Market Wrap

SummarizeDayAndPositions [pay]

Pattern points… (Setups and technicals)
Everything is relative. For example, Thursday afternoon’s bias environment dropped throughout, and expended a lot of selling pressure. But the drop developed over five hours, and it fell only 3-1/2 points. Its sellers weren’t very productive.

A 2-point surge when the bias environment lapsed was pretty big compared to the 3-1/2 point drop. Everything is relative. But the surge stopped short of gaining traction above 1198.00 that would have broken to fresh session highs.

A 4-1/2 point dive to 1193.50 took 30 minutes. That’s pretty big in any context, but this move’s relative size was not as important as its timing. The late drop could only refuel buyers after hours of ranging narrowly. In fact, the entire drop was retraced back up to 1198.25.

Everything is relative. The late drop was recovered after cash session’s close. Price did explode sharply higher only one moment later – but it was later. That buying was not a product accumulation, but a reaction to DELL’s earning and position jockeying ahead of Friday’s expiration.

What’s Next… (Outlook and opportunities)
Despite expending so much energy overnight and at Thursday’s open, buyers did not gain traction for their efforts. This being a Friday, signaling no-bias at 10:15 would make trending very unlikely. It also makes a bias signal likely to trend through the noon hour.

The pattern is still capable of probing fresh highs – maintaining a gap up to fresh highs above 1199.00 should extend higher through Friday morning. But there is otherwise no unfinished business above, and any failed overnight rally or opening weakness under 1195.00 would target 1186.50 and then 1180.00-1182.00[/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.

Last week’s trend change signal was similar to this week’s. A close under the prior low one day, and a failed attempt to recover it the next. A temporary bounce is still possible, but there’s only one path to follow. Almost any other price action would point down. [pay]

Pattern points… (Setups and technicals)
Tuesday’s close under it had signaled a new trend change, similar to last week’s signal, but bigger. Wednesday’s test of 1180.00-1181.00 held as resistance to avoid invalidating the signal.

The one path higher is for Thursday’s open to gap up above 1180.00-1181.00.  It’s too late for the recovery to produce a durable rally. And the “path higher” might only be marginally higher. But it would likely marginalize sellers for the day and avoid extending the trend down.

Not gapping up would not be bullish. It might not be immediately bearish – last week’s trend change didn’t extend down immediately on its third day, but the fourth day made up for lost time. But Thursday morning’s only reliable path higher would immediately resume Wednesday’s opening rally attempt.

Wednesday’s session traded entirely in positive territory without gaining traction. Monday’s “ineffectual pessimism” was similar, except it began by gapping up. A negative resolution might also differ by not gapping under prior lows and extending down sharply. Nevertheless, the alternative to bouncing should resume the decline – ranging sideways again Thursday is not likely.

What’s Next… (Outlook and opportunities)
1180.00-1181.00 should not be probed overnight unless the open will extend higher. Wednesday’s weak-handed buyers were not exploited by patient sellers. And 1180.00-1181.00 resistance was chipped away throughout the day. Its recovery is not required, so another attempt to recover it would intend to probe its next resistance.

Otherwise, not probing 1180.00-1181.00 – or failing from its probe anyway – would not initially target a retest of Tuesday’s 1171.00-1172.00 lows. The more important question would be whether their break ends the decline, or begins a much larger one.[/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.

Last Tuesday’s trend change signal was renewed by Tuesday’s close under another prior low. That is potentially bearish. It is also potentially bullish, because a fresh signal can be invalidated the following day. A much bigger drop is likely if Tuesday’s signal is valid. [pay]

Pattern points… (Setups and technicals)
Last Tuesday’s close under 1215.00 had signaled the trend was reversing down. This was the interim low between the rally’s two most recent new highs. Recovering it through the following close would have invalidated the signal.

1179.50 is the prior relative low, and this Tuesday just closed under it. A new trend change signal has triggered. Closing Wednesday back above 1179.50 would invalidate the signal. Otherwise, the signal would be confirmed, and last week’s signal would be renewed.

Tuesday’s post-open slide fulfilled the long-standing objective at 1180.00-1182.00. Closing under it then signaled the next lower objective in-play. Closing Wednesday back above 1180.00-1182.00 would invalidate the signal.

