Market Wrap

Snow day! Did Monday’s limited participation limit its recovery from extending into positive territory? Then it must also have limited the open’s selling pressure, too. Absorbing that selling pressure doesn’t seem so impressive.[pay]

Pattern points… (Setups and technicals)
Absorbing the open’s gap down doesn’t seem so impressive, not when considering that selling pressure was restrained. And there’s a difference between absorbing, and recovering.

Buyers had tunneled back up into positive territory above 1353.00 (circled green) for 2-1/2 hours before the close. But multiple probes above it failed to gain traction. Each recovery attempt was pushed back down to 1252.75. So, buyers were absorbed, too.

In fact, notice a pattern among the past three afternoons? Each day’s bounce *highlighted green) neutralized the earlier drop’s pent-up buying pressure. Gaining no traction, buyers weren’t rewarded for their efforts. Letting the drop’s pent-up buying pressure stew overnight would help it to explode higher the following morning. But impatient buyers couldn’t wait.

That buying pressure was sorely missed the following days Thursday and Monday. Tuesday may be different, at least initially, since Monday’s high re-filled the gap back to Wednesday’s open (boxed in green). It was unnecessary since Thursday’s open already did that. Any delay in reacting down Tuesday would require probing Wednesday night’s 1255.75 high.

What’s Next… (Outlook and opportunities)
Monday’s last productive pullback limit under 1253.00 was 1249.75. Its break Tuesday morning would signal momentum reversing down. Attractions would be a retest of Monday’s 1247.50 opening gap (circled red), its 1245.50 overnight low (dashed line), 1244.50 and 1242.00.

Gapping down to test 1249.75 could expend too much selling pressure too quickly, and may repeat Monday morning’s “recovery.” Filling the gap back to Monday’s 1253.25 close might produce some obligatory resistance.

Whether recovering from a gap down, or simply rallying at the open, eventually new highs above 1255.75 would be likely. [/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.

Big things come in small packages… No, not what’s under the tree. I’m referring to 1252.00-1255.00 range from Wednesday morning into
Thursday afternoon. A brief probe below it recovered, and formed a bearish pattern described below. [pay]

Pattern points… (Setups and technicals)
Wednesday’s Double Top resolved down Thursday to test its 61.8% target at 1250.00. Simultaneously oversold 1-minute and 3-minute RSIs at the test’s 1249.00 low require its retest.

Its retest is likely to be done immediately, since the reaction up peaked at resistance. The bounce retraced 61.8% of the way back into Wednesday’s Double Top pattern. Similar to Wednesday afternoon’s bounce, potential pent-up buying pressure has already been neutralized. This suggests sellers will sponsor the next effort.

However, it does not mean sellers will gain traction. The Double Top’s 1251.75 interim low’s recovery was still being tested at Thursday’s cash session close. Its is irrelevant that futures extended higher. If anything, the post-close push higher suggests excessive optimism, which is bearish.

Potential to a fresh high cannot be ruled out before closing under a prior low. And potential to a fresh high cannot be ruled out simply for probing another fresh low. Retesting Thursday’s oversold RSIs at 1249.25 could prove very bullish if recovered back above 1252.00.

What’s Next… (Outlook and opportunities)
Last week’s new highs were a product of low volume. That’s not the traction of a durable rally. Nevertheless, recovering 1257.25 through a relevant timing window w signal the rally was extending to test 1262.75 and 1267.75.

Just recovering 1255.00 would set a bullish tone for Monday morning. Similarly, just failing to hold 1251.25 would set a bearish tone. Failing to hold it as support – or failing to recover it after testing Thursday’s 1249.25 low – would put into play 1244.50 and potentially 1242.00.[/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.

Auto-pilot: It’s not just for cars! Triggering Wednesday morning’s 1252.00 bias-up signal was only a formality. The trend remained up, so long as the open held above 1250.00. Its 1255.00 target was tested during the noon hour. It was retested into the close after an interim dip to 1252.00.[pay]

Pattern points… (Setups and technicals)
[Imagine obligatory “low-volume, low-volatility” commentary here.]

The most interesting action during Wednesday’s session was the afternoon’s dip down to 1252.00. This had been the morning’s bias-up signal. Relevant resistance often proves its relevance by being retested as support from the other side. And vice-versa.

