Market Wrap

Wednesday’s open generally held its pullback limit… And that’s the rally’s bad news. A deeper dip could have been the first since Tuesday morning’s bottom to retest a prior low. Buyers haven’t been refueled for the past 27 point. And rallying through the noon hour reflects weak-handed sponsorship. [pay]

Pattern points… (Setups and technicals)
Wednesday’s noon hour rally peaked at 1327.75 just after the noon hour ended. The balance of the session seems to have trended down to 1323.00. But actually, only the last half-hour dipped back under 1325.00.

The noon hour’s 1325.00 low was tested and retested as support. It had been the morning’s bias-up target and the afternoon’s bias-up signal. Delaying its probe until an irrelevant timing window makes its sponsorship irrelevant.

So, we have a battle between weak-handed buyers (rallying to new highs through the noon hour) and irrelevant sellers (probing support during only the last half-hour). All taking place at the highs of an extended, uncorrected rally (from Tuesday’s low).

Their battle is also developing at Feb 22’s trend change signal around 1324.00-1327.00 (accounting for premium changes). It has held tests before. Recovering it one day could be invalidated by not closing higher the next day. And closing back under 1321.00 would signal that its current test had held.

Timing is also interesting, with Friday’s Employment Situation report fast-approaching. The next higher objective is 1338.00 in a retest of prior highs. Testing into or out of Friday morning would be difficult to extend without a sizable retracement. A retracement that would be vulnerable to sellers gaining traction.

What’s Next… (Outlook and opportunities)
Giving the rally a benefit of the doubt, Wednesday afternoon’s pullback has room down to 1322.00. Touching 1321.00 should be done overnight, if at all, and quickly rejected by a productive recovery. Opening under 1321.00 Thursday would target at least 1308.00. Recovering 1326.00 should resume the rally through the morning, until price action becomes paralyzed by anxiousness ahead of Friday’s pre-open 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.

Monday’s late sell-off was weak-handed… it’s timing gave it away. Tuesday’s new lows were weak-handed, which was hinted at by RSIs diverging positively. Neither was capable individually of launching a rally like Tuesday’s recovery, but together they were pretty productive. Now let’s see whether Tuesday’s recovery has accomplished anything, or just stretched things back the other way.[pay]

Pattern points… (Setups and technicals)
The cash session had just finished ticking higher and higher, tick-by-tick. I had just finished mentioning in the Market Wrap that it wasn’t accumulation, or noise. Had an individual stock been behaving that way, it would have reeked of manipulation. A 3-point spike up at the futures close was more of that behavior.

The 3:10-3:20 window had both probed and rejected a prior high, implying that the next rally effort would be final. If that last-minute spike up was it, then it has stretched the rubber band very tightly. Either it will snap back more forcefully, or else break higher sharply.

Breaking higher would target a retest of prior highs up to 1338.00, so long as sellers don’t retake control. Control that they lost through Tuesday afternoon.

What’s Next… (Outlook and opportunities)
Reversing down intraday from fresh highs at either 1321.00 or 1325.00 could resume the decline. Gapping down under the 1310.00 area could gain traction, as would closing under 1310.00. But gapping down Wednesday only back under 1314.25 – where Tuesday’s cash session closed – would be too little to reverse momentum 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.

Monday’s opening strength never behave appropriately… But it took all morning for its retracement to arrive. No bounce from there behaved appropriately, either. And it took all afternoon for its downleg to begin. Each drop compensated for its delay. But so far, they’re just two more ill-timed downlegs, yet to gain traction. [pay]

Pattern points… (Setups and technicals)
Monday’s late plunge from 1310.00 perfectly fulfilled its description for being steep and deep. But it originated in the session’s last half-hour. This is not where strong hands flex their muscles.

The drop fulfilled its minimum target at 1304.50 after the cash session close, and nearly touched the 1301.50 objective. Regardless of timing, a lot of selling pressure was fulfilled. And sellers gained no new traction because the cash session closed above targets. It’s a loophole.

Oversold RSIs at Monday’s late low predicted any bounce would fail until retesting the 1302.00 low while RSIs improved. More post-close action did retest 1302.00 while RSIs improved.