1158.50 is the next lower objective put into play by closing under 1180.00-1182.00. The rally up had left outstanding unfinished biz at 1166.00. Invalidating either signal would suggest a corrective bounce was underway targeting 1217.00.

What’s Next… (Outlook and opportunities)
Intraday trending tends to come in pairs or more, if at all. Trending just once intraday is unusual. Trending only once intraday should be followed by immediate trending at the next session’s open. Only Tuesday morning trended, so trending is very likely to greet Wednesday’s open.

Having ranged sideways since late-morning Tuesday, a refueling bounce is possible. An overnight refueling bounce could be rejected overnight, or into Wednesday’s open. In case of an overnight bounce, Wednesday’s open should trend from the opening print, regardless of whether the opening print were a gap up.

No bounce is required before extending down. Buyers didn’t gain any traction during Tuesday afternoon’s ranging. The decline is free to resume at Wednesday’s open. [/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.

1203.00-1204.00’s test at Monday’s open and noon hour both pushed back. One test should have sufficed to resume Friday’s decline. Either sellers won’t produce much more of a decline, or a much bigger decline is getting underway.[pay]

Pattern points… (Setups and technicals)
Friday’s drop wasn’t rejected. Not Sunday night, and not intraday Monday. There was plenty of opportunity, and at least two attempts, but buyers failed to gain traction. Sellers failed to gain traction, too. But Monday’s gap up put the burden of proof on buyers.

The session ranged exclusively in positive territory, and the morning’s high was later probed. The session’s optimism was ineffectual. A lot of buying pressure was expended without gaining traction, making the pattern likely to resolve down.

Overnight bouncing has room up to 1200.00-1201.00 before buyers would start gaining traction. But there is no requirement to bounce at all. In fact, Monday’s closing setup was acceptable to hold short, its next open being vulnerable to gapping down.

The trend remains down so long as 1200.00-1201.00 is not recovered. And so long as it is not recovered, Tuesday’s open will very likely gap down at or under 1193.00, next targeting 1189.00 and 1180.00-1182.00.

What’s Next… (Outlook and opportunities)
Monday night’s Globex open did gap down, and already extended lower to within 1 tick of 1193.00. Its break through a relevant timing window would put into play 1180.00-1182.00, with some interim support at 1189.00. Opening above 1200.00-1201.00 would leave unfinished business below, but the potential to 1217.00would be reinstated.[/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 answers that! Yesterday in this space I asked whether sellers were about to make up for lost time. The two days since triggering a trend change had not been very productive. Thursday night’s 19-point drop was a good start. Now Monday’s open is poised to keep the pressure on. [pay]

Pattern points… (Setups and technicals)
Sellers barely broke a sweat during Friday’s drop, as 3-minute RSI reached oversold levels only twice. Each time went on to form a positive divergence, and both were ignored – i.e. fresh lows printed before recovering above a prior relative high. This tends to reflect much bigger supply coming down the pipeline.

The decline’s next targets were 1193.00 and 1180.00-1182.00. Thursday night’s low touched 1193.00, neutralizing its attraction so a recovery was free to begin. The only reason to retest 1193.00 was if the market intended to break lower. Friday’s cash session did retest it down to 1191.50.

Actually, 1193.00‘s retest could have trapped shorts if the close had recovered 1199.00. But the reaction’s bounce held its test. Repeating that test at Monday’s open would be likelier to gain traction , and eventually test 1217.00. Meanwhile, the drop underway is next targeting 1180.00-1182.00.

What’s Next… (Outlook and opportunities)
Tuesday’s trend change signal need not produce a multi-week, extended decline. Its next objective at 1180.00-1182.00 is not too much further under Friday’s 1191.50 low. And it would qualify as a complete pullback, allowing the rally to resume.

But not if 1180.00-1182.00‘s test were delayed until a bounce first tests the 1108.00 1208.00 area again, or to 1217.00. Either would prematurely neutralize any remaining attraction above, and allow another larger downleg to begin.

And dropping first to 1180.00-1182.00 need not recover. If tested early Monday, then it had better push back up early, too. It’s a major target, but it’s not major support. Its test could easily slice through on the way to 1166.00.[/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.