Market Wrap

[pay]SPECIAL NOTE: An extensive library of short videos is now available for learning more about the Bias Parameter. Look in the blog’s sidebar for the link to “FAQ: Bias Parameters” and be sure to watch the two introductory videos. More videos to be made available in coming days…

About that close (How the prior session ended)
Thursday’s open and close were both 1120.50. You would hardly know the close followed an hour-long 11-point drop from 1128.25, already down 4 points off the high. And you wouldn’t know sellers gained no traction for the effort. The drop probed the 1117.50 pre-open low but held the opening print.

It’s like tagging up at second base on a pop-fly, and then getting tagged out trying to steal third. Should have held your base and waited for a line drive before advancing.

Pattern points (And technical influences)
Actually, Thursday’s 1120.50 open was still being retested at the close, and not clearly recovered. But the burden of proof was on sellers. They can still furnish it by gapping down Friday under 1114.50. That’s the 61.8% retracement of last week’s trading range. The 38.2% retracement already produced a bounce.

Having filled the gap back to Wednesday’s close, two overbought RSIs at this week’s highs are the only unfinished business above. And as I said here in yesterday’s Trading Plan, not retesting overbought RSIs happens only when a massive move is underway in the opposite direction.

Avoiding a drop into the weekend depends mostly upon avoiding opening weakness. Even if the most bullish result is a brief bounce back up to 1127.00-1128.00, Fridays don’t often reverse the morning’s bias. Making it past 10:00’s New Home Sales without new lows would marginalize sellers through the afternoon or weekend.

Price action through Thursday’s 3:10-3:20 window probed a fresh low and recovered it. This provides context for the next dip, predicting that its purpose is to refuel buyers for a rally leg. The dip’s targets held their tests through the close. But I wouldn’t give buyers any extra benefit of the doubt until they trigger a buy signal.

Bottom line (My underlying premise)
This week’s high peaked upon testing the sleeper high we had looked at repeatedly in the morning market tour. The rally there was littered with signs of excessive optimism. Even Monday’s breathtaking “breakout” has been fully retraced as expected. Keep in mind that this is the context in which there remains some potential to retest the high’s overbought RSIs – the overbought RSIs do not offset the bearish picture or provide a path to a new rally leg.[/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)
3-1/2 hours of ranging sideways off the 11265.50 lows could not break lower. A 5-point surge to 1132.75 at 2:30 relieved the consolidation’s pressure. Plenty of time remained to have a rubber band effect, and to give a running start to another sell-off. RSIs even diverged negatively into the surge’s retest to reverse price down. But despite sellers having these breezes at their backs, the surge’s 1128.25 low retraced only 61.8% into the midday consolidation.

Pattern points (And technical influences)
A 61.8% retracement is healthy. Closing any lower would have given sellers traction. Stopping any higher would have left an objective outstanding below.

Spending almost an entire session in negative territory without trending down can be “ineffectual pessimism” which tends to resolve positively. Wednesday’s session did probe positive territory at the open, but sellers did ultimately control the session. And the close clung to the prior session’s low.

Wednesday’s trapped shorts could have been squeezed during the last 60-90 minutes. So long as Wednesday’s low isn’t broken overnight, the pent-up buying pressure should almost literally explode higher Thursday. The setup usually gains some ground overnight. Closing above 1131.00 or 1132.50 would have argued for holding long through the close.

Holding the 1128.00 area helped to keep alive potential for retesting the Tuesday’s 1144.00 high, whose 3-minute RSI was the highest overbought. Simultaneously overbought RSIs at Wednesday’s 1139.75 high also require a retest. Chipping away at 1128.00 support will make its eventual break easier. Delaying a bounce past Thursday’s open could make the break immediate.

Bottom line (My underlying premise)
The 1128.00 support. A 61.8% retracement. Ineffectual pessimism. Unfinished business above. Conditions suggest a bounce is free to begin. By the same token, not exploiting the setup would be bearish. Overbought and oversold RSIs are almost always retested. When they are not, there tends to be a massive move underway in the opposite direction.[/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 breakout attempt would not be confirmed if Tuesday were to close under 1137.00 – Monday’s last relative low. That’s where the afternoon’s bias environment lapsed. And despite an interim surge to new highs, 1137.00 was tested repeatedly as support through 3:00-3:30. A retest of session lows barely avoided recovering 1137.00, so Monday’s breakout went unconfirmed.

