Market Wrap

Thursday should answer a lot of questions… Extending down for a third consecutive day would be bearish confirmation of this week’s selling. But a higher close could also confirm the pattern, assuming it’s not too high, and holds any test of relevant resistance.[pay]

Pattern points… (Setups and technicals)
The most important observation of Wednesday’s session is that it sellers gained traction. The close was under the morning’s low. A rally attempt Thursday morning – from 1318.50, or even to 1326.75 – would be doomed to failure.

Although a rally is possible, more likely is the decline’s resumption. Wednesday closed under the morning’s low despite the afternoon’s 14-point rally. Buyers expended a lot of energy, and gained no traction for their effort.

Buyers did gain one thing for their efforts: Exiting the bias environment back above its 1303.00 bias-down signal negated the afternoon’s 1295.00 bias-down target. It may be irrelevant, though, since simultaneously oversold RSIs at the 1297.50 low require its retest. Also, the “V” bottom that formed there is likely to be retested.

Retesting Wednesday’s low would likely include a visit to 1295.00. Its near-miss, and the V’s spike reversal, each reflect excessive optimism that make 1295.00‘s eventual test likely to slide through it.

What’s Next… (Outlook and opportunities)
Tuesday’s trend change signal extended lower the next as required. Maintaining a gap up above 1318.50 would put into play a test of 1325.00. Closing above 1326.75 would target a retest of the 1340.00 area. Otherwise, back under 1303.00 and 1301.00 would target 1295.00, whose break would target 1273.00, 1259.00 and lower.  [/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.

Two weeks up, one day down… Tuesday morning’s bounce brought in new buyers who are trapped. They’re not much newer than buyers of the past two weeks. So, it’s unlikely the drop has even begun to end. [pay]

Pattern points… (Setups and technicals)
Is Tuesday’s drop a one-day wonder? Unlikely. Single-session retracements of multiple sessions’ gains tend to repeat the following day. Also, Tuesday’s drop signaled a trend change by closing under the prior low.

There were two trend change signals previously, on January 28 and January 19. Each extended only into the next day before bottoming. Those setups had a specific challenge not shared Tuesday, whose low did not hold a test of a prior relevant low (dotted line).

Meeting 1295.00 on this leg (is 11:00am too early?) would indicate more than just a correction underway. Retracing two weeks would be a rounding error compared to retracing two months, or more. Regardless, whenever 1295.00 is met, its likely reaction is an upleg. So, for now, the trend is down and targeting 1295.00

What’s Next… (Outlook and opportunities)
A sort of close quarters Double Bottom at Tuesday’s 1310.25 already produced a minimum 61.8% bounce to 1314.00. The pattern tends to resolve in a new low, but its bounce might first extend to 1316.25 (161.8%) or 1318.50 (261.8%).

1310.50 was the drop’s target, and it was met and held at Tuesday’s low. So, it must be exceeded through any relevant window for the drop’s momentum to resume. Actually, its proxy is 1311.00. Recovering it after probing a fresh low would make a morning rally likely. A bounce’s objective would be 1321.00-1322.00, potentially 1326.50.

Bouncing at the open – prior to probing fresh lows – could also produce a morning-long rally. But the gap back to Tuesday’s close would need to be filled. And the attraction would undermine a durable recovery.

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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.

Is that an expiration in your pocket, or…  A last-minute surge expended a lot of energy just to return back to the morning’s failed high – which was touched only after the cash session close. Seems pretty optimistic ahead of a three-day weekend. [pay]

Pattern points… (Setups and technicals)
Friday morning’s late trending, and the last-minute surge, were products of expiration. Trending after no-bias is signaled is unusual. Trending sharply into the close isn’t unusual for expiration. The 1341.50 cash session closing equivalent was exceeded several minutes later to 1343.00.

Friday’s last-minute surge was a replay of the morning’s slower, but similar move. Each originated from the same area, and each gained 6 points. The late surge’s momentum might make it seem more durable. It’s actually more difficult to extend. Both RSIs went overbought, and that makes the trending vulnerable to a reversal.

Also, Friday afternoon is lightly attended. Any trending that originates then only reflects weak hands. That, or in this case, expiration.

Monday mornings often duplicate characteristics of expiration afternoons. On three-day weekends, the mimicry tends to be Sunday night. Either way, it’s irrelevant. I point this out only to make clear that Tuesday’s price action won’t be very tied to Friday’s.

What’s Next… (Outlook and opportunities)
Except for Friday’s high(s), 1338.75 contained all of the intraday timing windows. The last-minute surge originated there. An attraction back down to it could slingshot price down sharply to 1333.00. A gap down would have to break 1333.00 to avoid bouncing sharply. Otherwise, the next higher objective is 1348.75. [/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.

Opening weakness was swallowed whole, and spit back out, by a recovery to new highs. But the new highs tested and held the next target. Buyers once again gained no traction for their effort. And this renews the same vulnerability to a morning drop.[pay]

Pattern points… (Setups and technicals)
Thursday is the second consecutive session to test its target early, and not improve further (circled green). Testing a target later in the day could at least be excused for less time remaining. But Thursday’s test of 1338.75 was early afternoon. Wednesday’s first test of 1333.00 was that morning, then later in the early-afternoon.

Price isn’t being attracted higher by unfinished business above newly created the prior day. Rather, new sponsorship is needed each day. At least Wednesday’s buyers were the product of Tuesday’s “ineffectual pessimism.” Thursday’s buyers were the product of an overnight dip.

This rally isn’t about attracting new capital,  or about converting bears to bulls. It’s somewhat about rotation, but otherwise mechanical and seasonal – with Friday’s expiration, and then the three-day holiday weekend.

What’s Next… (Outlook and opportunities)
Higher highs can’t be discounted. The next attraction above 1338.75 is 1348.75. It would be in-play if 1338.75 were exceeded through any relevant timing window. Back under 1334.25 would signal momentum reversing down. Confirmed under 1330.00, then next lower objective would be 1325.00.

This being a Friday – an expiration, no less – the morning’s bias signal is likely to persist through the noon hour. Trending underway early should extend into the afternoon. Similarly, not trending out of the open would be unlikely to trend before late-afternoon, or next 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.

Another day, another higher high…  And another target met. But this time without extending higher – despite having an entire session to attract sponsorship. Could be difficult absorbing Thursday’s econ reports.[pay]

Pattern points… (Setups and technicals)
Wednesday’s entire last hour ranged very narrowly. It was interesting, because it wasn’t.

The late-ranging hovered just under the morning’s 1336.00 high. The afternoon recovery didn’t do anything the morning rally had not. And not for lack of time. There was plenty of time to close higher, if that were the intent.

A lot of buying pressure was expended without gaining traction for the effort. And it was relevant buying, originating from a relevant level at 1327.50-1328.00 discussed before the open (yellow highlight).

In the end, resistance held. The cash session close peaked at 1334.25 (red dash), which defined the upper-end of noise around the 1333.00 target (red line). Futures closed at 1333.00.

What’s Next… (Outlook and opportunities)
Since Wednesday’s 1330.50 gap up was under Tuesday’s prior high, the session did not form an Island. A gap down under its low could be durable. Quickly breaking under 1328.00-1330.00 would might find obligatory support at 1325.00. But it would be only temporary on the way to retesting the oversold RSIs at Wednesday’s 1327.50 low.

Tuesday morning’s 1318.50 bias-down target remains outstanding, too. Both should be in-play shortly, unless Thursday’s open were to gap up above 1336.00.[/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.