Market Wrap

A lot of buying energy was expended Tuesday. Pre-market news items were no match for post-open buyers. But that’s a lot of buying pressure to expend without gaining traction until the cash session close.[pay]

Pattern points… (Setups and technicals)
The 1293.00 pre-open high’s retest remained likely so long as sellers didn’t gain traction Tuesday. It was met on the way to fulfilling the morning’s 1293.50 bias-up target. Both were tested after the cash session close, but their timing doesn’t matter.

However, timing does factor into whether 1291.25 was exceeded on a closing basis. It was not, as it was still being tested within 3 minutes of the cash session close. Exceeding it would have meant buyers gained traction for their efforts. They did not. That could be a problem.

Post-close action extended higher to 1296.25. This compounded the risk, stretching the rubber band without first getting a good grip on it. This isn’t the sort of pattern to suddenly put in a durable top. And a morning drop is unlikely if not already underway at the open. Not snapping back at all Wednesday would next target the 1310.00 and potentially 1321.00-1324.00 areas.

What’s Next… (Outlook and opportunities)
Buyers expended a lot of energy overnight, and then after the cash session close, both times when it couldn’t gain traction. Opening under 1289.00 would signal momentum reversing down, but only if maintained through the open. Any lesser weakness – presumably down to 1289.25-1290.25 – would likely be absorbed.   [/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.

1289-who? Friday afternoon’s bias-up target wasn’t even put into play until that afternoon. It was quickly met. It was the session high. And it was the cash session close. How attached can the market be to a level so recently introduced, and already retired?[pay]

Pattern points… (Setups and technicals)
1289.00 isn’t entirely new. It was the next higher target of a successful breakout. But Wednesday’s breakout wasn’t confirmed, so 1289.00 never was put into play. Smaller more recent patterns did target 1289.00, and it was triggered by Friday afternoon’s bias-up. But its relevance is otherwise fresh.

Closing at a target is “equilibrium,” and Friday’s close was at 1289.00. Closing above a target would put into play the next higher target. Alternatively, reacting down from a target to close under its prior low would indicate the target had held. But an equilibrium close – closing at a target – leaves no momentum to extend into the next session.

No momentum doesn’t equate to no volatility. Equilibrium closes tend to be very volatile the next day. Two or three intraday trending attempts, alternating in direction, with the last gaining traction. This jives with other templates for Friday’s breakout attempt:

1. A second consecutive breakout attempt, following an unconfirmed break, tends not to be confirmed either. Wednesday’s breakout wasn’t confirmed Thursday, forming a range. Friday’s breakout is the second consecutive attempt. The next day’s close is unlikely to confirm it. 2. Friday breakouts are seldom confirmed anyway.

Even after not confirming twice, a third breakout attempt – i.e. more new highs – is not unusual. The trajectory into last week’s close was too steep yet for its trend to reverse down. But an early trending attempt Tuesday is likely to reverse intraday back through Friday’s close in the opposite direction.

What’s Next… (Outlook and opportunities)
Monday’s holiday might impact the templates’ normal outcome. Ignoring the equilibrium close and extending higher uninterrupted would confirm Friday’s breakout. Its next target is the 1310.00 area. If the template were going to be busted, then 1310.00 could break higher and put into play 1321.00-1324.00.

Otherwise, intraday weakness should again recover from testing 1277.00-1279.00. Closing under it would target 1265.00, whose break would target 1234.00 and 1225.00.

Saturday’s Open House: My thanks to those that attended Saturday’s open house (recording linked here). We reviewed the broader market, individual stocks mentioned in this week’s Barron’s, and then too stock requests. I have a conflict with the next one’s timing, so we’ll move it forward to next Saturday, January 22. More info to follow…

[/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 inside day ended like Wednesday, with a last half-hour surge past the cash session close. Also after having dipped to test Wednesday’s 1277-1279 opening range. While RSIs diverged positively into that low. But there’s one interesting difference.[pay]

Pattern points… (Setups and technicals)
Sellers retaking control Thursday optimally would have broken below 1277.00-1279.00 through the open. Preferably no later than exiting the noon hour. The attraction pulled price down, but never pushed it down further.

The consequences aren’t bearish. But they’re not being bullish, either. Wednesday’s breakout above the prior range is not confirmed. A new high close Friday could try again, but Friday breakouts usually aren’t confirmed on Mondays.

So, what’s different about Thursday’s late surge? This one extended higher. Wednesday’s post-close extension added 2 points up to 1284.25. Overnight action from there was flat to lower. Thursday’s post-close extension also added 2 points. And then another 2 during INTC’s earnings call, so far back up to 1284.25.