Sponsorship of Monday’s late plunge is not capable of launching a durable drop, its target has been met, and technicals are improving. New sponsorship can launch a more substantial downleg either by extending down without delay, or by absorbing an opening bounce.

Immediately retracing Monday’s late plunge back above Monday’s afternoon’s highs would essentially be as if it had never taken place. Except for one thing – buyers would be refueled and rallying.

What’s Next… (Outlook and opportunities)
An overnight or opening bounce has room up to 1307.75, or to 1310.50 without a bigger upleg starting to gain traction. A bounce could play out overnight, or through Tuesday’s open. Regardless of a bounce’s timing, and regardless of their being any bounce, fresh lows under 1300.25 would signal the next downleg underway.

An overnight bounce that isn’t rejected would start to gain traction above 1310.50. Opening above 1312.75-1313.50 would signal a new upleg underway. It could also marginalize sellers through mid-week, with potential to 1338.00. [/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.

The 1311.00 target was met, and met often… Thursday’s post-close spike up sliced through it. It was retested overnight. Friday morning’s surge tested it. And then a post-close surge ended there. That’s ample opportunity for the market to close above it, if the market had wanted to close above it. [pay]

Pattern points… (Setups and technicals)
Testing, but not closing above the rally’s 1311.00 suggests that buyers are satisfied. Especially while also testing its noise range up to 1314.00, and peaking there. And even more especially when the cash session closed back at the 1308.25 opening gap.

That last factor is the most bearish. It could have been more bearish, but it certainly wasn’t bullish. Closing back at the 1308.25 opening print, when the opening print is a gap up to fresh highs, means that all intraday price action above it was distribution.

Keep in mind my caveat about Thursday’s post-close 7-point spike up. It’s certainly optimistic, but not necessarily bullish. If not extended higher, then really it only reflects market elasticity. An environment able to produce a spike one way is also capable of generating a bigger spike the other way.

All that having been said, sellers have yet to prove they could exploit a bigger spike down.

Their recent attempts included no-bias downtrending and bias-up downtrending, all doomed to failure. And when they finally triggered a bias-down signal, the bias-down target was already met and held. If sellers haven’t yet figured out how to prevent another higher close, then 1324.00 and potentially new highs at 1338.00 could be in-play.

What’s Next… (Outlook and opportunities)
Friday afternoon’s late dip to the 1309.50 bias-down signal was another bad effort by sellers. Its support was probed and recovered just before the bias environment started lapsing. Its support was chipped away further into the close, another ill-timed effort.

Delaying 1309.50‘s break into another session now lowers the signal to 1306.00. Its break would be confirmed by extending under 1304.50 at an accelerated pace. Quickly recovering 1313.00 should at least probe fresh highs intraday before being vulnerable to reversing down sharply. Closing above 1314.00 would simply point higher.[/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 buyers didn’t lose traction… closing above the morning’s high. They even left unfinished business above, at the 1306.75 high’s overbought RSIs. The last half-hour’s dip down to 1304.00 wasn’t sponsored by strong hands since they don’t initiate moves during that timing window. In fact, just trending up through 3:10-3:20 timing window had already put into play 1311.00 with potential to 1314.00.[pay]

Pattern points… (Setups and technicals)
So, touching 1306.75 about one hour after the cash session close wasn’t surprising*. Spiking up to 1314.00 five minutes later was kind of a shock. It also fulfilled the pattern’s objective. Price settled back down to 1308.25 just before 5:30’s half-hour maintenance close.

I haven’t yet tracked down the news, but I wonder whether anyone has checked Kadaffy’s pulse lately. If something that macro were the spike up’s cause, then its high would easily hold any retest.

*Actually, touching 1306.75 after the close was a little surprising. Firming at all was a little surprising, since RIMM was trading down 10% on lower guidance. If the spike up’s news is macro, then trending up into the weekend could depend upon other news off-setting RIMM’s.

What’s Next… (Outlook and opportunities)
1308.00 happens to be the sell signal off of 1314.00. Maintaining a break under 1308.00 would target 1298.00. The pullback limit for 1314.00 is 1310.50. Quickly recovering 1310.50 would target 1314.00‘s retest. And maintaining a break above 1314.00 would create potential to 1324.75. [/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.