Market Wrap

Last Friday’s close was bearish… but perhaps too pessimistic to extend down immediately. So, the market took a round-trip instead of a dive. This Friday’s close was just as bearish. Could it still be “too” pessimistic? [pay]

Pattern points… (Setups and technicals)
Friday’s close was eerily similarly to the prior Friday’s close. A steep, deep morning drop led into a narrow consolidation at the lows. No afternoon bounce. No afternoon break lower. Differences between their exact lows’ timing were not meaningful. Their structures were the same.

Two similar consecutive setups tend not to resolve similarly. If the prior week’s version of the same pattern resolved up, then this current instance should resolve down.

The path down could simply trade down without delay, or include a detour that bounces first up to 1340.00-1341.00. A new downleg may be averted by recovering 1344.00 through the morning. Otherwise, any bounce remains likely to resolve down.

What’s Next… (Outlook and opportunities)
Any pattern indicating a break under 1332.00 would be expected to probe sharply lower lows. Obligatory support is possible at the prior week’s 1325.25 low, but the next real objective would be 1319.00. A much more attractive target would be 1299.00. Opening strength no greater than 1340.00-1341.00 would still be likely to resolve 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.

1346.00-1348.00 was a big target area… It held as resistance or was still being tested into Thursday’s close. Buying pressure that created the target was satisfied, and the target held. But it wasn’t rejected, not by Thursday’s close.[pay]

Pattern points… (Setups and technicals)
Closing under 1340.00 would have made Friday likely to decline throughout. But Thursday’s reaction off of its highs held 1343.00. Perhaps sellers are keeping their energy in reserve. Or they don’t have any.

If sellers are saving it in reserve, then they’re waiting for another fresh high. That would be vulnerable to reversing down sharply, like Wednesday’s pre-open surge up to 1358.50 after Tuesday’s rally. Now, 1351.50 would suffice, with a reversal triggered back under 1346.25.

Maintaining a gap down under 1340.00 could also reverse momentum down, without requiring any bounce before extending down. That could be difficult.

The alternative to reversing down Friday could just as easily range narrowly, instead of extending higher. Potential to resolve bearishly only requires that 1346.00-1348.00 hold as resistance – not that its first test be rejected.

What’s Next… (Outlook and opportunities)
We’ll be watching early strength for signs that buyers aren’t gaining any traction. Waiting to surge until 8:30’s econ report would be easier to absorb and reverse down. Simply trending down could be absorbed, too, although not necessarily Friday 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.

Wednesday was a day of reckoning… Proving this week’s bounce was only corrective, retesting last week’s low closes, and giving a glimpse of the extreme bearishness predicted after Friday’s close. If last week’s low was not a durable bottom, then this week’s low could have much, much further to go. [pay]

Pattern points… (Setups and technicals)
Wednesday’s stunning drop retraced two days of rallying – three days, counting Friday’s false start that fell intraday from nearly 1352.00 to under 1332.00. Sound familiar? Wednesday fell from above 1358.00 pre-open down to 1333.00.

Session lows repeatedly tested 1335.00 as support. This was essentially Thursday’s open and its futures close, Friday’s futures close, and Monday morning’s low. Each test was interrupted by a new relative high. There was no bullish reason to return to 1335.00 again.

The nearby chart depicts a bearish reason to return. Notice last Thursday’s first test of 1335.00 down to 1332.00. This was the “pivotal low” to the move’s 1325.25 actual low. A retest of the actual low is all but ensured after a bounce above the 1344.75 interim high returns to the pivotal low. The bounce into Tuesday’s high was simply a detour.

Wednesday’s low stopped short of touching the 1332.00 pivotal low. Its previous retest already predicted a retest of the 1325.25 actual low. This leg’s low should visit at least 1331.50, so Wednesday’s higher low reflects temporary optimism. And the interim bounce has further refueled sellers.

What’s Next… (Outlook and opportunities)
Wednesday afternoon’s ranging was resisted by 1340.00, which held repeated touches. I can hardly call them “tests.” That pessimism keeps open the door for one more corrective bounce, either to 1342.50 or 1346.00. But no bounce is necessary before resuming a much deeper decline at a much steeper pace.[/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 second session of ignoring Friday’s bearish setup… followed by a third Wednesday, and pretty soon there’s a real rally underway. Extending much higher intraday – extending almost any bit higher at all through the close – would suggest a bigger rally underway.[pay]

Pattern points… (Setups and technicals)
Tuesday’s morning and afternoon bias environments combined to form a Complex Ascending Triangle. It tends to produce a final upleg, before reversing down sharply. The pattern’s 1351.00 breakout met its minimum 61.8% objective at 1353.50 while RSIs diverged negatively.

But timing saved the day – fresh highs as the last hour began are difficult to reverse. In fact, the next higher 161.8% target at 1356.00 was met. And that was throughout the 3:10-3:20 window, timing that further marginalized sellers.

A pullback into the close was still in the process of testing 1353.50. Without closing decisively above it, no higher target is necessarily in-play. And no prior pullback refueled buyers. Extending higher uninterrupted to meet it would be extra vulnerable to reversing down sharply.

What’s Next… (Outlook and opportunities)
The next higher target is 1358.75, but higher highs are not required. They’re likely, nonetheless, so long as 1351.00-1351.75 holds as support through any relevant timing window. [/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.

Monday’s bounce… refers to a 30-minute surge. It began when the morning’s bias environment started lapsing after 11:30. It ended soon after noon. In the end, it did nothing to refute patterns in place at Friday’s close that point down.[pay]

Pattern points… (Setups and technicals)
In fact, Monday’s 30-minute surge bisected the day. The morning only ranged around Friday’s 1337.00 cash session close. The afternoon only ranged around the 1345.00 overnight high, without breaking higher.

It was more noise than accumulation. And it was an “inside day,” contained entirely within the prior session’s range. Rising price without gaining traction is “ineffectual optimism.”

The midday surge may seem to offer a buffer that can absorb selling pressure. But the trending was limited to a timing window dominated by weak hands. Other than some obligatory support at 1340.50, there is an air pocket down to 1337.00.

Yet, a higher high can’t be discounted. Although Monday’s Monday’s 1346.25 noon hour high fulfilled the bias-up target, and although its overbought RSIs were later retested, 1347.25 would have been more vulnerable to reversing down. Perhaps that is why there was no reversal down.

What’s Next… (Outlook and opportunities)
Gapping beyond an inside day’s range can extend without requiring the gap to be filled. Gapping under 1335.00-1337.00 would trigger the setup in-play after Friday’s close, targeting a probe under last week’s 1325.25 low. Recovering above 1347.25  would target 1351.75 and potentially 1353.50.[/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.