Market Wrap

Making up for lost time… This market has gone from not wanting to trend, to not wanting to stand still. That’s not the same as wanting to rally. All this pattern assures is that volatility will be extreme.[pay]

Pattern points… (Setups and technicals)
Gapping up sharply to new highs is by definition optimistic. But Thursday’s gap up to new highs was not excessively optimistic. Each relevant timing window either held a test of support or a break above resistance. This helped to maintain confidence in the intraday outlook for 1218.75 or 1220.25.

The last-hour breakout to a new high indicated that its sponsorship was squeezing shorts. Shorts reflect pessimism. And when shorts are so active at new highs, it is bullish from a contrarian perspective. But the bullishness might only serve to absorb a downleg so that it can recover to test Thursday’s high.

Bullishness is context. It does not equate to price measurements that identify next higher targets. And a bullish context does not necessarily point higher without delay. Extending immediately to higher highs is even less assured since Thursday’s high met and held an important target.

What’s Next… (Outlook and opportunities)
Speaking of which, Thursday’s last-minute high at the 1218.75 target fulfilled its pattern’s buying pressure. And it comes just before Friday morning’s Employment Situation report. Recovering 1220.25 through any relevant timing window would point higher into the afternoon. Any meaningful intraday drop must first break under 1212.50.[/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 news, big swings and big closes… Even with the two most anticipated news items playing out predictably, the market is providing plenty of intraday trending attempts and turning points. This is the hallmark of wide disparity among opinions, and of fertile ground for trading opportunities.[pay]

Pattern points… (Setups and technicals)
Resistance at 1195.00-1196.00 was influential Wednesday, despite being tested only once intraday. It pushed price down when tested overnight, and it attracted price up into the close. Its attraction was neutralized.

The 1196.50 “new Globex trend extreme” was retested after the cash session close, but before the Globex open. This mitigates the requirement to retest it intraday. But its retest remains likely so long as Thursday’s open doesn’t reject the recovery by gapping down under 1190.00.

What’s Next… (Outlook and opportunities)
A pullback has room down to 1192.00 without buyers losing traction for extending the rally to the 1200.00 area. Extending higher without first dipping would stretch buyers thinly ahead of Friday’s Employment Situation report. Gapping down under 1190.00 would put the market back on defense ahead of the news. But trending Thursday afternoon is no more likely to gain traction than it was before Wednesday’s FOMC announcement. [/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.

It’s all over but the waiting. And then more waiting, as election results take a back seat to anticipation ahead of the FOMC statement. Two of the most impacting, high-profile news items, coming on the same day, and widely telegraphed in advance. [pay]

Pattern points… (Setups and technicals)
Tuesday’s gap up to 1190.00 was the first in some time not to be retraced relatively early. In fact, a corrective dip to 1186.25 was recovered into and out of the noon hour. And it extended to new session highs that afternoon.

That afternoon’s high touched last week’s 1193.00 high. A no-bias environment at the time prevented trending higher. Nothing that a drop back down to 1189.50 couldn’t off-set. Sellers weren’t likely to gain traction after only touching the week-old high.

Similar to Monday’s close above 1179.50, closing Tuesday above 1191.50 would have ensured an opening rally Wednesday. Tuesday’s cash session ended at 1190.00, but futures closed at 1192.75.

What’s Next… (Outlook and opportunities)
Regardless, last week’s 1193.00 high is likely to be probed intraday before sellers could gain traction for another downleg. Resistance at 1195.00-1196.00 could be a problem if an early probe were rejected back under Tuesday’s highs. And sellers would gain traction if new highs were rejected back under 1189.00-1190.00.

Two of the most impacting, high-profile news items, coming on the same day, and widely telegraphed in advance. There’s not much room for a positive surprise, but there should still be some follow-through buying while the news meets expectations.

A downleg that doesn’t first probe new highs intraday requires a degree of selling that would have to be underway well before the open. A downleg triggered by the FOMC news would be much likelier if a probe of new highs had already fallen back into negative territory. [/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.

Did I mention this market doesn’t want to trend? It does want to try, gapping up for the second time in three days, and for the second consecutive Monday. But its buyers are shut down and gain no traction for their efforts. Yet another close in the 1180.00-1182.00 area. Some kind of news coming, apparently… [pay]

Pattern points… (Setups and technicals)
In fact, buyers had gained no traction Friday. They spun their wheels avoiding any reactionary dip during revelations of a terrorism plot. Gapping open without first gaining traction doesn’t invent traction out of thin air.

The lack of traction still could have been compensated enough Monday for at least a morning rally. Either weakness down to 1185.25 from the 1186.25 opening print, or a probe above 1187.00 after most of the opening 15 minutes of volatility had elapsed. But the open’s dip was too shallow, and the surge was too early. The consequence was an unsustainable surge.

More so, the consequence eventually was a reversal into negative territory. Three forces combined to form the low: selling pressure was fulfilled at 1173.75 support (green line), during the last hour when new sponsorship is difficult to generate, while oversold RSIs (circled green) reflected strong hands having expended a lot of selling pressure.

Closing above 1179.50 (highlighted green) robbed sellers of their traction. Monday’s 1173.75 low requires a retest, but closing above 1179.50 made the bounce likely to extend, first. Caveat: Monday afternoon’s bounce may have already borrowed too much from Tuesday’s potential opening bounce. Closing above 1179.50 was bullish, but extending into the futures close at 1183.00 left less pent-up buying pressure.

What’s Next… (Outlook and opportunities)
Extending higher overnight or at Tuesday’s open would likely hold a test of 1186.00 resistance (red line). Gapping up above 1186.00 or spiking through it could trend up to and through 1193.00.

An opening dip that fails to hold 1178.50 support would indicate that Monday’s bounce had borrowed too much buying pressure. It would resume Monday’s slide – initially targeting a retest of Monday’s lows, and then 1166.50. [/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.

No, seriously – this market really doesn’t want to trend… Two high-profile econ reports after Friday’s open and a high-profile terrorist threat didn’t shake things loose. What’s it going to take to move the market out of this comfort zone – a mid-term election and an FOMC meeting?[pay]

Pattern points… (Setups and technicals)
The range defined by Thursday’s last half-hour essentially defined Friday morning’s range. It was just a couple of points too narrow to also define Friday afternoon’s range. Now six consecutive sessions have finished within 2-3 points of each other, around 1179.00-1182.00. And two consecutive Fridays have ranged narrowly throughout the day.

The UPS threat wasn’t going to be resolved before the close. So, it was surprising that the session didn’t gravitate to the range’s lower-end. In this context, price action was more optimistic than pessimistic. The day’s relatively narrow range means its sponsorship was weak hands. So, weak hands are optimistic.

Optimistic weak hands is bearish from a contrarian perspective, albeit not immediately. Rather, their sponsorship warns that a rally effort will not gain traction. It does not prevent the rally effort. Friday’s closing action did open the door to another rally effort, assuming no major weekend event.

What’s Next… (Outlook and opportunities)
Friday’s last-minute bounce into the cash session close was fully retraced after the close. Only the bounce was retraced – nothing extra. But it is the quick retracement that offsets enough optimism to create a vacuum, and that vacuum can suck the next open higher.

Recovering from another quick dip would add power to the vacuum, and to an opening rally. A dip has room down to 1174.00 before beginning to suggest the open might be defined by weakness instead.

Regardless, the first trending attempted from an extended narrowing range tends to be false. And Tuesday’s unknowns don’t make trending any more likely. So, initial trending in either direction may not endure through the bias timing window.[/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.