Market Wrap

Tuesday night’s drop was the ultimate in ill-timed selling… Like Tuesday’s intraday dips, and Monday night’s drop before it, selling was sponsored by weak hands. No-bias selling, bias-up selling – triggering Wednesday morning’s bias-down signal wasn’t bearish, since the bias-down target held its test, too. [pay]

Pattern points… (Setups and technicals)
A buy signal triggered during Wednesday morning’s bias-down environment. After an extra dip back to the 1279.00 low, the rally extended up to 1296.00. The rally was repeatedly expected to resolve each challenge favorably, and it did.

It isn’t surprising that some cracks in the rally’s momentum started appearing. What’s surprising is how many suddenly started appearing after the bias environment started lapsing at 2:30:

– Late start. The 1293.00 target was met by a leg that originated after the bias environment had started lapsing, which means its sponsorship was weak hands.

– Slow finish. The last hour at 3:00 was not entered cleanly above 1293.00, let alone at fresh highs. The weak-handed sponsorship being attracted was thinner, yet.

– False start. The 3:10-3:20 window began by trending up to a fresh high above 1294.50, but ended by retracing back down to it. This setup suggests the next fresh high will be rejected aggressively.

– Wet fuse. A Rising Wedge that formed in the last hour’s uptrend didn’t resolve up. While this resolution isn’t assured, delaying it makes it no less likely.

– Too low. Touching the last productive pullback limit at 1293.00 signaled the rally’s momentum had ended.

Wednesday’s post-close break under 1293.00 extended down to 1289.50. This is a 38.2% retracement of the rally from Wednesday morning’s low. If it now resolves in a recovery to fresh highs, then its sponsorship would not be the strong hands attracted to a 61.8% dip. And impatient buyers tend to produce a final fresh high.

Another reason for visiting fresh highs is Wednesday’s hesitation at 1296.00. Peaking pessimistically just 1-2 ticks under the prior two days’ highs, from a contrary perspective, suggests the pullback will recover. It’s being attempted now by a  surge back up to 1292.25 from the post-close dip touched 1289.50.

What’s Next… (Outlook and opportunities)
Rejecting a fresh high in the same timing window that it appears – whether overnight or Thursday morning – would leave no unfinished business above. Exiting a timing window above prior highs would be likely to extend higher.

First things, first. Recovering 1293.00 would start to target 1297.00 or 1299.00. If not rejected on a timely basis, the next higher objective at 1311.00 could be just the beginning. Regardless of overnight action, opening Thursday under 1287.50 would suggest the next downleg was already underway.

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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.

Worse than trending in the wrong direction… is not trending at all. Tuesday morning’s action essentially fell into this trap. There was movement, but mostly in a relatively narrow range. Flat RSIs accompanied the most productive price moves, which means they lacked sponsorship that could extend the move. Probes of fresh lows all recovered before their timing could gain traction.  [pay]

Pattern points… (Setups and technicals)
The most bearish case to make is that none of the failed probes of support trapped shorts into a squeeze higher. The last bounce stopped 1 tick short of touching the 1291.00 buy signal. And its reaction closed back at intraday support around 1289.00.

Tuesday’s price action was a series of lower highs and lower lows, which resembles trending. But each intraday leg overlapped part of all others. The most bullish case to make is that the 1289.00 bias-down signal held as support through the close, despite support having been chipped away throughout the day.

Buyers didn’t gain traction, and neither did sellers.

3-minute RSIs barely acknowledged overbought and oversold territory, stuck mostly in mid-range throughout the day. Buyers and sellers didn’t gain traction because buyers and sellers expended now pressure either way.

What’s Next… (Outlook and opportunities)
Closing at or around session lows requires any credible rally attempt to begin suddenly, and to be steep. Back above 1291.00 and 1293.50 would target 1297.00 and 1300.00. But 1291.00‘s recovery must be aggressive. A weaker rally effort would almost be a sell signal, as would exiting the open at new lows for the week under 1288.00. [/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.

It’s all in the wrist… Or, in Monday’s case, it was all in the open. The balance of the session ranged narrowly, with few setups forming. At least gapping up for a second consecutive session isn’t likely to range narrowly again. And at least two intraday trending attempts Tuesday are likely.[pay]

Pattern points… (Setups and technicals)
Friday’s drop had to overcome a gap up. Monday’s gap up wasn’t overcome. If the gap was of any benefit, it was to help absorb selling. Except for surging predictably through the first 15 minutes of volatility, the balance of the session traded flat-to-lower.

