Market Wrap

Inside day, to a point… Early weakness was absorbed, and the prior session’s high was probed. Fresh highs were either too brief, or too late, to constitute a breakout. Closing under the interim low could seal a top.[pay]

Pattern points… (Setups and technicals)
1320.00 was Monday’s high (the upper-end of its 1318.75-1320.00 intraday target). Tuesday afternoon probed it a couple of times. But it wasn’t permanently recovered until the session’s last 15-30 minutes (highlighted yellow, circled green).

This is not a relevant window. Opportunities to recover 1320.00 during earlier relevant windows were not exploited. This undermines whether buyers are gaining traction.

Also depicted in the chart is “pivotal uptrending support.” Its anchor and connector are circled red. Often this trendline holds through only one or two tests before being broken. Then its complete retracement is only a formality. The trendline held Tuesday afternoon’s last two dips.

What’s Next… (Outlook and opportunities)
There are two possible paths down. One path down would first probe new highs up to 1324.00. Alternatively, spiking or gapping down under Tuesday afternoon’s 1317.00 or 1318.50 lows could trigger a session-long decline.

Opening only slightly weaker would be likely to recover for a test of 1324.00. Its test would still be likelier to hold, and to launch a reversal down. Extending up uninterrupted through the open may be the only bullish scenario.[/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.

Impatient buyers. Can’t live with them… The open’s gap up and its running correction were signs that strong hands weren’t sponsoring the rally’s latest upleg. Its early peak and afternoon dip suggest that stronger sellers are starting to bite. [pay]

Pattern points… (Setups and technicals)
Rising wedges in uptrend tend to surge first, plateau and then retrace fully. Two out of three ain’t bad? Monday’s rising wedge has yet to retrace fully under its 1312.50 low. Both the first and second dips back into the pattern bounced, so the third dip is likelier to compensate for the delay by retracing the last relative low back to 1310.00.

“Lower prior highs” at 1308.00 and at 1306.00 could also be tested. Testing either would mean the dip had retraced into a prior session’s range. Monday’s 1310.50 opening gap would then help to attract price higher. Retesting 1310.50 from 1308.00 and at 1306.00 would neutralize its attraction above.

Gapping down first would also create unfinished business above at 1315.75, which is Monday’s equivalent to the cash session close.

I don’t have a template that allows for extending higher. Monday’s 1320.00 high can be probed, but only in the context of a retest, perhaps up to 1324.00. Regardless, a new rally leg would require a deeper dip, or an extended multi-session sideways ranging.

What’s Next… (Outlook and opportunities)
Monday afternoon’s dip left something on the table by bouncing to 1317.00. Rather than touch 1312.50 first, now a more reliable bounce must originate from under 1310.00. Gapping down to test 1308.00 or 1306.00 probably wouldn’t gain traction, and should recover temporarily to test 1310.50 and 1315.75. Rallying first to test Monday’s highs could target 1324.00.[/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.

To breakout, or not to breakout… That is the question. Thursday’s close was technically a breakout. Friday’s was either its confirmation, or another breakout. Either way, it’s sticky.[pay]

Pattern points… (Setups and technicals)
Here’s an interesting picture of a Head & Shoulders (highlighted orange) that formed Friday afternoon. It is generally assumed to be a reversal pattern. Actually, almost as often it is a continuation pattern. And that’s how it performed Friday.

When a (an?) Head & Shoulders breaks higher, its target is either a 100% or 200% extension from the pattern’s left shoulder and right neckline (circled green). The higher was met at 1308.00 before the cash session close. It held another test afterward.

Whether first breaking higher or lower, that break then normally reverses more substantially in the opposite direction. If this pattern resolves normally, it will retrace back to the 1304.25 neckline, then reverse much lower.

One small obstacle to reversing down is the 1308.50 pre-open high. It is a “new Globex trend extreme” that requires being retested intraday. It was created by a weak-handed surge just ahead of the Employment Situation report. It was retested to within 1 tick just after the cash session close. Close enough.

A bigger obstacle to reversing down is Thursday’s breakout. More precisely, it is its confirmation Friday of a second consecutive higher close. Thursday’s new high close was dubious for failing to hold an intraday probe above prior highs. Friday’s higher highs came only during its last hour.

