Market Wrap

Objects in motion, and all that… Friday’s open kept optimism in-check. It is difficult to generate counter-trend sponsorship on a Friday afternoon. The session firmed to new highs, not by accumulation, but by slow-playing its gains. [pay]

Pattern points… (Setups and technicals)
Thursday night’s retest of 1233.00 pushed back down into Friday’s open. Thursday’s test of 1233.00 had done the same. Both morning dips were absorbed (circled red). And each recovered to fresh highs. Similar characteristics between Thursday and Friday’s session make one an extension of the other.

A breakout is new trending that leaves a consolidation behind. If Friday’s new high was an extension of Thursday’s price action, then it cannot also be a breakout. Anyway, a breakout’s volume should increase, sharply, which Friday’s volume did not. The final proof will be in whether Monday closes higher to confirm, which it should not.

That’s just timing, and doesn’t equate to being a sell signal. But one could be signaled from rejecting a fresh high at 1238.00. Or a gap down under Friday morning’s 1227.00-1229.00 lows could invalidate the breakout and reverse momentum down in the same breath.

If Monday’s session avoids reversing down, Tuesday could still extend higher. The left chart below depicts S&Ps for three weeks, including overnight Globex action (81-minute bars). Last week formed a Rising Wedge in an uptrend. This pattern tends to resolve by surging higher – a final upleg, but a pretty aggressive when its starts.

The right chart depicts the same price action not including overnight Globex. It no longer forms a wedge, but an Ascending Triangle. And Friday’s high is a 38.2% extension of the pattern. Reacting down immediately from touching 1239.00-1240.00 would leave no unfinished business above. And it would suggest no wedge had formed.

What’s Next… (Outlook and opportunities)
Initial weakness that isn’t breaking under 1230.00 would be likely to recover. Perhaps not to resume the rally, but to probe Friday’s highs. Fresh highs would be vulnerable to reversing down from the 1238.00-1240.00 area. From where specifically, and how far down, would determine the next leg – slightly higher then slightly lower would suggest another rally effort coming Tuesday. Otherwise, surging at Monday’s open would get a benefit of the doubt for being a breakout of the Rising Wedge. [/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.

Bullishness comes in different flavors… Wednesday’s night’s rally to new highs is one flavor. More meaningful is Thursday morning’s recover from two dives into negative territory. None of which is relevant if not triggered.[pay]

Pattern points… (Setups and technicals)
The attraction back up to Wednesday night’s 1233.00 “new Globex trend extreme” was mitigated somewhat, but not entirely. The pre-open retracement to 1230.50 could serve by proxy as if the high were retested. But Thursday’s close was still within the high’s orbit.

This doesn’t change that price action since fulfilling the 1223.00 target (basis Mar, was 1228.00 basis Dec) has been distributive. This is not accumulation. That said, I am not ready to turn bearish.

I would get bearish on a gap down Friday or a sharply lower break, anything that ignores the attraction higher to trend down. There have been 2-3 opportunities for downlegs ignored: Wednesday afternoon, Thursday’s open, and late-morning Thursday’. When sellers do retake control, it should be with a vengeance.

Otherwise, only weakening meekly is unlikely to gain traction. Thursday morning already absorbed two probes back into Wednesday’s range (circled red), which is accumulation. The gaps back to Wednesday’s closes were filled (highlighted red), neutralizing their attraction down. And RSIs were overbought at the close (circled green), requiring any dip to recover.
What’s Next… (Outlook and opportunities)
This being a Friday, the morning’s bias signal is likely to persist through the noon hour. Overbought RSIs at Thursday’s late high suggest it will be retested. Delaying the retest until the open, and then not rejecting it by 10:15, would make the 1233.00 high’s retest likely. Gapping down under the afternoon’s 1223.75 low would not necessarily trigger a session-long decline, since the closing action didn’t trend up. But gapping any break under the morning’s 1222.25 low would be bearish.[/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.

Wednesday’s market was down for the count… It did fluctuate into positive territory. In fact, most of the session traded positive. But buyers never gained traction intraday, despite holding tests of prior lows, after the prior day’s steep drop from new highs. This is not exactly “resilience.”[pay]

Pattern points… (Setups and technicals)
Tuesday afternoon’s dive damaged the chart, leaving only limited bounce potential for Wednesday. And the bounce target’s test pushed back aggressively. But not permanently.

The 1228.00-1228.50 bounce target’s opening test pushed back to 1219.00. The bounce target’s retest when the afternoon’s bias environment lapsed also pushed back, but less so. It was tested once again at the close.