Wednesday’s breakout made higher prices likely into the holiday weekend. Thursday’s open could have rejected it, maybe even the noon hour. They didn’t. Friday’s likely probe of higher highs wouldn’t necessarily close at higher highs. A probe of lower lows or reversal down is probably delayed until next week, but could still be started before the weekend.

What’s Next… (Outlook and opportunities)
Wednesday’s high is on a path to be probed Friday. Wednesday afternoon’s 1285.75 bias-up target remains unfinished business above. Exceeding it through a relevant timing window would next target essentially 1290.00 and 1303.00.

Thursday afternoon’s 1276.25 low printed during the last half-hour, so no gap down would trigger a session-long decline setup. But a break maintained under Thursday morning’s 1278.00 low can still trend down sharply to test 1270.00. [/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.

Aaaarrrggghhhh. I gave too much credit to the opening range’s magnetic power. No, actually, I gave it too much credit for too long – 1279.00 was supposed to attract price back down. It did. But I gave no credit to three other factors that facilitated a 5-point surge into the close. Triple argh.  [pay]

Pattern points… (Setups and technicals)
One of the three other factors was that the session’s least predictable timing window had just opened. A bounce back up to 1281.00 was certainly expected, but so was 1279.00‘s ability to attract price back down. Reversing back down would have slid sharply to 1272.50. Instead, its rally extended sharply.

Another factor given short-shrift was RSIs diverging positively. Let me say that again. RSIs diverged positively, at 1279.00 support, at a timing window. Oh, and did I mention there already was a requirement for bouncing at least to 1281.00?

1281.00 was too shallow a bounce for buying before such a big drop coming moments later. However, the afternoon’s 1285.75 bias-up target became unfinished business above when the bias environment was exited above the 1281.00 bias-up signal.

Wednesday’s close was the first new high in more than a week. It is a breakout, and now requires confirmation by closing higher Thursday. Except for Wednesday’s late surge, the breakout’s origin and its price action made confirmation unlikely. A visit to 1285.75 is possible in either scenario.

What’s Next… (Outlook and opportunities)
Wednesday’s close before a holiday weekend can foreshadow price action into the holiday. Wednesday’s breakout suggests the trend will persist. The signal can be invalidated Thursday, optimally through its first hour. Rejecting the breakout would suggest resistance was sending price back down.

Before the last half-hour’s randomness became more influential Wednesday, the open’s 1279.00 high did attract price back to it. It should be tested more thoroughly as compensation initially repelling price. The next downleg’s minimum objective would be 1266.00.

Having trended up into the close, a session-long decline would be signaled Thursday by maintaining a gap down under the afternoon’s 1279.00 low. So, holding a test of 1279.00 at the open would be bullish for sellers failing to exploit the opportunity.[/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 the highs… Tuesday morning’s gap up triggered the bias-up. An ascending triangle was triggered and its target was met and held. Another pattern formed whose objective was the bias-up target. But somebody exited the market in a very big way, pressuring price sharply lower. [pay]

Pattern points… (Setups and technicals)
Regardless of the intraday range and pattern, Tuesday’s buyers were expected not to gain traction. The gap up’s high was probed, and could have extended even higher. But the open’s high would hold as resistance.

This was expected because, despite their efforts, Monday’s buyers hadn’t gained traction either. It’s a vicious cycle, and it can continue indefinitely. The pattern tends to accompany last gasp efforts to extend the trend. So, higher highs Wednesday are likely to begin by gapping up. Not gapping up could still trend up intraday, and still be likely to fail – much more dramatically.

Higher highs Tuesday would have targeted the morning’s 1277.75 bias-up target. The morning’s bias environment was exited above the triggered bias-up signal, so its target then becomes unfinished business above. And it remains outstanding until tested, regardless of the path there or detours along the way.

One more test of the highs remains possible, and it remains unlikely to gain traction. Meanwhile, any further rally is challenged by the attraction down to Tuesday’s 1265.50 low, whose oversold RSIs require a retest. Anything but the briefest dip could gain traction, too.

What’s Next… (Outlook and opportunities)
Tuesday’s closing action trended up, and its session 1265.50 low came during the afternoon, preceding the last hour. So, gapping down under  1265.50 would trigger a session-long decline. This market range is like a tinderbox, and that could be like throwing a lit match into it.

Just gapping down to the 1267.50 area would be likelier to recover into positive territory. Similarly, gapping up would be vulnerable to giving back its gains, unless immediately recovering 1272.50-1273.50. The afternoon’s Beige Book release could turn this into a traditional “Wreversal Wednesday” that undoes early trending. [/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.