Market Wrap

With inside days like this… who needs trending? None of Wednesday morning’s swings probed either end of Tuesday’s range. The wild moves were deceptive. No trending in the afternoon either, making the session an “inside day.” [pay]

Pattern points… (Setups and technicals)
Wednesday was the third consecutive cash session close that narrowly avoided signaling to hold short through the futures close. The prior two instances each rallied overnight. But only temporarily, and only to resume their declines into the following open.

4 points of the 5-1/2 point slide into Wednesday’s futures close came after the cash session close. Ending at fresh afternoon lows, under 1316.00 support, would signal new lows ahead – if triggered at the cash session close. It’s still possible, but the setup was triggered too late to be assured.

Another repeat item Wednesday is the dubious unfinished business left outstanding. The morning’s bias environment created the objective to test its 1324.00 bias-up signal (basis Mar). It never happened, and the bias environment was exited above the 1315.75 bias-down signal  (basis Mar) to make it “unfinished business.”

I don’t think it’s really a requirement. The bias-down signal was retested after having held the open’s test. That’s not in the spirit of simply delaying the off-setting bounce.

Overbought RSIs at Tuesday’s 1325.75 high (basis Mar) printed at noon. The timing also makes the retest not required. It seems that buyers are expending their energy when it is least productive. Closing at fresh highs would signal new sponsorship had arrived – if new lows don’t print first.

What’s Next… (Outlook and opportunities)
Closing under Wednesday afternoon’s lows requires a rally to gap up above Wednesday afternoon’s 1326.50 highs (basis Jun). Any less strength would be vulnerable to reversing down. And any weaker open that simply touches or breaks under 1308.00 (basis Jun) would target a probe under 1301.00 (basis Jun), and probably new lows for the week. [/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.

Spinning wheels, got to go down… Tuesday morning’s rally expended a lot of energy, even without including the open’s 4-point dip. Yet it was an inside day, contained entirely within Monday’s range. This is “ineffectual optimism,” meaning that buyers didn’t gain traction for their efforts.[pay]

Pattern points… (Setups and technicals)
A bearish setup triggered during Tuesday’s last half-hour. It just satisfied a lot of sellering pressure. And its sellers didn’t gain traction.

Once a relevant price is tested, it must maintain its break avoid losing traction. Tuesday’s cash session closed while in the process of testing the pattern’s 1321.50 connector. A post-close plunge probed the 1319.50 anchor, which then held through the futures close.

That’s quite a contrast to the morning’s rally, which also did not gain traction. Besides direction, the difference is that Tuesday afternoon’s drop fell 7 points. Not too productive compared to the morning’s 16-20 point rally.

Noon’s RSIs were overbought 1325.75. Noon hour extremes don’t require a retest, but their retest is likely. As is this one, so long as no prior low is broken on a closing basis.

What’s Next… (Outlook and opportunities)
The last relative low is 1316.00, from Tuesday morning’s plateau. Its 1319.00 upper-end was tested by the post-close dip. Gapping under its 1316.00 lower-end would require big selling sponsorship. But rallying through Tuesday’s highs would put into play the 1330.00 area. And its recovery would signal a multi-session rally underway. [/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.

Hurry up, and bounce… Friday and Monday each fell sharply through their mornings. Their afternoons ranged flat to higher. But two consecutive similar patterns tend to resolve differently. So, Monday’s open should either be down, or else extend a gap up. [pay]

Pattern points… (Setups and technicals)
Monday and Friday afternoons formed similar patterns. Friday ranged narrowly at support, while Monday afternoon trended up. But the data points identified in the nearby chart show similar counts and structures.

Friday’s instance resolved in a short-squeeze. Successively higher highs repeatedly returned to support, creating “ineffectual pessimism.” Its pent-up buying pressure was unleashed into the close.

Monday’s successively higher highs also returned to support. But it was a rising support. This optimism gradually released buying pressure, instead of forcing it to become pent-up.

Impatient buyers did not hijack Monday’s pattern. But a signal for holding short through the close did not trigger. Narrowly holding above 1309.00 left the door open to an overnight bounce.

What’s Next… (Outlook and opportunities)
Gapping up through 1314.00 may be the only credible path for avoiding lower lows Tuesday. And lower lows through Tuesday’s open would resume the decline, targeting 1298.50 on the way to 1271.00. [/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.

