Market Wrap

Signs of life… Meeting 1257.00 early Monday was likelier to hold as support. Sunday night is pretty early Monday. And its test launched a rally back up to prior highs. It’s still probably not enough for a durable bottom, but it’s a good start – so long as this bounce doesn’t get carried away. [pay]

Pattern points… (Setups and technicals)
Monday morning’s rally was almost like a laboratory or different predictive behaviors. From repeatedly testing support, while RSIs improved, to recovering resistance through a relevant timing window.

The afternoon’s breakout attempt was another learning moment. It originated during a no-bias environment – neither bias signal had been triggered through 1:20. No trending attempt was likely, and any trending attempted was likely to be retraced.

In fact, the rally up to 1280.00 was retraced back to 1274.00 where the market was trading at 1:20.

Now the lab is closed. Monday’s dip back down to 1274.00 fulfilled the selling pressure, but it didn’t bounce. Buyers didn’t gain traction. Sellers didn’t gain traction, either, so no trending is indicated. Trending is possible, but no setup is in-play.

What’s Next… (Outlook and opportunities)
Tuesday’s econ calendar is unusually heavy. That could wreak havoc on a rudderless market. Especially if it is sitting too high, above unfinished business below (a retest of 1252.25‘s oversold RSIs). But avsell-off should be underway by mid-morning to avoid refueling too much for a bigger downleg. [/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 Greek plan’s knee-jerk surge… required a complete retracement according to Thursday afternoon’s pattern. Its origin was tested at Friday’s late low. Taking an entire day to complete left no time for reacting up to safer ground. The market chose otherwise, suggesting that Monday’s open will be interesting, too. [pay]

Pattern points… (Setups and technicals)
Delaying the retest of Thursday’s 1261.50 last relative low prevented a base from forming Friday. Extending down at Monday’s open is the likely resolution. So, NOT extending down immediately would be likely to bounce.

Meanwhile, the leg underway before Thursday afternoon’s surprise announcement is back in-play. A decline from 1270.75 was aiming for new session lows under 1257.25. There was already a risk of its break, which would next target 1251.00. Now that is even likelier, to compensate for the detour’s delay.

Regardless of direction, Monday’s open is likely to gap sharply. Fridays that trend at all tend to contain at least two trending legs. But Friday morning’s downleg never got a sequel. In these rare instances, Monday’s open tends to compensate for the delay.

What’s Next… (Outlook and opportunities)
Thursday’s 1257.25 low would be likelier to hold its test if tested early Monday. But bouncing before touching it would reflect optimism that would help to maintain the slide. Meanwhile, a bounce would have room up to 1271.00 without Friday’s decline losing traction. Recovering 1272.50 could gaining traction for something much bigger, like retesting Thursday’s 1286.00 overnight high.

Don’t forget to join us Saturday morning for the weekly Strategy Session. Its link is in the sidebar. We’ll go into greater detail about using Bias Parameters, and then open the floor to instant analysis requests from subscribers.[/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.

Getting ahead of itself… Technical issues undermining Wednesday’s highs, were combined with the negative reaction to Bernanke. The attraction back down to last week’s lows accelerated the drop’s momentum. The drop got ahead of itself. But it did not end. [pay]

Pattern points… (Setups and technicals)
Thursday’s post-open pattern eventually created a minimum target of 1257.25. Its test and retest launched a rally up to 1270.75. The decline resumed from there, targeting fresh lows. End of story.

Actually, there was a plot twist when Greek’s latest bailout developments made news. And there was another rally back up to the 1277.75 overnight highs.

But there was not a new accumulation pattern. And there was not a retest of last week’s oversold RSIs at the 1252.25 low. So, there is not a bottom. There can be another sizable rally – but its failure would be as likely as the last two rally legs.

Meanwhile, note the pattern that formed from the Greek deal’s reaction. Its interim consolidation was sloped upward, with higher lows. This reflects optimism. It is “excessive” optimism since the interim consolidation’s purpose was to create pessimism. Instead, the ill-timed optimism is sorely missed just when it is needed most, to break above the prior high.

The prior high at 1277.75 was being tested into Thursday’s close. It should be rejected immediately if the corrective bounce has ended, and to avoid extending into another sizable rally.

What’s Next… (Outlook and opportunities)
A sizable rally could be underway if Friday’s open were to recover 1280.00-1281.00. Otherwise, a retest of Thursday’s 1257.25 lows is likely, whose break would target 1251.00. Dipping back under 1275.75 overnight could start the next downleg without further delay. [/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.

Bernanke’s no-confidence vote… was more influential than the Greek confidence vote one day earlier. Wednesday’s probe of Tuesday’s highs failed, and its reaction down fell at an accelerated pace. Has the corrective bounce ended?[pay]

Pattern points… (Setups and technicals)
1290.00 was probed twice Tuesday, and then through much of Wednesday. Closing above it could have signaled the week-old corrective rally was extending higher. Closing under 1283.00 suggests the rally has ended.

Tuesday’s cash session close equated to 1282.00. Futures extended down to 1279.00. A lot of selling pressure was expended since testing 1292.00-1293.00 just two hours earlier. A lot of pessimism was expressed by extending straight down throughout, and by extending lower after the close.

Meanwhile, 3-minute RSI was oversold, and 1-minute RSI diverged positively. A gap up is possible at Thursday’s open. But there is no unfinished business above, and no accumulation pattern, so any bounce would likely be only a correction.

I notice also that the Dow and NDX did not probe Tuesday’s highs, while SPX did. The Down’s outperformance Monday had meant bigger money was essentially forced to buy. But reluctant buyers aren’t even buying anymore. That would be bullish if NDX were now outperforming, but it isn’t

What’s Next… (Outlook and opportunities)
The drop has room down to the 1278.00 area, while still being able to retrace Wednesday afternoon’s dip up to 1284.00. But a break under 1272.50 through any relevant timing window would leave only one support remaining on the way down to retesting oversold RSIs at last Thursday’s 1252.25 low. [/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.

All eyes awaiting Greece’s results… The market may expect an orderly result, suggested by its steep rally. But that rally met its target, and ultimately held it through the close. So the market has also priced in an orderly result.[pay]

Pattern points… (Setups and technicals)
Extending Monday’s rally put into play 1281.50. Exceeding the target through Tuesday’s open put into play 1290.00 Tuesday’s high tested it, neutralizing its attraction.

Closing above 1290.00 would have put into play higher targets. Closing under its 1286.00 interim low would have rejected 1290.00. There was plenty of time intraday to accomplish either. Tuesday’s close still testing 1290.00 wasn’t arbitrary. It reflects the level’s attraction. And that is “equilibrium.”

An equilibrium close tends to produce two trending attempts in opposite directions the next day. Each one is retraced entirely, and then a third trending attempt extends substantially. Gapping below or above the  1286.25-1292.75 prior high and prior low can gain traction and extend without delay.

Interestingly, closing back under the morning’s high also suggests that buyers gained no traction for their efforts. Extending a rally without traction requires gapping up. Not gapping up Wednesday would suggest a later probe above Tuesday’s high will be rejected by a bigger downleg. And closing above Tuesday’s high would next target 1307.00-1310.00.

What’s Next… (Outlook and opportunities)
The watched kettle eventually boils, too. And everyone has been talking about Greece. Wednesday afternoon’s FOMC announcement and Bernanke’s conference hasn’t been discussed very much. And being a new format, which produced volatility last month, it could have a bigger impact Wednesday than Greece. [/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.