Market Wrap

The market has fallen, and it can’t get up… With the weekend’s illiquidity just hours and then minutes away, the optimistic hesitation is all the more eerie. That’s a lot of misplaced optimism. Either someone knows something (like last Friday’s post-close spike up), or else everyone truly has no idea what’s coming.[pay]

Pattern points… (Setups and technicals)
Friday’s open gapped up 10-13 points from Thursday’s futures close 1335.00. Friday morning was spent ranging above Thursday’s 1344.50 high. Friday’s noon hour ended under the morning’s low.

These are the base criteria for a template being tracked that expects a break under Thursday’s 1325.25 low. Just filling the gap does not fulfill this pattern’s selling pressure. Just filling the gap confirms the pattern is aiming under Thursday’s low.

Not touching Thursday’s low Friday suggests the pattern is now aiming much lower. This hesitation has left something on the table to help Monday attract price down. There was already excessive optimism at Friday’s low, which stopped 2 ticks short of touching Thursday’s 1331.25 cash session close. So, Friday’s late bounce is doomed.

What’s Next… (Outlook and opportunities)
Unless Monday’s open were to recover immediately 13 points above 1347.75, the next lower targets in play is 1319.00. Under 1317.25 would target 1309.00-1311.00. For starters.[/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.

Going into overtime… In a trend, the third consecutive lower open tends to expend the trend’s sponsorship. That led to posturing for a bullish morning. But the afternoon’s fall to new lows suggests new sponsorship has arrived.

[pay]Pattern points… (Setups and technicals)
The 3:10-3:20 window probed the morning’s 1332.00 low, and also recovered it. The particular timing of this particular action tends often warns that the next low will produce a sizable bounce.

In fact, a fresh low down to 1325.25 was recovered up to 1332.50 into the cash session close. The recovery extended up to 1335.75 into the futures close. And it touched 1337.25 soon after the close. Sizable? That’s a 61.8% retracement back to session highs.

There’s room up to 1339.75 before a bigger rally would start gaining traction. So, this bounce off of Thursday’s 1325.25 low isn’t even close to being “sizable,” which the 3:10-3:20 signal suggests.

And much of the bounce hasn’t really happened – 1332.00 was still being tested at the cash session close. Its clear recovery would have made the bounce’s potential clearer, too.

Meanwhile, oversold RSIs at the 1325.25 low require its eventual retest. They were higher lows, which facilitated the recovery. But they were oversold, nonetheless.

What’s Next… (Outlook and opportunities)
Greeting Friday morning’s Employment Situation report from above the 1339.50 bias-up target would be likelier to absorb any unfavorable reaction. Being a Friday, a morning’s bias-up tends to persist through the noon hour, which could marginalize sellers for the day, or until 1346.00 were tested.

But any unfavorable reaction from any lower would be difficult to absorb. New trend lows into Friday morning tend either to extend down sharply for the morning as extra selling tries to avoid the weekend’s illiquidity. Bouncing from new trend lows on Friday morning only delays the inevitable.[/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’s session was interesting for several reasons… not the least of which was it being the third consecutive negative close. Its low tested February’s prior high close as support. The two-week rally up to Monday’s high is now 38.2% retraced. If Thursday doesn’t bounce, then the next major downleg may underway already. [pay]

Pattern points… (Setups and technicals)
1346.50-1347.00 needed to be recovered through some relevant timing window to signal momentum had reversed up. But it held its test as resistance. Any delay in resuming the bounce would all but ensure probing Wednesday’s 1337.50 low.

Pivotal uptrending support from Wednesday morning’s low was being tested at the close. It was the trendline’s second test, the test that often breaks lower. Its key support is 1341.75, and its break would make new lows a formality.

If Friday’s post-close surge is not valid, then neither is Sunday night’s initial follow-through, or the surge in reaction to the Bin Laden news. And then neither is there any requirement to retest any of it before the anticipated downleg does its damage.

Almost any close under Wednesday’s low would point down sharply. So, closing under Wednesday’s low would suggest there is no requirement to retest prior highs, and that the next downleg is underway.

What’s Next… (Outlook and opportunities)
Recovering 1346.50-1347.00 through Thursday’s open would still face a challenge from 1351.75 and 1353.50. But it would be a big step toward testing 1358.75 and 1361.50, and potentially attacking prior highs.

A break under 1341.75 would be confirmed under 1339.75. New lows could be as shallow as 1336.00, although probably targeting 1333.50, and potentially 1328.75.[/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.

Choppy, choppy, choppy… Tuesday’s opening range had already signaled the session’s intention to be volatile. The adherence to negative territory was surprising. But it wasn’t necessarily bearish, since the overnight and morning’s lows held as support through the close.[pay]

Pattern points… (Setups and technicals)
The afternoon’s 1345.75 low was recovered up to 1353.50. That represents yet another test of 1351.75, and almost another recovery of 1353.50. Closing above 1353.50 would have been bullish. Not closing above it was not bearish.

Closing above 1353.50 would have put into play the next higher objectives at 1358.75 and 1361.50. The latter objective is Tuesday’s morning’s bias-up signal, which is “unfinished business above” that requires an eventual test.

Note the nearby chart of Tuesday’s price action, which shows the close still in the process of testing the morning’s lows. Overnight lows (not shown) held as support, but this wasn’t decisive enough to label the session as “ineffectual pessimism.” But Tuesday’s low could still hold a retest as support if timed appropriately.

Not having put into play the next higher objectives, there is exposure to resuming the decline. Since Tuesday’s final action trended up, and since the afternoon’s 1345.75 low preceded the last hour, gapping down under 1345.75 would signal a session-long decline.

What’s Next… (Outlook and opportunities)
If Tuesday afternoon’s bounce bleeds into Wednesday, then any pullback shold be limited to overnight. And any overnight pullback should be limited to 1349.00-1350.00. Under 1348.50 would resume the decline.[/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 get too excited… Taking Bin Laden out of the game has only created a temporary opening at the top. Speaking of top, Monday’s highs held some meaningful resistance. So, as for that rally on Bin Laden’s death? Don’t get too excited.[pay]

Pattern points… (Setups and technicals)
Sunday night’s 1373.50 high was in reaction to news. Despite being a “new Globex trend extreme,” it does not require a retest. Potential for its retest remains alive so long as its last relative low holds as support.

Its last relative low is Friday afternoon’s dip to 1357.50. It held Monday’s noon hour low, and it barely held Monday’s last hour low. That’s not a buy signal, but it does undermine sellers. Any potential to rally at all could retest Sunday night’s 1373.50 high.

Meanwhile, three more timing windows Monday tested 1358.75, after each of Friday’s timing windows had. It wasn’t recovered at Monday’s close, so its break could extend down to 1351.75.

What’s Next… (Outlook and opportunities)
Gapping up Tuesday or immediately recovering 1361.25-1362.00 would sequence a retest of Sunday night’s 1373.50 high before testing 1351.75. Closing under 1351.75 could take 1373.50‘s retest out of the sequence altogether.[/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.