Market Wrap

Friday’s expiration was relatively volatile, as expirations go. The flat close doesn’t hint that the morning probed repeatedly into negative territory, and the afternoon attacked prior highs. Just wait until expiration’s restraints come off after Monday morning. [pay]

Pattern points… (Setups and technicals)
Friday morning’s probes into negative territory were accumulation, as the afternoon’s rally proved. But a the rally’s single 3-point leg from 1238.00 to 1241.00 was not ample reward for recovering from repeated probes under 1235.50. Higher highs are still likely.

The afternoon’s narrow consolidation at 1241.00 eventually formed an Ascending Triangle. The pattern normally retraces its initial breakout to probe the pattern’s other end. The breakout down to 1237.50 was retraced fully into the cash session close at 1239.75. Meanwhile, the Ascending Triangle’s measurements indicate its recovery would target 1243.00-1243.50.

Expiration pushed futures back down to 1237.50 after Friday’s close. This is irrelevant, and should be rejected at Monday’s open. If anything, the post-close drop has pulled back the slingshot to retest prior highs.

Wednesday’s close had signaled no trending into and out of expiration. Its influence should still extend to Monday morning. The rally from 1230.00 to 1241.00 left a little on the table by not yet retesting the prior week’s 1242.50 highs. Having come so close might be considered pessimism, which is potentially bullish from a contrarian perspective, but it could have been due to expiration.

What’s Next… (Outlook and opportunities)
Expiration’s character usually persists into Monday morning. Friday tried unsuccessfully to trend, so another trending attempt Monday morning would likely fail. A morning probe of prior highs up to 1243.00 could even be rejected by entering the noon hour back under 1238.75. An initial drop could recover easily from 1233.00, perhaps even from 1230.00.

Neutralizing the 1243.00 unfinished business above and rejecting it back under 1238.75, with trending free to resume, would target a break under 1230.00. By the close. Trying to trend down first on Monday – as did Friday morning – could instead recover to rally significantly through the afternoon.[/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.

Lower-end, meet upper-end… Upper-end, meet lower-end? Wednesday’s signal established 1230.00 as support, and 1243.00 as resistance. If resistance were met during expiration, would it push price back down?[pay]

Pattern points… (Setups and technicals)
Patient buyers controlled Thursday afternoon. The afternoon’s 1237.50 bias-up signal had extended only 2 points more to 1239.25. And it was probed by 2 points as support down to 1235.50 when the bias environment lapsed.

Patient buyers controlled Thursday’s close, too. A short-squeeze could have exploded higher to new session highs if 1238.00 were recovered by 3:50. But waiting until 3:55 restrained buyers, preventing a test of the afternoon’s 1239.25 high.

1243.00 can be tested overnight, but it is not a sell signal. It can be tested and rejected overnight. It can be tested and not rejected. Its test would fulfill a lot of buying pressure, but it would not necessarily attract selling pressure. A reaction would have room down to 1238.75 just as noise.

Reversing from 1243.00 to close under 1237.00 would signal momentum reversing down. A pullback has room down to 1230.00 before 1243.00‘s attraction became moot. A dip is not likely since Wednesday’s close under Monday’s 1235.25 low was invalidated Thursday. But expiration can be a wild card, and 1233.00 could be visited.

What’s Next… (Outlook and opportunities)
Thursday’s closing price action was a rare setup that accepted holding long through the close. Patient buyers didn’t probe the session’s 1239.25 where they might have been rejected and lost traction. (Futures did, but that was too late to be predictive.) Probing 1243.00 overnight might form a “new Globex trend extreme” requiring intraday retest. But a dip has room to 1233.00 or even 1230.00 before sellers might gain traction.[/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.

What a difference 3 ticks makes… If this morning’s 1238.00 bias-up signal were 1238.75, then this morning’s bias environment would have been clearly no-bias. Instead, the signal was opaque, and the 1233.00 bias-down signal would have been actively in-play. [pay]

Pattern points… (Setups and technicals)
Wednesday’s close under 1233.00  was a little too close to 1233.00 to be considered a decisive break. In fact, 1233.00 was being probed as resistance minutes after the futures close. But a decisive close under 1233.00 would have targeted an overnight test of either 1227.75 or 1225.25, to be recovered into Thursday’s open.

If 1233.00‘s late recovery means it wasn’t really broken, then Thursday’s open should have already recovered 1235.00-1236.00, on the way to 1243.00. And it would mean Wednesday’s drop had been skewed by expiration.

Closing under 1230.00 would have suggested 1243.00‘s test was satisfied by this week’s highs. Closing under 1230. would have reversed momentum down into and out of Friday’s expiration. And 1230.00 is the only untested “lower prior high” before 1200.00 as noted in yesterday’s Trading Plan.