If Friday’s new high close truly confirmed Thursday’s breakout, then 1324.00 is in-play. If Friday’s new high close thinks that it is the breakout, then it will learn Monday that Friday breakouts rarely succeed. And if Monday’s open rejects Friday’s last hour gain, then the next objective below could be 1284.25.

What’s Next… (Outlook and opportunities)
1304.75 was a relevant level Friday. Its recovery would have confirmed the open’s drop had been absorbed. But it struggled at the morning’s 10:15-10:30 bias timing window. Then it struggled at the 1:20-1:30 window. It was likely to recapture Friday’s close. It remains vulnerable through Monday’s open.

Immediately reversing back under Friday’s afternoon’s 1303.00-1304.00 lows would be interesting. Because late trending was up, a “session-long decline” would trigger. Reversing the Head & Shoulders would target at least 1298.50. That’s dangerously close to Friday’s 1298.00 lows, whose support was also chipped away overnight.

Avoiding a reversal down would make new highs likely intraday. Avoiding an afternoon reversal – to which new highs would still be vulnerable – would next target 1324.00.[/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.

That’s a switch. Often, afternoons prior to Employment Situation reports tend to become subdued. “Paralyzed by anxiousness,” I always say. Thursday morning’s action was volatile, dropping sharply, and then rallying. But three hours of very, very narrow ranging rallied further until the final minutes.  [pay]

Pattern points… (Setups and technicals)
Thursday’s new high close was below prior highs, which means buyers didn’t gain traction for their efforts. It’s a breakout, but it needs confirmation from a second consecutive higher close Friday. That would put into play 1324.00.

The minimum objective of Thursday’s recovery was to retest Wednesday’s 1304.25 high. There was potential to probe Tuesday’s 1306.00 high. Tuesday’s 1305.50 pivotal high was touched. Touching the pivotal high, the high prior to the actual high, all but requires piercing the actual high.

The path to piercing the actual high isn’t predictable. It is predictive. Extending higher without interruption is likelier to fail quickly. A bigger dip first – not a gap down – would refuel buyers to help extend the rally

Thursday’s dip under last week’s highs threatened to start a decline. Its recovery was bullish, and closing positive more so. All that is missing is confirmation from a second consecutive higher close Friday. That’s going to be difficult following a new high close that is below prior intraday highs.
What’s Next… (Outlook and opportunities)
Closing higher Friday would confirm the breakout. Extending higher without interruption would be less likely to maintain the gain. So, the optimal bullish setup would recover from another dip to close positive.

Rejecting a fresh high like last Friday is unlikely, simply because that happened last Friday. Simply trading down through the open might be only temporary and bounce off of 1300.00. But gapping down or spiking under Thursday afternoon’s 1298.00 low would trigger a session-long decline that repeats the effort of Thursday’s opening drop.[/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.

So much for the pre-open blizzard of selling. It wasn’t going to extend with such low participation. And its recovery wasn’t going to gain traction for the same reason. So, the most bullish observation of the day is that it wasn’t very bearish. The inverse is as true for bears. [pay]

Pattern points… (Setups and technicals)
Breaking beyond either end of the 1300.00–1302.00 range would have been likely to extend in that direction. The lower-end held as support, instead of meriting shorting into the close.

Recovering 1302.00 overnight would be likely to test 1304.00. Recovering 1304.00 would put into play new highs above 1307.00 – potentially attacking 1310.00.

The door remains open to new highs, because sellers had plenty of opportunity to gain traction Wednesday. Perhaps they lacked sponsorship because of the weather, which won’t be such an issue Thursday. Breaking 1299.00 overnight would need to rally sharply from 1296.00-1297.00 to avoid sellers gaining traction.

What’s Next… (Outlook and opportunities)
Wednesday’s narrow ranging doesn’t alter the bigger picture. Fresh highs Thursday would be vulnerable to reversing down under Wednesday’s lows. New highs could be rejected through the morning, but probably not until the afternoon. In any case, Friday’s session would be greeted by selling pressures already underway, targeting a retest of Sunday night’s low. Closing above 1304.00 would suggest otherwise. [/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.