Market Wrap

Rally attempt, new lows, then another failed rally… Monday’s session had a little something for everyone. Requirements to test the morning’s high and Friday’s low were both fulfilled, while creating new requirements to test the new extremes. Tuesday could be very similar for awhile.[pay]

Pattern points… (Setups and technicals)
Both Monday’s morning and afternoon bias signals invoked their grace periods. The morning’s late bias-up never extended higher, and the afternoon signal never triggered. That only inhibited trending, not volatility.

It may have also inhibited the a Pivot Reversal from triggering with a close above the morning’s 1271.50 high. It still could trigger Tuesday, either by immediately recovering 1272.50, or by opening in rally mode after dipping to new lows overnight. A valid effort would not delay in extending sharply higher.

Oversold RSIs at Monday’s 1259.50 low require a retest, which could be fulfilled overnight. That’s probably the best chance at neutralizing the attraction below, absorbing the selling pressure, and then also rallying through the open. Otherwise, a fresh low intraday would be vulnerable to becoming a bigger decline.

Simply gapping up Tuesday above Monday afternoon’s 1271.75 high (its RSIs were overbought) would reject the closing dip. And that would trigger a Session-long Rally setup. It could also become a multi-session rally, but would leave outstanding the oversold RSIs at Monday’s low.

What’s Next… (Outlook and opportunities)
Bounces should be limited to 1270.00 if a retest of Monday’s low remains in-play. Considering overbought and oversold RSIs lie at either extreme, much of Tuesday could be choppy, like Monday. Unless the opening action were recovering above Monday’s highs, fresh lows are likely, and somewhat capable of extending the decline… Monday’s last hour and Market Wrap recording are 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.

Don’t forget about the “Strategy Session” Saturday morning… After discussing Friday’s new lows, we’ll have a brief workshop on properly drawing trendlines.[pay]

Pattern points… (Setups and technicals)
Simultaneously oversold 1-minute and 3-minute RSIs accompanied Friday afternoon’s 1261.75 low. That requires strong hands. That left only weak hands to sponsor the corrective bounce up to 1273.75.

That doesn’t mean strong hands sponsored the bounce’s failure back down to 1262.75. But the burden of proof is on buyers, and they failed.

If any day could have made this pattern turn very ugly, it is a Friday. The weekend’s impending illiquidity can bring fearful sellers out of the woodwork to sponsor a new downleg. A short-squeeze should have exploited the same fear to an opposite effect – fear of being short to trigger a surge.

But the fear of being short produced two surges that could not get away from the noon hour’s 1269.75 high. That was weak enough, without also reversing back down to 1262.75. Stopping optimistically short of actually touching the low wasn’t weak enough.

Opening the new week at new trend lows with unfinished business below. A bottom would require probing fresh lows. So would extending the decline. Not recovering through the open could be the difference between them.

What’s Next… (Outlook and opportunities)
The next lower objective under 1262.75 is only 1259.25. The larger pattern’s longstanding objective continues to be March’s 1243.00 low, and then 1237.00. Somehow recovering 1280.50 Monday through a relevant timing window could trigger another bounce.[/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.

Thursday’s bounce started reversing down… but stopped short of triggering a bigger drop underway. That doesn’t make the bounce any more durable, but it might try to extend higher before resuming the decline.[pay]

Pattern points… (Setups and technicals)
Entering the last hour at fresh session highs usually marginalizes sellers for the balance of the day. It usually extends higher through the bottom of the hour. Thursday’s fresh high at 3:00 – probing the afternoon’s 1287.75 bias-up signal by 3 ticks – did neither.

That was appropriate since the afternoon’s narrow range was likely to resolve down. It was the plateau following a surge out of a Rising Wedge that had appeared in the morning’s uptrend. The next leg should be down, and it should retrace all of Thursday morning’s rally from 1273.50.