The chance to point the market down was ignored Wednesday by holding tests of 1230.00 as support. But Monday’s 1235.25 low was broken as support, which would signal the trend reversing down if not recovered Thursday. Breaking under 1230.00 and not quickly recovering could trade down hard into Monday’s open. Otherwise, 1230.00 is the range’s lower-end and the upper-end is 1243.00.

What’s Next… (Outlook and opportunities)
1227.75, 1225.25… Failing to recover from probing fresh lows Thursday could quickly melt down into the weekend. Any bounces here would be temporary if not tested and rejected before or into Thursday’s open… Recovering 1235.00-1236.00 overnight would be bullish, confirmed above 1237.00 and 1238.75. That’s a lot of resistance and it is tightly compacted. But any test of 1243.00 could be rejected in the blink of an eye. [/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.

Careful what you ask for. And don’t… Monday afternoon’s plunge was expected to recover fully. A recovery underway at Tuesday’s open didn’t end until probing Monday’s 1242.00 high. The recovery was expected to reach 1243.00, but stopped 2 ticks short. And then it plunged, too. [pay]

Pattern points… (Setups and technicals)
Tuesday afternoon’s 10-point plunge to 1233.00 was bigger than Monday’s 7-point plunge to 1235.00. But a late bounce recovered 1235.00. And 1237.00 was still being tested at the close. It was not clearly rejected, but the burden of proof is on buyers. And it was not clearly recovered.

1237.00 failed to hold as support at Monday’s close, too. It was the penultimate target preceding 1243.00. Closing below 1237.00 means buyers aren’t gaining traction, and that jeopardizes this leg meeting 1243.00. But it also makes 1243.00 likely to push back down hard if reached on this leg.

1242.50 might have sufficed for 1243.00 had Tuesday finished in negative territory. But the late bounce robbed the plunge’s sellers of their traction. Perhaps the sell-off was only temporary disappointment FOMC generated only tepid enthusiasm. Potential to test 1243.00 remains alive.

By the way, Tuesday’s shallow fresh high makes it easy to trigger a trend reversal. Tuesday’s new high made Monday’s 1235.25 low the rally’s last relative low. Closing under it would signal the trend had reversed down. Also, this being Wednesday of expiration week, any trending underway at the close is likely to remain underway through Monday morning. Trending not underway won’t likely start any earlier.

What’s Next… (Outlook and opportunities)
Extending Tuesday afternoon’s drop overnight would target a test of 1230.00 as support. It had better hold. There are no untested “lower prior highs” 1200.00. While that’s the likely resolution to testing 1243.00 anyway, testing 1243.00 first would be more appropriate. [/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.

About that gap up to new highs… Its eventual retest by two higher highs was ultimately rejected by a late plunge to new lows. Sponsorship for this leg of the rally doesn’t seem up to the task. [pay]

Pattern points… (Setups and technicals)
1242.00 might have sufficed for the 1243.00 target. But 1242.00‘s test formed a close-quarters Double Top, and a Double Top at session highs is almost always retested. Wherever and whenever its sell-off were to end, the upleg that emerges should include a retest of 1242.00. And its retest would presumably test 1243.00.

The Double Top’s reaction down failed to hold its 161.8% 1238.50 target. But the extra selling was probably bullish. Its lower low down to 1235.25 neutralized the requirement to retest the morning’s oversold RSIs (circled red). And RSIs made higher lows (underlined greed) on the retest to suggest sellers did not gain traction for their efforts.

The oversold RSIs retest was likely to include a test Friday’s 1235.00 “lower prior highs” as support (chart inset). The pullback’s 1235.25 actual low could suffice. It was not a measured target like 1243.00. That said, it could be probed easily overnight down to 1233.00.

Many rules are appearing, and they’re all proving influential. The template of Friday breakouts not being confirmed on Monday ultimately prevented a new high close. The narrow range’s (mid-day triangle) first breakout attempt was almost imperceptible by being so shallow, but it proved false nonetheless. The morning’s oversold RSIs required a retest and got it. And the open’s dip to only within 1 tick of Friday’s late high later suffered for its excess optimism.

With this market honoring its rules, the unfinished business above at Monday morning’s 1243.00 bias-up target cannot be easily dismissed. Reacting down from a test of 1243.00 would not be easily dismissed, either.

What’s Next… (Outlook and opportunities)
Recovering 1237.50 should launch a retest of Monday’s 1242.00 highs, at least to 1243.00. Extending first down to 1233.00 would make 1235.50‘s recovery meaningful, but 1237.50‘s recovery would still be needed to signal momentum reversing up.

A bigger downleg would gain traction under 1230.00, signaled under 1227.00 and confirmed under 1223.50.

1233.00, 1237.00, and 1243.00 were the targets above 1223.00. Another close back under 1237.00 after probing above it – especially if 1243.00 were tested intraday – would suggest the rally’s gas tank had run dry. No unfinished business above would be dangerous with no weekend illiquidity impending that might inhibit counter-trend sponsorship. And plenty of unfinished business below to attract price 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.