Market Wrap

Monday’s gap down was a gift to buyers. But they did a poor job opening it. Despite trending up all day, buyers gained no traction for their efforts. A gap up Tuesday may be the only way to avoid new lows.[pay]

Pattern points… (Setups and technicals)
Monday afternoon’s test of 1268.00 did fill the gap back to Friday’s 1267.50 close. The close dipped back under Thursday afternoon’s 1267.25 support. For a second consecutive day, buyers expended energy through the afternoon without gaining traction for their efforts.

This is not “ineffectual pessimism” that might otherwise be bullish. Pessimism was extreme, gapping down and essentially spending the entire session in negative territory. But the open’s low stopped short of touching Friday’s prior low, let alone probing it. And there was no afternoon probe of new lows to be absorbed.

Monday morning’s bias-down was rejected, yet buyers couldn’t get out of negative territory. Their only accomplishment was to fill the gap back to Friday’s close, and neutralize its attraction above. The last-minute reaction down did hold above 1264.50, so the bounce could extend higher. But any further rally would not be durable, launching from an unstable base.

What’s Next… (Outlook and opportunities)
A rally that doesn’t gain traction can extend higher by gapping up. Maintaining a recovery above 1269.50 would target a retest of last week’s 1277.00 overnight highs. Not gapping up – or not maintaining a gap up – would target fresh lows under 1258.00. And a fresh low at this stage of the pattern is likely to extend sharply, initially to 1250.00.[/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.

A taste of things to come. Friday’s dip back down to the prior week’s high was unnecessary to prove its support. But it did help to disprove it. Its ultimate break would leave no doubt.[pay]

Pattern points… (Setups and technicals)
Friday afternoon’s bounce tested 1268.25 resistance. Any higher would have put into play a probe above the morning’s highs. It still could on Monday.

But the close did not decisively recover above Thursday afternoon’s 1267.25 support, despite hovering there for the last half-hour. The bounce was purely a retracement  of the morning’s drop, and was not accumulative.

Buyers did not gain traction for their afternoon-long effort. But they did recover from probing under the prior week’s 1258.50 high. And that avoided signaling that the trend had reversed down.

The last test of 1258.50 support had recovered to new highs. Just revisiting the interim low afterward suggested the rally’s resumption needs a deeper or longer pullback. Closing under 1256.00-1258.50 would have signaled the rally’s trend reversing down. It still could, on Monday.

Measuring the rally either from Thanksgiving’s lows, or from the summer’s bottom, would determine a correction’s potential objectives. Two consecutive new high closes could avoid it altogether.

What’s Next… (Outlook and opportunities)
Simultaneously oversold RSIs at Friday’s 1257.75 low require its retest. Without first probing another new high, the low’s retest has a chance to hold as support. But its test would still target 1255.00. Under 1250.00 would signal a significant downleg underway. Back above 1272.50 could trigger a new upleg.[/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 stealth optimism limited the selling. It repeatedly bounced off the same support, and narrowly avoided retesting the morning’s low. Left there, the behavior would have been “ineffectual pessimism,” bullish from a contrarian perspective. But trending up into the close left fewer shorts exposed… This sort of sponsorship doesn’t often maintain new highs, or avoid a bigger decline.[pay]

Pattern points… (Setups and technicals)
Thursday’s 1277.00 pre-open high is a “new Globex trend extreme” that requires an intraday retest. Thursday’s close was still in the process of testing the morning’s 1271.00 low as resistance, keeping alive 1277.00‘s attraction.

Maintaining new highs through 10:15 could marginalize sellers for the day. Gapping up above Wednesday’s ~1273.00 highs would be difficult to reject, too. Firming patiently would reflect patient buyers absorbing sellers.

That said, Thursday’s optimism makes a durable rally difficult Friday. It doesn’t prevent an initially favorable knee-jerk reaction to Friday’s report. But probing new highs at the open would be vulnerable to reversing down. Reversing back into negative territory by 10:15 could trigger a vicious circle that attracts heavy selling into the afternoon.

Oversold RSIs outstanding at Thursday morning’s 1266.25 low have yet to be fully retested. And that’s just the nearest attraction. Last week’s 1249.50 low is the lowest near-term attraction. Other than a new high close, perhaps the most bullish scenario is a gap down that creates new unfinished business above.

What’s Next… (Outlook and opportunities)
Monday’s probe above last week’s 1258.50 high did not even touch 1258.50 intraday. This made the eventual reversal back under 1258.50 unlikely the next day. Often, the buffer lasts three days. Those three days have ended. Avoiding a reversal down by Friday’s close or at Monday’s open could extend this rally into month’s end.[/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 was quite a bullish day Wednesday. Was it really? It was a very bullish morning, recovering into the open from an overnight drop, and trending up into the noon hour. But the afternoon only ranged sideways. And probes of higher highs failed to gain traction. [pay]

Pattern points… (Setups and technicals)
The afternoon’s narrow ranging had extended the noon hour’s narrow ranging instead of trending out of it. This made the third consecutive timing window likely to range narrowly, and it did.

The fresh high was largely contained within the 3:10-3:20 timing window. Prior highs were probed into the window, and the probe was rejected coming out of the window. That’s rarely the high. But it’s often the second-to-last high.

Having retested Monday’s high, there is no unfinished business above. And an entire afternoon was just spent probing the prior high without extending higher. If these conditions can’t launch a decline, then the rally’s next objectives are 1279.00 and 1281.00.

What’s Next… (Outlook and opportunities)
At least a momentary fresh high Thursday morning is likely. Reversing quickly back under 1271.00 would target 1266.50, and potentially 1263.00, whose break would reverse the trend down. That’s a lot of support, and a credible attempt would be aggressive. Otherwise, the rally would gain traction from fresh highs Thursday morning that aren’t quickly reversed.

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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.

The market dodged a bullet, the bullet of closing too quickly back under last Wednesday’s 1258.50 high. The timing would have been very odd since Monday’s close above last week’s high should have interjected at least one day (and potentially three) before reversing down. [pay]

Pattern points… (Setups and technicals)
Tuesday’s drop really wreaked havoc on my pattern’s timing. Either rallying or selling off into the open would have tracked a template. Rejecting an opening rally did not. The afternoon’s recovery puts the pattern back on-track.

Closing nearly flat Tuesday suggests that sellers were absorbed. A close above the morning’s 1270.00 high would have been decisive. Just closing above 1266.75 would have signaled to hold long through the close. The close did firm, but it was almost reluctantly optimistic and not overly-so.

Perhaps Tuesday’s drop refueled buyers. A retest of Monday’s high could gain traction and extend for another 15-18 points to test the 1290.00 area. Regardless, I’m still inclined to give buyers a benefit of the doubt until a key support is broken.

Monday’s 1263.50 opening gap required being retested from below. Any test would be only arbitrary if not originated from a pullback to prior highs. Despite the havoc it wreaked, 1258.50‘s intraday test as support did react up to (and through) 1263.50. That attraction has been neutralized.

What’s Next… (Outlook and opportunities)
Trying to extend the rally overnight would be credible above 1266.75 and 1268.25. Buyers would lose traction by probing Tuesday morning’s 1270.00 high without recovering it through a relevant timing window. Otherwise, a retest of Monday’s 1272.50 high would target 1274.00.

Morning weakness need not gain traction. But a 1258.50 shouldn’t be retested before new highs. Fresh lows could still bounce again from 1256.00. But now that 1258.50 has been tested as support, a close under 1254.00 would be capable of extending down [/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.