Market Wrap

What expiration taketh… The day after expiration giveth back? Actually, expiration held positive territory. But the drop from its opening gap up was retraced Tuesday. And held. [pay]

Pattern points… (Setups and technicals)
Monday afternoon’s ranging did not breakout in either direction. Tests held both the upper-end and lower-end.

Prior lows under 1271.00 were probed during the 3:10-3:20 window. The probe began after the window opened. Recovering the probe when the window shut would have sealed a bottom. But fresh lows were being probed at 3:20. This did not extend down, but it identified any potential bounce as being unable to gain traction.

Another bounce did hold 1273.50-1274.00 resistance once again peaked. Its recovery would be likely to extend higher. Likely objectives would include Friday’s 1277.25 pre-open high, and the gap back to Tuesday’s 1283.00 cash session close.

Failing to extend Monday’s bounce would all but require retesting last Thursday’s 1252.25 low – either to resume the decline, or to form a more durable bottom.

What’s Next… (Outlook and opportunities)
Tuesday’s econ calendar is light, but one post-open item stands out. Its timing jives well with reversing initial trending, whether it is trending up, or trending down to either bias signal. [/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.

Saturday’s Strategy Session starts at 9:30am ET… We’ll review the market’s bigger picture, how to apply Bias Signals, and then do instant analysis of any chart request… Its recording is linked here.[pay]

Pattern points… (Setups and technicals)
Friday afternoon’s low filled the gap back to Thursday’s 1263.50 futures close. A lower low tested it down to 1261.50, and bounced. That can be bullish – IF their 1270.00 interim high is recovered.

It wasn’t.

Having missed the opportunity to close above 1270.00 Friday, gapping up above 1270.00 Monday would not be bullish. It could trigger a brief bounce. But any more bullish scenario must recover Friday’s 1275.00 intraday high through a relevant timing window.

Probing under 1260.00-1261.00 and recovering through a relevant timing window would be bullish. It could form a strong enough bottom to launch a rally back to Tuesday’s 1287.00 high and higher.

1260.00-1261.00 need not be tested at all, let alone at Monday’s open, not even in the absence of a rally. But if its support were broken, Monday morning could mimic Friday’s intraday downtrend and extend sharply lower under 1260.00-1261.00.

What’s Next… (Outlook and opportunities)
Wednesday’s expiration indicator lacked clarity that could have put into play a test of prior highs. So, buyers did not deserve a reward. The burden of proof was on sellers, who didn’t deliver, and the overnight bounce may have fulfilled that consequence. Triggering either bias signal Monday morning could extend sharply in that direction, beyond the bias target. [/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.

Another probe of fresh lows… and another recovery back above prior lows. Thursday’s recovery even ended in positive territory. It this area isn’t a significant low, then it will soon launch a significant downleg.[pay]

Pattern points… (Setups and technicals)
Wednesday’s expiration indicator was borderline bullish. The lower-end of the range had held through Wednesday’s close. Now two days of probing under Monday’s 1259.50 low have failed to gain traction. In fact, Thursday’s new low was recovered to close in positive territory.

The decline must attract new sponsorship immediately, or else a bounce off the range’s lower-end happens next.

Thursday afternoon’s decline had originated during a no-bias environment. Any trending under the 1261.00 bias-down signal required being retraced. It was. For the same reason, there is potential (only potential, not a requirement) for the retracement to also test the 1266.25 last relative high.

Extending the bounce would also target filling the gap back to Tuesday’s 1283.00 close. And Tuesday afternoon’s 1290.00 bias-up target remains unfinished business above. The market is unlikely to range here narrowly. Not rallying would leave only the potential for extending the decline.

What’s Next… (Outlook and opportunities)
Thursday’s oversold RSIs at its 1252.25 low require a retest eventually. It could be neutralized overnight or Friday morning, presumably down to 1251.00, or delayed until a bigger bounce has ended. Of course, the risk in probing a fresh low is that sellers could gain traction. And new lows on a Friday morning, quad-witch expiration, could extend down very sharply. [/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.

Payback’s a… Oversold RSIs require a retest, and any interim rally is all about refueling sellers. An incomplete Pivot Reversal cannot launch a durable rally. Tuesday’s rally fell prey to these and other market truisms, despite the steep detour. Other truisms are pointing lower.[pay]

Pattern points… (Setups and technicals)
Ranging at Wednesday’s low was centered around 1259.00. Bounces weren’t expected to gain traction, and did not. But potential down to 1251.00-1253.00 wasn’t fulfilled. Attempts to extend down were retraced back into the range, but not back above it. That could have been bullish, but instead the delay was “ineffectual optimism.”

Extending intraday down to 1253.00 could have stretched sellers thinly enough to trigger another steep rally. It would have been a credible low, but an attack barely got underway. The delay makes 1244.00 increasingly likely, if the decline were to resume.

Wednesday’s expiration signal wasn’t decisive, despite probing fresh lows. Closing at new lows would have signaled the downtrend would extend through expiration. Recovering from fresh lows would have targeted prior highs up to 1290.00.

What’s Next… (Outlook and opportunities)
Thursday’s open can still do by proxy what Thursday’s close did not. Recovering 1264.50 would suggest the range’s lower-end held. Exiting the open at fresh lows would suggest that expiration will be tilted down. No clarity is required – and even then, it may only signal that a rally or decline will be absorbed. [/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.

Tuesday’s Pivot Reversal was unfinished… so extending higher without further delay required a gap up. The gap up also reflects impatient buyers, which is not bullish coming so close to the low.[pay]

Pattern points… (Setups and technicals)
Tuesday afternoon’s 1284.50 bias-up signal put into play 1290.00. The bias environment exit dipped back down to 1284.50, then bounced instead of breaking lower. That is bullish action. In fact, its bounce printed a fresh high at 1287.00.

The fresh high was printed going into the last hour. That action is also bullish. And, of course, it avoided a drop back under 1284.50 long enough to validate its 1290.00 target. Now 1290.00 is “unfinished business above” whose eventual test is required.

“Bullish” does not prevent a drop. It indicates that strong hands were not sellers. Sponsorship of a later drop should be limited to weak hands. That should limit the drop, and enable its recovery.

We’ll see.

The last hour’s 6-point drop fulfilled its potential to 1281.50-1282.00, which held through the close to confirm its sponsorship was weak hands. Recovering 1283.25 through the close would have confirmed the drop had ended. That proof must be left to Wednesday’s open, whether by extending the rally, or by absorbing another dip.

What’s Next… (Outlook and opportunities)
Assuming a bullish context, and that Tuesday’s late drop will recover to fresh highs, there is still no assurance of that evolving into a durable rally. The more bullish path – at least, for the purpose of delaying new lows – would be another shallow dip at Wednesday’s open. [/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.