A funny thing happened on the way to recovering… Thursday’s uninterrupted rally was interrupted Friday. No single dip Thursday (not even Wednesday night) had attacked a prior low, reflecting excessive optimism. That optimism was sorely missed, just when it was needed most – upon testing resistance at Tuesday’s prior highs. [pay]

Pattern points… (Setups and technicals)
Friday’s Employment Situation report reflected an improving jobs picture. Jobless rates fell to under 9%. The knee-jerk reaction up ended within 2 minutes. The obvious impression is that an improving jobs picture is already discounted. The eventual reaction down fell 20 points. What if there’s a hiccup in the improvement?

Slightly less obvious is that the employment hiccup is already expected. The market is a discounting mechanism for future fundamentals. Just as the rally has been discounting economic improvements like Friday’s report, a decline would anticipate poorer results to come.

A distinction with a difference? Either way, the market would no longer attract buying that absorbs selling, i.e. more buyers than sellers. Whether or not selling pressure (supply) were to increase, buying pressure (demand) would decrease. Price falls either way.

The distinction’s difference is that one scenario allows for the recent 1343.00 high’s retest, while the other scenario would simply break back under the 1300.00 area to trigger a new downleg. The current trading range has formed an Ascending Triangle (dashed lines).  The pattern may be “complex” because its touch points don’t include the rally’s trend extreme (circled red).

Breaking above resistance would confirm the pattern is a Complex Ascending Triangle. Its normal resolution is a quick detour to a new trend extreme (1351.25 or 1361.00), followed by an equally quick drop back to and through the triangle. Breaking under uptrending support would at least target the 1300.00 area, whose break would simply trigger a new downleg.

What’s Next… (Outlook and opportunities)
Repeatedly testing Friday afternoon’s 1312.00 bias-down target (underlined green) chipped away at its support, but never broke it. Settling there would have formed a sort of “ineffectual pessimism” to trap shorts. Their pent-up buying pressure could have helped the next session start rallying.

Instead, a surge into Friday’s close (highlighted yellow) already expended that buying pressure. And that buying pressure didn’t gain any traction for its efforts. Friday’s 1320.00 close was still testing the morning’s 1319.50 bias-down target as resistance (underlined red). The late bounce also neutralized an attraction back up to Thursday’s 1319.25 gap open (circled green).

Time heals all wounds, but a weekend often suffices to overcome wasted efforts. Exiting Monday’s open back above 1323.25 would attack Thursday’s highs. Otherwise, a break back under 1315.50 would resume Friday’s rally to fresh lows.

Neither move must extend any further than their initial targets. But extending further than their initial targets could answer whether a Complex Ascending Triangle was breaking higher, or if a new downleg had begun.

[/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 orphan rally emerged from a session that gained no traction, following an overnight session that suddenly trended, and extended higher without a single pullback. And this is no time to rest. Turning the selling pressure back on here would find little support back to prior lows.

SPECIAL NOTE: Saturday morning’s Open House starts 15 minutes early at 9:15am ET. And the event will be held in a separate chartroom, linked here. [pay]

Pattern points… (Setups and technicals)
Entering the last hour of an uptrending session at new session highs should extend higher into the close. Thursday’s last hour probed up to 1331.75. Not exploiting the opportunity reflects tired sponsorship. And the 3:10-3:20 timing window still had not extended higher.

This told us not to trust any subsequent rally attempt. A bounce from 1329.00 support was fully retraced after retesting 1330.75.

Thursday’s last 90 minutes ranged narrowly at 1329.00-1332.00. Such narrow, extended ranges tend initially to break falsely in one direction, and then reverse more substantially in the opposite direction.

Wednesday’s 3:10-3:20 timing window had projected the next rally leg’s pullback to develop into a new downleg. The next rally leg started at Wednesday’s close, and it has yet to include a pullback. Nothing overnight or intraday to refuel buyers, and now signs that buyers are losing steam.

None of which is a sell signal, leaving open the door to fresh highs Friday. And being a Friday, not rejecting initial strength early can marginalize sellers for the day. By the same token, the Friday morning’s bias signal tends to persist through the noon hour.

What’s Next… (Outlook and opportunities)
Friday’s Employment Situation report is an appropriate catalyst either to aggressively reject Thursday’s rally, or else resume it. Immediately breaking back under 1322.50 would resume Thursday’s rally Tuesday’s decline without leaving any unfinished business above. But a shallower dip back to 1325.00 could still recover well into positive territory. [/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.