Market Wrap

Friday’s drop didn’t immediately extend down… and that only made Monday a bigger surprise. Intraday starts and stops defined trending down to the next target. But that suggests this is not a durable bottom, regardless of the immediate reaction. [pay]

Pattern points… (Setups and technicals)
1284.50 could have been a hold-short-through the close signal, but the cash sesion closed there. It was probed a little later, and could extend down overnight, but the bounce potential is no worse since 1284.50 held as support through the cash session close.

1286.25 was the next major target under 1299.00. Monday’s last hour was a 5-point swing around 1286.25. So, 1286.25 wasn’t really broken, despite closing under it. Relative to the range’s measurements, closing under 1284.25 would have been far enough under 1286.25 to qualify as a break.

A bounce has room up to 1295.00 without the downleg losing traction. Closing above 1299.00 would signal a new rally leg underway, confirmed above 1303.00. Otherwise, an air pocket lies just under 1280.00, whose break would next target 1256.00 and 1251.00. (That’s 12-5-6)

What’s Next… (Outlook and opportunities)
This is the decline’s third instance of meeting a major target at the close. Closing under a target would signal the downleg was extending. But closing AT the target does NOT signal a rally is beginning. The pattern remains vulnerable to extending down 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.

NDX underperformed S&Ps at twice Friday… by not retesting the morning’s high, and by breaking the pre-open low. That’s the speculative index, and recovery attempts don’t succeed without its participation.[pay]

Pattern points… (Setups and technicals)
Friday afternoon’s drop stopped short of touching the 1296.00 opening print. That’s optimism. It stopped short of touching the 1294.50 pre-open low’s “new Globex trend extreme.” That’s also optimism.

All other elements to Friday’s price action reflect pessimism. And that keeps alive potential for a recovery attempt.

Friday’s spike down on the Employment Situation report was preceded by a lot of pessimism. Its recovery was prevented by fears ahead of exposure into the weekend’s illiquidity. And the recovery never turned positive.

Let’s see… gapping down, probing new lows, and spending the entire day in negative territory is pessimism. But it wasn’t “ineffectual pessimism” since no new afternoon low was rejected.

So, the drop’s momentum remains intact. Gapping up above Friday’s 1307.50-1309.00 highs would rob the decline of its traction while also reversing momentum up – not for a durable rally, but for a sizable corrective bounce. Meanwhile, the next lower objective is 1286.25, whose break would confirm the bear market had resumed.

What’s Next… (Outlook and opportunities)
1-minute RSI diverged positively into Friday’s futures close, but 3-minute RSI continued deteriorating closer and closer to oversold territory. Closing under 1298.00 would have made a compelling argument for holding short through the weekend, but the cash session closed at 1299.00 – futures closed under 1296.00. If that doesn’t mean sellers have gotten ahead of themselves, then it could be an ugly ride down to 1286.25 and through it.

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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.

Thursday began with bounce potential… but Goldman’s subpoena derailed it at 1317.00. A complete recovery back to 1317.00 was derailed, too, by a bigger drop to new lows at 1304.25. The afternoon’s rally never touched 1317.00, so maybe it was never derailed.[pay]

Pattern points… (Setups and technicals)
Anxiousness ahead of Friday’s Employment Situation report was obvious. Thursday afternoon’s bias environment ranged sideways between 1310.00-1316.25. Then so did the subsequent 90 minutes into the close. And the close was essentially unchanged back at or around 1312.00-1312.50.

It is potentially bullish that the afternoon’s consolidation peaked twice just 2-3 ticks under the morning’s 1317.00 highs. That reflects pessimism. It is “ineffectual pessimism” since the fear was never justified by reacting down. This would normally resolve in a higher high, perhaps testing the 1317.75 overnight bounce, or the low 1320‘s.

Also potentially bullish  is the day’s two big sell-offs. Each recovered back into positive territory, so sellers gained no traction for their efforts. Buyers have yet to be rewarded for absorbing those drops, and another larger drop could still develop. But fresh highs would get a benefit of the doubt for extending higher.

Regardless, much lower objectives remain outstanding. Thursday’s low stopped optimistically short of even touching last Tuesday’s night “new Globex trend extreme” at 1302.25. The original detour to its retest already suggests a bigger break down to 1277.00. Thursday’s premature bounce confirms.

What’s Next… (Outlook and opportunities)
Being a Friday, the morning’s bias signal tends to persist well through the noon hour. The weekend’s illiquidity could most influence the morning’s price action, magnifying the reaction to the Employment Situation report.[/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.

If the decline has resumed… then it is compensating for the delay, retracing four days of improvement in one single day. And except for the potential of an oversold bounce, lower targets remain outstanding. [pay]

Pattern points… (Setups and technicals)
Rejecting Tuesday’s close above 1337.50 had several consequences. First, it confirmed the bounce since Tuesday night’s 1302.25 low was only a correction of the drop from May’s high. Second, it confirmed Tuesday’s late surge was sponsored by weak hands, which only increased the pent-up selling pressure. And third, having been delayed, it meant the decline would resume more aggressively.

Meanwhile, since Thursday and Friday avoided closing back within the 1312.00-1320.00 range, a probe of its lower-end became likely. Wednesday’s 1311.25 low was not that probe.

So, there are two competing influences trying to take control of Wednesday’s close.

A bounce has potential since 1311.25‘s test was accompanied by 1-minute and 3-minute RSIs diverging positively. And the 1312.00-1320.00 range’s lower-end was still being tested at the close, instead of being broken decisively. A bounce has room up to 1319.50, perhaps even up to 1325.00 before resuming the decline.

Otherwise, the decline’s momentum remains intact. The next lower objective is an intraday test of last Tuesday night’s 1302.25 low, a “new Globex trend extreme.”

What’s Next… (Outlook and opportunities)
The first opportunity to rob sellers of their traction would be to recover 1315.00. Any bounce can develop and fail overnight to resume the decline at Thursday’s open. But gapping open up or down will create unfinished business, since openig gaps are often retested.[/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 late surge seemed bullish… and maybe it was. Gaining 8 points in 20 minutes, probing fresh highs, taking RSIs overbought. But a lot of energy was expended, so failing to extend higher could be very bearish.[pay]

Pattern points… (Setups and technicals)
Resistance at the afternoon’s 1338.75 bias-up signal limited the upper-end of Tuesday no-bias environment. Its test eventually reacted down to 1336.75, ranging sideways well past the bias environment lapsing. Nevertheless, another rally leg probed fresh afternoon highs, and its brief consolidation launched an 8-point surge up to 1345.75.

What’s not to like? Nothing, so long as the rally extends higher Wednesday. That would indicate new sponsorship had arrived. But extending higher would require new sponsorship because Tuesday’s surge satisfied what little there was already.

Tuesday’s late 8-point surge was impressive, but originating after 3:10-3:20 means its sponsorship was weak hands. The surge created no new buying pressure, ending the cash session back at the morning’s 1344.00 high. Higher highs printed only after the cash session close.

1337.50‘s first test peaked at 1344.00. Closing above it Wednesday would confirm 1337.50‘s recovery by a rally leg targeting new highs. Closing back under 1337.50 Wednesday would suggest the rally had peaked. Closing back under the 1333.25 interim low would signal momentum reversing down.

What’s Next… (Outlook and opportunities)
An overnight dip has room down to 1341.00-1342.00 before sellers could start to gain traction. Back under 1337.25-1338.00 would reject Tuesday’s late surge, probably very aggressively to compensate for the delay. But almost any open above 1343.25 would marginalize sellers through Wednesday morning.[/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.