Market Wrap

[pay]About that close (How the prior session ended)
New lows printed when Thursday afternoon’s bias timing window started lapsing at 2:30. All of the session’s other pushes down originated too late for its sponsorship to be durable. And a late fresh low was testing an inflection point at 1163.00-1164.00 while RSIs improved. Recovering 1164.00 indicated the low was being rejected. The afternoon’s 1169.00 high was retested, then broken by a very last-minute surge.

Pattern points (And technical influences)
The very last-minute surge reached 1170.50 into the cash session close, then extended up to 1174.25 one minute later on GOOG earnings. That was not the high according to measurements of the afternoon’s ranging. In fact, higher highs after the futures close just touched 1176.50.

That’s a big recovery. It’s also late, so no more durable than the session’s earlier selling. More so, the late recovery is only the first leg emerging from the afternoon’s ranging. That makes it vulnerable either to dipping momentarily back into the range at 1165.50-1167.50 for a better bottom, or failing altogether.

Thursday’s sell-off invalidated Wednesday’s late breakout. Friday’s expiration session is vulnerable to a downdraft to test 1165.50-1167.50, but then likely to retest 1179.00 resistance. Gapping up above the 1179.00 area, or under 1165.50, would be likely to extend in that direction.

Bottom line (My underlying premise)
Expiration’s influence has already delivered much volatility. A sideways day would not be surprising, with plenty of room to range between bias signals. Although the week’s earlier buyers have been shown not to be durable, sellers haven’t gained any traction for their efforts, so a downleg is unlikely to begin this week without first gapping down sharply Friday. [/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.

[pay]About that close (How the prior session ended)
Wednesday’s bias-up signal wasn’t triggered very convincingly at 1:20. Its eventual probe of fresh highs at 1181.00 was almost an after thought. And that’s how long it lasted. Its rejection eventually fell through 1177.50 to 1173.50. Every support was broken, but 1177.50 wasn’t clearly rejected at 2:30, or at 3:00.

Pattern points (And technical influences)
For spending all of the last 90 minutes trending down, sellers deserved more clarity for their buck. Timing windows are a reflection of who is active, and when. So, struggling to break under support – regardless of whether support did break – suggests its sellers were weak hands.

Weak hands, or not, the late selling did undo most of the cash session buying. The closing dip back to 1173.50 tested all of the pre-open highs. This suggests the cash session’s buyers were weaker hands.

The late drop was productive, retracing 61.8% back to the cash session low. This can be a healthy correction. But if Wednesday’s 1177.50 bias-up signal was invalidated, then there is no unfinished business above to recall price back up. That is a dangerous place to leave the session hanging.

It’s also dangerous since this is expiration week. If Wednesday’s new high close is trending, then it marginalized sellers through Monday morning. Otherwise, spiking or gapping down at Thursday’s open would mean Wednesday’s buyers were the weak hands. More than marginalizing them, the balance of the week would likely trend down sharply… Nothing that an overnight rally back above 1179.00 can’t reject.

Bottom line (My underlying premise)
The economic calendar takes on more influence than usual. It is already a busy day of econ reports, but there has been a drought since last Friday. And this Friday has to contend with expiration. Thursday’s price action should be choppy. Choppy, without trending down, would be bullish. [/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.

[pay]About that close (How the prior session ended)
FOMC Minutes had triggered a favorable reaction from 1160.00 to probe fresh highs above 1165.00. It was retraced almost entirely back down to its origin. Anticipation for INTC’s earnings triggered signals targeting 1167.25. It was probed momentarily up to 1169.00, then retraced down to 1164.00 at the futures close.

Pattern points (And technical influences)
The FOMC reaction probed new highs up to 1165.75. This test made it part of Monday’s prior high. Ending the day back at 1165.75 does not qualify as a breakout. So, a higher close Wednesday would not confirm a breakout, as there is no breakout to confirm.

The reaction down from 1165.75 bottomed at 1160.25. Having closed at this leg’s upper-end, opening under its lower-end would equate to a valid breakout not being confirmed.

Despite seeming similar, there is a very specific difference. A breakout can still be re-attempted two days later, if the interim day failed to close higher and confirm it. “Try, try again,” as they say. But a breakout attempt invalidated at the close barely reflects a try. More dangerously, it reflects shallow sponsorship. And that would only be confirmed by breaking back under the failed breakout’s origin.

