Market Wrap

That was quite a rally into Tuesday’s close. The price was right, along with timing, and eventually also technicals. Too bad it didn’t gain traction. Extending higher immediately isn’t likely to become a new rally leg. [pay]

Pattern points… (Setups and technicals)
A lot of selling pressure was satisfied at 1277.00. And it was satisfied at a relevant time, as the afternoon’s bias environment was starting to lapse. RSIs diverged positively on its retest to squeeze out the last drop of selling pressure.

Otherwise, the last hour’s rally was impressive.

Buyers had no active opposition. Their 11-point non-stop rally was very productive, recovering from session low back to session high. But it did not avoid a negative close. Its sponsorship gained no traction for their efforts.

Nevertheless, the burden of proof is on sellers. Until the last hour, they were in control. Gapping down, probing prior sessions’ lows, spending the entire session in negative territory. That’s a lot of pessimism. But probing the morning’s low only to close above the interim high is “ineffectual pessimism.”

Tuesday morning’s buyers were weak hands, because each rally attempt started too late. That context told us the rally attempts would fail and resolve in fresh lows. Tuesday afternoon’s buyers were weak hands, too. They face a similar fate.

But unless that suffering were obvious already at Wednesday’s open, then the door is open to probing fresh highs first. Then a resolution down to fresh lows.

What’s Next… (Outlook and opportunities)
An overnight or opening dip has room down to the 1283.00 area without sellers gaining traction. A recovery would target 1291.00, and possibly new highs above 1296.25 and higher. Back under 1283.00 would suggest sellers were already retaking control.  [/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.

Momentum of truth. Friday’s 1288.00 high was retested, including 1289.00. Closing back under 1288.00 robbed buyers of their traction. It’s almost time for last week’s trend change signal to prove itself. [pay]

Pattern points… (Setups and technicals)
Objectives come in various forms. Prior highs (and lows), targets, overbought (and oversold) RSIs. Buyers lose traction after probing an objective intraday, and failing to close above it.

Monday had two or three objectives. The first was tested overnight at 1285.00 and retraced into the open. Then 1288.00‘s test held as resistance into the cash session close. So did 1289.00‘s post-close test.

Each piece of unfinished business or attraction above was probed. All held through their respective close. Monday’s last high was itself purely a product of the last half-hour. This is not where moves begin or resume.

Closing above 1286.50 does threaten to end last Wednesday’s trend change signal. It’s too late to be invalidated. But closing above its 1291.00 prior high would end its influence – influence that has been inhibiting a bigger recovery.

1291.00 can be probed intraday. Closing above it – or above any other prior high probed intraday, like 1295.00 and 1296.25 – would signal another rally leg underway (targeting 1310.00 area and 1324.00). Closing back under 1286.50 would all but seal a top.

What’s Next… (Outlook and opportunities)
Gapping up Tuesday above 1291.00 would be credible for extending higher to test the 1295.00 prior high, and possibly also probe 1296.25. The earlier, the more time available to reverse down. Otherwise, Monday’s late-afternoon drop can resume under 1285.25, targeting 1280.25 and 1277.25.[/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.

Don’t forget about tomorrow morning’s Open House in the chartroom. Saturday at 9:30am ET.

Form trumped function, Friday.  My template for the session expected a morning rally and afternoon decline. The morning rallied and the morning also declined. The afternoon ranged sideways.Second time’s a charm?[pay]

Pattern points… (Setups and technicals)
The decline expected Friday afternoon was a victim of its own success. The open’s gap up expended so much buying energy so quickly, that it had little to sustain itself for very long. Shifting the decline forward into the morning may have been too early for sellers to be properly refueled.

Another downleg is likely to be attempted. The overnight pattern (Descending Triangle) is incapable of launching a durable rally. And delaying its retracement this long makes it likely to be a reversal more substantial than the rally it produced.

But now there is potential to bounce again, first. If Monday’s open isn’t already declining, then its detour to another bounce will be underway. A temporary bounce that seems optimistic – as did Friday’s open – but that ultimately honors the trend change signaled by Wednesday’s close under 1286.50.