Pattern points (And technical influences)
Tuesday morning’s no-bias signal was suspicious, which undermined my confidence in its 1131.00 objective. The drop’s weak start was followed by a drip, drip, drip into the afternoon that discounted pessimism ahead of the FOMC news. The decks were cleared of all sellers, and a knee-jerk reaction down completed the effort by fulfilling 1131.00.

Consequently, the 13-point rally up to 1144.00 was a reaction to the selling that preceded it. It was not the product of accumulation. Its complete retracement back down to 1131.25 proved this point.

Fully retracing Tuesday’s last upleg also avoided trapping weak longs overnight, whose pent-up selling pressure would have resumed the drop at Wednesday’s open. A retest of Tuesday’s 1144.00 high is possible, especially since it was accompanied by the highest overbought 3-minute RSI. But any rally attempt is likely to fail since it would be launched from a close under 1137.00.

Bottom line (My underlying premise)
A retest of Tuesday’s 1144.00 high can be neutralized overnight. But probing it by more than 2-3 ticks might create a “new Globex trend extreme” that attracts intraday price higher. Regardless, the high’s retest is likely so long as a drop doesn’t gain traction overnight. And a top is likely so long as a rally doesn’t gain traction at Wednesday’s open.

NOTE: The link to “FAQ” on each Bias Parameter post now includes new video tutorials about the indicator. More will become available by Wednesday.[/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)
Rallying to new session highs into the last half-hour is too late for a retracement to gain traction. Monday’s 1139.75 pivotal high printed at 3:45, and it was probed by 2 ticks 7-8 minutes later. So, despite dropping after the cash session close to 1135.25, fresh highs are likely.

Monday’s 3:10-3:20 timing window trended up throughout to new session highs. This context makes the pullback’s purpose to refuel buyers, which also predicts a recovery. The pullback should bottom upon testing the 1133.50 area.

Pattern points (And technical influences)
Monday’s session resembled a session-long rally in two ways. Neither one was the rally: gapping up above Friday afternoon’s high, and printing the session high during the last hour.

Perhaps expiration prevented the setup from trending down into its close – Sunday night’s open did initially spike down. Assuming that Monday’s session was a session-long rally, the following session is likely to probe a higher high.

Valid breakouts from multi-session consolidations rarely occur on Mondays. Much more often they are disproved Tuesday by failing to close higher. Often enough, Tuesday’s close is back in the consolidation just broken.

Retesting Monday’s high would target 1141.00, and potentially 1145.00. A reversal down could close back under 1128.00 to begin invalidating the breakout effort. Tuesday afternoon’s FOMC announcement would ben appropriate catalyst – one way, or the other.

Bottom line (My underlying premise)
Confirming Monday’s breakout Tuesday would all but put into play a retest of April’s highs. Little about the interim price action is capable of launching a durable rally, not without being retested. And the interim lows would be all but in-play if Monday’s session were fully retraced through Tuesday’s close. [/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)
Quadruple witch expiration came in like a lion and went out like a lamb. For all of the volatility leading into Friday’s session, overnight and through its open, the balance of the session was rather tame. A generally narrowing range narrowed further, ending unchanged from Thursday’s cash session close.

Pattern points (And technical influences)
Apparently, Friday’s session was over before it started. That can happen, when the session begins before it starts. Thursday night’s 26-point round trip from its 1120.00 cash session close was retraced through the first half-hour. The balance of the session ranged around 1120.00, where the session closed.

The morning’s bias-up parameters were rejected to create a sell signal targeting 1111.00. The objective remains outstanding, regardless of any interim price action.

Friday’s range narrowed throughout, except for a brief rally attempt when the afternoon’s bias environment lapsed. Its failure did not react down to a fresh low. Nevertheless, that one exception was enough to disqualify the pattern from being an “extended narrowing range” or triangle. So, its first breakout attempt would be credible for extending into a durable leg.

Regardless, the ultimate resolution is still likely to be down, thanks to Friday’s failed rally attempt. Wednesday failure to trend had closed the door on any trending being able to succeed Friday. An ill-timed trending attempt reveals weak sponsorship. Probing the range’s lower-end and recovering could have launched a new rally leg. Probing the range’s upper-end and failing should instead launch a downleg.

Bottom line (My underlying premise)
Expiration’s character tends to repeat the following morning. Monday’s open may to attempt another rally, or simply range narrowly. An immediate drop would likely bounce to delay its follow-through until expiration’s influence had lapsed. However unlikely it may be to resume the rally, it can’t be fully discounted without first closing under 1116.50.[/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.