Market Wrap

The present value of future cash flow is essentially the underlying guide to longer-term stock market trending. At the opposite end of the spectrum is be individual company earnings announcements, which can inhibit trending. But the latter is only momentary, and often ignores the earnings reaction by the reporting company’s stock. Earnings have more influence inhibiting price action before the announcement than after it. Earnings is otherwise irrelevant.

Except indirectly. Like now.

I’ve been revisiting a theme since NFLX’s earnings plunge, that FAANGs strong-handed sponsorship has stopped accumulating. They don’t have to become sellers for prices to drop, only stop pushing price higher or buying dips. Being leadership, the broader market initially reacts down. But often the stopped accumulation becomes rotation into laggards, sending the the market higher one more time.

AAPL’s post-close earnings were perhaps responsible for inhibiting Tuesday afternoon from extending the morning’s rally. Maybe it was responsible for retracing the afternoon’s 2824.25 bias-up signal test back down to 2818.00 (dropping to 2813.50 was due to the session’s second China trade talks headline). Surging back up to 2824.25 through the close was enabled by month-end portfolio positioning.

Extending higher through Wednesday’s open would all but confirm one more upleg is underway, targeting 2873.00. That will be difficult initially if AAPL misses, sending FAANGs lower again. Even then, as I describe during the Market Wrap recording, an initially favorable knee-jerk reaction by AAPL could fulfill upside targets and end the day reacting back down sharply.

Tuesday’s rally may have created enough room to absorb another round of selling pressure without reversing the trend down. But there is no bullish reason for Monday’s test of 2801.50 to even be attacked Wednesday.

Details and other markets coverage are discussed in the post-market Wrap recording here.
Monitor overnight Globex trading in the chaRTroom here.

Ultimately, Monday morning’s decline was not rejected by the close. Similar to Friday’s drop, which had also bottomed during the noon hour, the balance of the afternoon ranged sideways. But unlike Friday’s drop, Monday has left the decline with no room for noise below.

Either the extended pullback testing 2801.50 has expended all near-term selling pressure, or another 20-25 points lower is underway.

Already bouncing into Monday’s close would at least have signaled that 2801.50‘s leg was done. Instead, Monday’s closing action was overlapping 2801.50. Rejecting it’s test by proxy Tuesday requires gapping up above the prior high, which is 2811.25. That’s Monday afternoon’s high, and having trended down into Monday’s close, the setup would also trigger a session-long reversal.

Any shallower opening strength Tuesday would remain vulnerable to extending down to 2875.00-2881.00. Greeting Tuesday’s open in negative territory would already suggest the decline is extending down. In lieu of gapping up sufficiently, only an Isolation setup that temporarily probes fresh lows overnight would be credible for rallying Tuesday.

Details and other markets coverage are discussed in the post-market Wrap recording here.
Monitor overnight Globex trading in the chaRTroom here.

Thursday night’s relentless rally was shallow, but nevertheless productive since it probed Thursday’s 2846.50 high. The proximity to “unfinished business above” at 2848.75 had opened the door wide for its retest. But the GDP reaction slammed the door shut. The upside potential could have reopened had the GDP reaction’s 2839.00 low held its retest. But it didn’t, and that was the sound of the slammed door being locked shut.

Extending down wasn’t required, since only noN-bias had triggered. But the pre-open low’s retest extended down to within 2-3 ticks of the morning’s 2829.50 bias-down target. Extending that drop wasn’t required, either. But it extended at the morning bias environment exit, and at a much steeper slope.

The 2818.00 prior high was retested, including unfinished business below at 2813.75. And that was probed by 5 points as the noon hour ended. The balance of the session ranged back up to 2821.00, exiting the bias environment too low to trigger a short-squeeze, but somehow avoiding another downleg targeting 2801.50. Monday’s open should either take care of that, or else be well on its way to recovering 2828.50.

Details and other markets coverage are discussed in the post-market Wrap recording here.
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Wednesday night’s relatively narrow 2833.50-2838.00 range seemed deceptively calm after comparing it to the open’s attack on 2844.00. But it was the open’s surge that proved deceptive, quickly retracing back down to the overnight range’s upper-end. Rallying into the noon hour was also retraced back down to the overnight range, which supported the choppy afternoon.

All of which developed in negative territory. And all within the range of Wednesday’s position-squaring window surge, which had been triggered by the US-EU tariff deal. Thursday’s overlap of Wednesday’s last upleg has created a position of strength to help recover from a decline.

A decline isn’t currently indicated. There’s only the vulnerability to testing 2829.50, 2818.00 or even “unfinished business below” at 2813.75 in search of strong-handed buyers to extend the rally’s unfinished business above. That includes Thursday morning’s 2848.75 bias objective, the new upleg’s 2873.00 target, and at least an eventual third higher close.

Details and other markets coverage are discussed in the post-market Wrap recording here.
Monitor overnight Globex trading in the chaRTroom here.

Wednesday’s gap down created a position of weakness, since the prior afternoon’s bounce had gained no traction. If a rally were attempted, it would be doomed to failure. Tuesday’s 2823.00 opening gap up wanted to be filled from below, and the open surged up to 2826.00. But its reaction down to 2819.00 was recovered entirely by noon. Hint.

Retesting Tuesday’s 2831.25 high up to 2836.00 was also possible, as discussed during the Market Tour. The rally extended to touch it upon exiting the afternoon bias environment. A deep enough reaction down would have been bearish. Instead, its reaction down held above Tuesday’s 2831.25 high to avoid reversing momentum down. Hint.

Timing isn’t everything, but it’s a lot. It was certainly the most important thing when Trump announced a tariff deal with the EU. The shallow pullback had not reversed upside momentum, so the position-squaring window created a vulnerability to a short-squeeze. That’s the setup, which Trump’s announcement then spiked over the net.

The market spiked up 18 point to 2849.50 before the cash session close, and futures dipped back down to 2840.00. The second consecutive close above 2818.00 confirms a new rally leg underway, requiring at least an eventual third higher close. Closing back under 2821.00 would negate the objective. The bullish context and the proximity to January’s highs could create turbulence Thursday morning. But trending Thursday afternoon through Monday morning is likely.

Details and other markets coverage are discussed in the post-market Wrap recording here.
Monitor overnight Globex trading in the chaRTroom here.