Wednesday’s 1269.75 post-close low should be retested, too. Rallying away from unfinished business below suggests that sellers are being refueled. Meanwhile, the morning’s Rising Wedge is a Running Correction that reflects excessive optimism. It is inappropriate on the first leg off of a new low.

Thursday’s late drop retraced 38.2% of the rally from Wednesday’s 1269.75 post-close low. Fresh highs before dipping any further would further confirm the bounce’s sponsorship is weak hands. Regardless, only a weaker open may prevent extending the bounce Friday.

What’s Next… (Outlook and opportunities)
Closing any lower under 1281.00 would have suggested holding short through the close. This was avoided, suggesting another attempt to extend the bounce. A bounce has room to attack 1287.00 without buyers regaining traction. But just opening under 1281.00 would trigger weakness. Being a Friday, any initial trending is likely to extend through the noon hour. [/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 horse! A horse!… Richard III had a whole kingdom at his disposal, if he only had a horse to get to it. Somewhat similarly, this decline has an opportunity to stage a significant corrective rally. Excessive pessimism, targets being fulfilled. It just lacks a trigger to put a rally into play. [pay]

Pattern points… (Setups and technicals)
A short-squeeze was so widely anticipated that it was preceded by two surges off of 1277.00. Actually, the two surges fulfilled it. So, rather than rally to new session highs into the close, new session lows touched the 1276.25 “new Globex trend extreme” whose intraday retest was all but required.

1276.25 was only touched, and not pierced or probed. Sure, nothing deeper was required. But the prior hour’s two surges reflected excessive optimism. Just touching the overnight low probably isn’t a bottom, either. In fact, a slightly lower low after the close has now touched 1275.25.

That wasn’t a terribly long wait for the fresh low. Perhaps enough excessive pessimism remains to help limit and absorb much more selling pressure. Once new sponsorship stops arriving to take the decline’s reigns, a fresh high through a relevant timing window could trigger a steep rally. The trend otherwise remains down.

What’s Next… (Outlook and opportunities)
Don’t forget that the front-month rolls to Sep at Thursday’s open. It trades at about a 6.25 discount to the underlying SPX index. No gap up can form a durable bottom in this pattern. But recovering 1284.00 would try. Otherwise, this leg’s next targets would be 1262.75 and 1259.25 – testing either and recovering back above 1265.25 could form a significant bottom.[/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 close resembled Monday’s… refusing to close under 1284.50. Still ranging around 1286.25, the next big target under 1299.00. Tuesday’s bounce was all about refueling sellers, and they weren’t very refueled. The window is open for a bounce. A trap door will open otherwise.[pay]

Pattern points… (Setups and technicals)
The gap back to Monday’s 1284.50 close required being filled. Gapping up above Monday’s high could have nullified its attraction. The detour could have extended higher. In the end, Tuesday afternoon’s 12-point slide from 1295.00 also probed under Monday’s lows.

1284.50 was still being tested at Tuesday’s cash session close. It was still being tested at the futures close. So, 1284.50 held, while 1282.50 was tested and retested, and while RSIs diverged positively.

Price objectives below were neutralized by filling the gap, by probing the prior low, and by not closing under 1284.50. Technical objectives were created by RSIs diverging positively.

Only timing was not optimal, but timing is everything. A durable bottom could still form in this area after probing fresh lows early Wednesday and recovering. Meanwhile, the pattern remains vulnerable to resuming the decline aggressively.

What’s Next… (Outlook and opportunities)
Gapping up above 1292.50 would rob sellers of a lot of traction. Extending quickly through Tuesday’s 1295.50 high would trigger a bigger corrective bounce. It would only refuel sellers, and perhaps also neutralize Tuesday morning’s unfinished business above at 1296.50.

The most bullish scenarios cannot leave outstanding a gap below. So a gap up must react down to new lows and then recover. The risk is that new lows simply gain traction to resume the rally, but we’ll look at specific levels in the Market Tour.[/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.