight, gapping down at the open, and recovering back above 1330.50. All would have been for naught, if the close were in the process of testing resistance. But it was not.

In fact, the recovery peaked less than 1 point short of simply touching 1341.00. That’s pessimism, and that’s what creates a vacuum to help the recovery extend higher overnight. Gapping up sharply would be entirely appropriate for this pattern.

What’s Next… (Outlook and opportunities)
Actually, not gapping up could be bearish. Gapping down Tuesday is the likeliest alternative to gapping up. The econ calendar is heavy, and that’s after getting past two more press conferences planned for Monday night.[/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.

Breaking news: Dueling press conferences Friday evening revealed that debt talks had hit their biggest impasse, yet. Futures had closed already, but Spyders (SPY) dropped back down to Friday’s 1333.00 lows… As that news turned 180 degrees, so did Oslo’s news, which now suggests the “terrorist” is not part of a wider network. [pay]

Pattern points… (Setups and technicals)
The combination of Friday afternoon illiquidity, with headline paralysis, locked price into a narrow 2-point range around 1341.50. Even a last-minute plunge (relatively speaking) to 1338.50 was retraced back up to 1342.50, settling just under 1341.50.

Thursday and Friday were the second consecutive instance of trending up one day to resistance – 1341.00 – and the next day absorbing dips. Tuesday had also trended up to resistance – 1323.50 – and Wednesday absorbed minor dips.

Pullbacks are entirely appropriate during trending. This is how a trend refuels. But a healthy rally’s pullbacks should close under resistance, not still testing it, leaving a discount to help resume the rally. Or the pullback’s intraday recover should close above resistance, triggering a breakout whose momentum carries the rally overnight.

But Tuesday and Wednesday each closed while testing 1323.50 resistance. Then Thursday and Friday each closed while testing 1341.00 resistance. Neither is a sell signal, but each is tentative and not gaining traction.

Some of the week’s afternoon paralysis could be dismissed to anxiousness ahead of quarterly earnings dribbling out after the close. And some could be due to the debt deal’s headline risk. Friday’s hesitation could also be due to the morning’s attacks in Oslo.

What’s Next… (Outlook and opportunities)
55 point up from Monday’s bottom at the decline’s 1292.25 target could still extend higher. Pullbacks – productive pullbacks – have room down to 1330.50 before the rally loses traction. Closing under 1323.50 would signal the rally 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.

Tick, tock… Immediate weakness after Wednesday’s close led to much volatility overnight. A significant reversal would have developed, but for a last-minute surge back into and through Tuesday’s range. That’s a lot of buying pressure in a short time, and a breakout is most vulnerable when it is fresh. [pay]

Pattern points… (Setups and technicals)
Thursday afternoon’s bias environment was exited above the 1339.50 bias-up signal. Its 1344.50 bias-up target became unfinished business above. It was touched soon after the Globex open, but could still be probed by an additional point.

1344.50 is Friday morning’s bias-up signal. Its target is 1349.50, but this leg’s next objective is 1352.50-1353.50. That would be a formality, since closing above 1349.50 would next the 1370‘s.

That’s if the bias-up signal is triggered. Holding its test as resistance would be quite a different story.

Reversing down would target 1330.50, and potentially 1325.00. Also testing 1323.50 support would be likely, and closing under it would signal a new downleg underway.

What’s Next… (Outlook and opportunities)
New trend highs, already probing higher overnight, why would the pace slow? The pace already slowed. Thursday’s last two timing windows ranged sideways, around the morning’s 1341.50 high. Almost anything less than surging at Friday’s open would be unlikely to suddenly extend higher, and would be likelier to reverse down.[/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.

Market Wrap discussed the bearish setup… which is already being attempted after the futures close, by a 5-point plunge to 1316.50. It’s the first reaction down from the 1323.50 bounce limit’s test. And if a decline doesn’t catch, then it could be the last.[pay]

Pattern points… (Setups and technicals)
Wednesday’s late-afternoon drop resumed after holding a test of the 1323.50 bounce limit. That made it a productive bounce limit. Its relevance needed no further confirmation.

1323.50 was the bigger picture’s bounce limit after testing the decline’s 1292.25 target Monday. Without any refueling along the way, 1323.50 was tested Tuesday, and  held as resistance through the close. Its test Wednesday held through the close, too.

But it wasn’t rejected, not intraday, as Wednesday’s session essentially ranged around it. The 1323.50 area can still launch a downleg, either by breaking lower immediately at Thursday’s open, or by quickly rejecting a probe of fresh highs.

But exiting Thursday morning’s bias environment after 11:30 above 1323.50, and without yet having launched a downleg, would be much likelier instead to extend the upleg.

What’s Next… (Outlook and opportunities)
Whether by gapping down or immediately slicing lower, breaking under 1317.00 through Wednesday’s open would compensate for the delay of not yet having rejected the test of 1323.50 resistance. Alternatively, a fresh high can be rejected through the morning’s bias environment exit (either from 1328.00, or from above Wednesday’s 1329.75 pre-open high).

A downleg’s minimum objective would be 1330.00 1300.00, which could extend down further, or launch another rally leg. Extending higher would next target 1339.00-1340.00, but probably also new highs in the 1370‘s.[/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.