What’s Next… (Outlook and opportunities)
Sliding or gapping down under 1277.00 would target Thursday night’s 1273.00-1274.00 lows. Their break would next target 1257.00-1258.50. Not declining at Monday’s open would allow the influence of attractions above: The open’s 1285.00 gap up, the overbought 1-minute and 3-minute RSIs at the 1288.00 high. Presumably also 1289.00-1290.00.[/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.

Good news, bad news: GOOG announced. If a rally is relying on good news to avoid a drop, then how bullish can it be to get that good news out of the way? The stock is holding its own, but its effect on indexes has been negligible. [pay]

Pattern points… (Setups and technicals)
Thursday afternoon’s 1275.00 bias-up signal didn’t trigger at 1:20. Trending would be unlikely through 2:30. Any trending attempted anyway must be retraced. So, Thursday afternoon’s no-bias rally up to 1280.00 was  retraced back to the 1275.00 bias-up signal. It was also retraced down to 1274.00 where price traded at 1:20.

A similar story preceded that one 3 hours earlier at the 1267.50 session low. It was the product of miniature Head & Shoulders (circled red), too small to be confident even now that it wasn’t just noise. But it was symmetrical, and its measurements targeted 1267.75. And the pattern’s normal resolution is to reverse substantially from its target. Check, check, check.

These little stories are similar because each depicts a target being met soon after it was created. That’s interesting because the morning’s low had just neutralized targets that had been outstanding longer. If any lower targets were still in-play, then the newer ones should have broken.

It’s possible that Thursday afternoon’s rally refueled sellers anyway, creating a new target much lower. Already neutralizing the 1274.00-1275.00 attraction – and only it – suggests otherwise. So does the session’s “ineffectual pessimism” (gapping down, probing prior lows, ranging exclusively in negative territory, but closing above the prior low).

It’s possible that Thursday afternoon’s rally refueled sellers anyway, because they gained no traction for their efforts. They did expend a lot of effort. But the probe above Wednesday’s 1280.00 late high held as resistance. Recovering it would have marginalized sellers.

And It’s possible that Thursday afternoon’s rally refueled sellers anyway, since Wednesday’s trend change signal was confirmed. Failing to close back above Tuesday’s 1286.50 low means the latest rally leg is done.

What’s Next… (Outlook and opportunities)
The trend change signal does give cover for a corrective bounce to refuel sellers. Two likely objectives are 1283.00 and 1289.00. An opening dip to 1274.00 could still recover for the bounce. But breaking under it overnight could gain traction to trend down sharply into and out of the weekend. Next lower targets would be 1257.00 and 1241.00.[/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.

Dead cats and fingers lying everywhere. There were only two falling knives to catch Wednesday. Once coming out of the noon hour, and again during the last hour. The first measured 4 points, and it failed. The second measured 5 points, and it hasn’t failed. Not.yet.[pay]

Pattern points… (Setups and technicals)
Wednesday’s selling was relentless. o bounce probed a prior high to refuel sellers. This was surprising since the open’s gap down didn’t immediately slide lower. The gap to Tuesday’s 1289.50 last relative low would normally set the tone for the day. The balance of the session performed as if the gap had immediately slid further.

So, maybe that was excessive pessimism Wednesday. Not that selling wasn’t productive – it was. But everything available for sale near-term might have been sold already. Wednesday’s close signaled a trend change, but I’m skeptical.

A trend change is signaled by closing back under the highest relative low. Tuesday’s 1286.50 low was the highest relative low (circled red) – the intraday low between the two highest closes (circled green). Closing just under it would have been bearish. Closing just above the next relative low (also circled red) would have been bearish. But Tuesday’s probe of that low lacked the energy to close below it.

What’s Next… (Outlook and opportunities)
An early recovery from retesting the 1276.00 area’s support would help to launch a corrective bounce. Its minimum target would be 1289.00, but it could probe 1291.25 or 1295.00.

Recovering 1283.00 could also extend to the same bounce targets. Testing 1283.00 too early would leave plenty of time for reversing back down – as in, resuming the decline.

Resuming the decline would next target the 1270.00 area. Wednesday’s drop has already expended a lot of selling pressure without refueling. Its 1276.00 low is already extreme. Gapping down to 1270.00 snap back up very sharply if not extended down immediately.[/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.