Tuesday morning’s 1244.50 bias-up signal is still owed that courtesy. Actually, it wasn’t even touched intraday as resistance. But it should still be touched as support. The gap back down to Monday’s 1242.00 close should be filled, too.

Delaying any retest – let alone so many consecutive pieces of unfinished business below – creates pent-up selling pressure. And vice-versa. But once they start to fall, they fall. Their cumulative delay suggests the market intends to break below them forcefully.

What’s Next… (Outlook and opportunities)
Breaking under 1252.00 would signal the fall is underway coming. It may serve as resistance again, whether from 1244.50 or from 1242.00. But a downleg would target 1239.75, and its break would target 1217.50 and 1201.50.

All of which depends upon sellers returning. Their continued absence wouldn’t necessarily point higher as it did Wednesday. But extending above 1257.75 would target 1267.75, with interim resistance at 1262.75.

Watch for volume (what’s left of it) to evaporate quickly into the noon hour as participants (what’s left of them) leave early. Have a safe and happy holiday (what’s left of it) and a Merry Christmas… -=Rd [/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.

They don’t make breakouts like they used to… Tuesday’s gap up extended higher on low volume, pretty much throughout the day. When it wasn’t extending, retracements were avoided by barely fluctuating. One two-hour stretch ranged 3-4 ticks total. Maybe that wasn’t really a breakout.[pay]

Pattern points… (Setups and technicals)
Tuesday’s late surge to 1251.25 was retraced in time to close the cash session back under the afternoon’s 1250.00 prior high. There is still potential for retesting the surge’s peak up to 1251.50, unless Wednesday gaps under Tuesday afternoon’s 1248.75 low.

Tuesday’s close is a breakout, being a new high, having begun the day by gapping up. Its low-volume warns that it will be proved false. As does retracing the late surge and closing back under the afternoon’s prior high. It is essentially an accident waiting to happen. But the breakout can stay in motion until acted on by an equal and opposing force.

Closing Wednesday back under the 1242.00-1242.50 prior highs would signal that opposing force had acted. Testing 1242.00 early enough might leave enough time to attract sponsorship for a recovery. Lightning would have to strike twice, since Monday’s intraday breakout was already retraced to 1242.00, and already recovered. Retracing another breakout likely wouldn’t bottom at 1242.00.

What’s Next… (Outlook and opportunities)
The gap back down to Monday’s 1242.00 close wants to be filled, regardless of its resolution. Just exiting the opening sequence back under Monday’s 1245.75 high would rob buyers of their traction, and all but require filling the gap back to 1242.00. There is plenty of downside potential if sellers gain traction to compensate for lost time.

Not dropping enough, early enough, nor for long enough, would at least avoid reversing down. It may even let the rally extend – probably through Thursday morning – even if only to test 1255.00.[/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.

When is a buy signal a sell signal? When it fully forms, but fails to trigger. This can often be considered a sell signal. Like Monday’s close still testing 1242.00-1242.50 prior highs. A rally had plenty of time to extend higher, unless its sponsorship was trapped by stronger hands.[pay]

Pattern points… (Setups and technicals)
The range’s upper-end was likely to be retested. It was probed. And its test held. The burden of proof is on buyers, and they failed. So, the bad news for the rally is that a breakout failed to trigger after being attempted.

The good news for a rally is it can still be triggered Tuesday. Certainly, the market is well-positioned for a breakout, while sitting at prior highs. Any trending underway after Tuesday’s opening sequence could extend into Wednesday’s open, or into Thursday’s close. Maintaining a break to new highs would be bullish.

The bad news for a rally is that the market is well-positioned not to break higher. The rally since Thursday’s low has fulfilled its objective. Now higher highs have failed to gain traction through the close. Trending has been free to resume since Monday afternoon. Not trending up very early Tuesday would soon attract sponsorship for trending down.

What’s Next… (Outlook and opportunities)
The holiday-shortened week inhibits trending after Tuesday’s close, unless it has already started by then. Regardless of direction. A temporary probe beyond either end of the 1230.00-1242.50 range would lose traction. But a break underway through Tuesday’s close could extend in that direction into the new year.[/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.