But the gap up created unfinished business above, at Monday’s gap back to Friday’s ~1274.00 close. And the gap up tested more “higher prior lows” that can push back down, if not recovered aggressively without delay.

Not that sellers tried very hard to push back down Monday, but every attempt was ill-timed – either during a no-bias, or a bias-up environment. A substantial sell-off attempt at the wrong time could actually trap shorts. But not many shorts were trapped Monday.

No trapped shorts means no refueling. And gapping up Monday already expended a lot of energy, without much of a pullback since then. Extending the recovery attempt to the next open gap (highlighted red) would only exacerbate the problem.

What’s Next… (Outlook and opportunities)
An overnight dip to 1289.00 could be the next ill-timed sell-off attempt. The risk is it would be vulnerable to sliding much deeper, back into Friday’s range at 1281.00 or 1274.00. But opening flat to higher after recovering an overnight dip would extend the rally to 1301.00 and potentially 1312.00.[/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 Wednesday indicator told us what to expect… At least, what to expect directionally: down. It tells us what to expect Monday, too. We can infer from how much down there was – actually, how little – what to expect on Monday. (Hint: a lot more of the same.) [pay]

Pattern points… (Setups and technicals)
Wednesday’s expiration indicator expected downtrending into and out of the weekend. In fact, every relevant timing window Friday did trend down. In fact, the entire session trended down despite gapping up sharply to new relative highs. So, why is that excess optimism?

Friday’s lows probed dipped briefly under Thursday’s highs. Friday’s 1270.75 low avoided filling the gap back to Thursday’s 1268.25 close. And Friday’s last 45 minutes firmed firming back up above Thursday’s highs. But it’s all “ineffectual optimism”  since buyers gained no traction. Even the late firming ended while still in the process of testing Thursday’s highs as resistance.

There are two potentially bullish elements. First, the 1284.50 open’s gap up may attract price back to it, although it was only a retest of Tuesday’s prior. Second, the 1287.50 pre-open high, may be attractive too, although its retest isn’t required.

But Friday’s session was a second consecutive “inside day” relative to Wednesday’s wide range. Retracing from the range’s lower to upper-end tends to resolve bearishly. Wednesday’s expiration indicator still expects more downtrending coming out of the weekend. Unless Monday’s open is gapping up to new relative highs, Friday’s drop should extend aggressively.

What’s Next… (Outlook and opportunities)
Since buyers didn’t gain traction Friday, the only way to rally Monday morning is to gap up above Friday’s highs. Anything less would be likely to resume Friday’s slide. Under Thursday’s 1268.25 close is another gap back to Wednesday’s 1252.50 close. Oversold RSIs at Wednesday afternoon’s 1243.25 low is also attractive. [/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.

Yippee! An inside day, with no net post-open gain! Hooray! Thursday’s 1270.50 open was probed just before the close, and it held as resistance. Thursday’s entire ~1266.00-1271.00 opening range contained almost all of the last 90 minutes price action. Despite gapping up and trading entirely in positive territory, Thursday’s session was “ineffectual optimism.”[pay]

Pattern points… (Setups and technicals)
Buyers gained no traction Thursday for their efforts. Higher highs all but require gapping up. Not gapping up would mean no higher highs.

Sellers didn’t gain traction, either. Gapping down under Thursday’s 1261.50 low would trend down, although not necessarily session-long. Any lesser opening weakness would likely recover to trade out the week inside Thursday’s 1261.50-1274.50 range.

Unfinished business below now includes Wednesday night’s 1241.25 “new Globex trend extreme,” whose intraday retest is almost historically required. Oversold RSIs at Thursday’s 1257.75 pre-open low don’t require a retest, but there’s an attraction. Intraday oversold RSIs at Thursday afternoon’s 1261.50 low do require a retest.

What’s Next… (Outlook and opportunities)
All of which can be delayed by resuming the rally that was being attempted Wednesday morning, before it was blind-sided by a 20-point plunge. Gapping up Friday would suggest the detour was underway, targeting 1286.00. The pattern’s outcome doesn’t require rallying, but not rallying would be extra vulnerable to trending down through either the morning, or through the afternoon. [/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.