Coming into Tuesday’s session, there was no unfinished business above to attract price higher. But the unfinished business below was likely to hold as the lower-end of a brief range. Now there is also a hint at why there isn’t any unfinished business above, and the answer could be that buyers are done. Buyers are better off to refuel with a shallower dip.

Bottom line (My underlying premise)
This stage of the market cannot simply range sideways – it must extend higher without delay to avoid a new downleg. Under 1160.00-1161.00 puts into play a retest of Tuesday’s 1151.75 low. And that was an obligatory low, whose oversold RSIs require a retest. Having probed new highs since then, the only reason for returning to the interim low would be to reverse the trend 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.

[pay]About that close (How the prior session ended)
Monday’s quiet day was working on being “ineffectual optimism” –  its gap up had probed prior highs without gaining traction or being rejected. But the last hour broke from 1163.00 to 1157.75. The 30-minute plunge was recovered entirely before futures closed at 1162.25, which was also the recovery’s peak before the cash session closed.

Pattern points (And technical influences)
The plunge’s 1157.75 low coincided with obligatory support from Thursday morning’s high and Friday afternoon’s low. Being just into the last half-hour, the timing was right. And, of course, both 1-minute and 3-minute RSIs were simultaneously oversold.

Oversold RSIs make a drop vulnerable to bouncing. Normally, that bounce is doomed to failure because simultaneously oversold RSIs are the product of strong hands selling. Only weak hands are available to sponsor the bounce.

But Monday was quiet for Columbus Day. The plunge’s sponsorship was strong relative to Monday’s quiet. Tuesday’s normal volume pace care could ignore the product of what passed for strong hands on Monday.

That said, I’m giving a benefit of the doubt to a retest of Monday’s 1157.75 low. After the plunge expended the ineffectual optimism’s pent-up selling pressure, the closing bounce expended any pent-up buying pressure. And the morning’s no-bias environment left unfinished business below, a test of its 1154.50 bias-down signal.

There is no requirement to retest Monday’s 1165.00 highs. But there’s little likelihood of avoiding it, not unless Tuesday’s open were already trying to fulfill Monday’s unfinished business below at 1154.50-1157.75.

Bottom line (My underlying premise)
Bouncing 5 points off the plunge’s low allows it to be retested by 3 points (61.8% of the 5-point bounce) without sellers gaining traction. So, the low’s retest can fulfill the 1154.50 unfinished business and still be only a retest. Assuming it were tested, at all, I’ll look for signs of it either holding, or breaking. Any lower through a relevant timing window might find some obligatory support just below it. But only obligatory support is just below it.[/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.

[pay]About that close (How the prior session ended)
Friday’s last half-hour was entered at 1161.00 (circled green). It probed both the morning and noon hour’s 1161.50 and 1162.50 highs (circled red). It tested Thursday’s 1163.75 pre-open high during. And then it dropped back under the 1161.00 origin. This last-minute effort reflects excessive optimism.

Pattern points (And technical influences)
The opening half-hour had formed a triangle around unchanged levels (see nearby chart). Meanwhile, RSI deteriorated. This established that its buyers weren’t the kind to gain traction for their efforts. So, afternoon highs were not the product of accumulation, but a reaction from the mid-morning false break down to 1151.50.

An opportunity to attract new sponsorship was missed by Wednesday’s shallow dip. Thursday’s deeper intraday drop rallied too early, revealing its sponsorship to be weak hands. But overnight and pre-open action had neutralized all unfinished business below. If not declining, the market could only firm back to the range’s upper-end at Thursday’s pre-open high.

Friday’s new high close might be considered a breakout. Mondays rarely confirm Friday breakouts by closing higher. A probe of fresh highs is possible – it’s picky, but Thursday’s pre-open high really should have been probed by at least 2 ticks instead of only 1. Friday’s last-minute trapped buyers created the context that would force an early fresh high to be rejected.

The rally can create new business that protects against a drop – by gapping down, setting a new Globex trend extreme, or by confirming Friday’s breakout. Otherwise, Monday’s open is similar Friday when there was no unfinished business below. Now there is no unfinished business above (apart from that annoyingly shallow retest of Thursday’s pre-open high).

Bottom line (My underlying premise)
Turnabout is fair play, and Monday’s session could easily probe Friday’s lows. The reaction up from its false break reached its potential at the highs. And the closing action trapped weak buyers. Sellers can force a close under prior lows and signal the trend reversing down. If the rally gains new traction instead, then sellers for whatever reason will have failed to exploit another opportunity, and the trend would remain intact. [/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.