1228.00-1228.50 was thoroughly tested, and it held as resistance through all relevant timing windows. Its latest recovery makes a higher high likely – more than just to 1230.00 which was probed after the close. But a higher high should be temporary, and its rejection should be permanent.

No higher high is required, as there is no unfinished business above. The pattern is unusually vulnerable to suddenly launching another downleg that is steep and substantial. Wednesday’s late trading came dangerously close to triggering it. Wednesday morning’s 1217.00 (basis Dec, 1212.00 basis Mar) bias-down signal is still owed a test, and its unfinished business would be the next lower objective.

What’s Next… (Outlook and opportunities)
This market isn’t going to sit still and range narrowly. If it’s not bouncing, then it has resumed the decline. Ranging sideways narrowly isn’t likely. A bounce has potential to 1231.50 or to 1234.00 (basis Dec, 1226.50 or 1229.00 respectively basis Mar) . The true target should react down sharply.

The bounce target can be met overnight. It can also be rejected before Thursday’s open. In case of an overnight bounce, not opening in negative territory after testing 1231.50 would make 1234.00‘s test likely (basis Dec, 1226.50 or 1229.00 respectively basis Mar).

Gapping up above 1233.00 (basis Dec, 1228.00 basis Mar) would be a variation of a “session-long rally” setup. Gapping down under 1224.00 (basis Dec, 1219.00 basis Mar) would qualify as the “session-long decline” setup. [/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.

Excessive optimism is just that, excessive… Monday night’s rally through the 1228.00 target expended all of its buying energy before its sponsorship could refuel. Tests of support are now likelier to attract sellers than buyers. [pay]

Pattern points… (Setups and technicals)
Tuesday afternoon’s no-bias rally extended a little higher than I expected it would, exceeding 1229.50. The bounce extended every bit as high as it could, testing the 1233.00 bias-up signal. Nevertheless, the bounce resolved exactly as it should, having failed to gain traction.

Oversold RSIs on breaks under 1231.00 and 1229.50 into the last hour indicated that sellers were getting serious. They were likely to sponsor trending down into the close. The gap back to Monday’s 1222.25 close was probed into and out of the cash session close, and probed down to 1219.25 after the futures close.

There is no unfinished business above, but a bounce could test 1228.00 as resistance (solid red line). That was the objective for retesting November’s prior high, where a Double Top would form. Gapping up above it prevented it from being tested as resistance. It’s not required, but it’s common.

Oversold RSIs have yet to be retested at Monday night’s 1219.00 low, Monday’s pre-open 1216.25 low, and last Thursday’s 1202.00 pre-open low. Just closing under the 1220.00 last relative low (red dashed line) would signal the trend had reversed down.

What’s Next… (Outlook and opportunities)
Tuesday’s close trended down, so gapping up above its 1233.00 afternoon high would trigger a session-long rally setup. Gapping up any less would be rejected. Testing 1228.00 as resistance would likely react down, whether overnight or intraday. The alternative to gapping up or bouncing at Wednesday’s open is to already be far along extending Tuesday’s drop. [/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.

Another overnight dip, another intraday recovery. But still no retest of overnight highs. It has been satisfied by proxy, but intraday potential remains alive to probe the high. For now.[pay]

Pattern points… (Setups and technicals)
Monday’s hard-fought battle slowly and steadily recovered to attack 1225.00. Unfortunately, slow and steady wasn’t going to win that race. Just ticking higher wasn’t inappropriate for a recovery. But it needed a surge to follow soon after 2:30. Into the last hour would have sufficed.

Buyers never gained traction to break beyond Friday’s highs. Monday was an inside day. And since the intraday trending was up, its sponsorship was weak hands. This further confirms that testing this area will ultimately resolve in a new downleg.

Meanwhile, holding 1222.00 through the close kept alive potential to test the highs up to 1227.00-1228.00. There is room to fluctuate around 1222.00 down to 1220.00 before a detour down to 1216.00 becomes likelier, first. Closing under 1216.00 would signal a new trend reversal.

What’s Next… (Outlook and opportunities)
The room down to 1220.00 is already being tested after Monday’s close (highlighted blue). Although 3-minute RSI is reaching new oversold lows, 1-minute RSI is diverging positively. Recovering 1222.00 would now be that much more bullish, at least for probing fresh highs.

But a retest of the high is not as reliable as the consequence of failing to probe the high, or the likely reaction, which is a new downleg larger than November’s.[/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.