Market Wrap

[pay]About that close (How the prior session ended)
The long-awaited fresh session highs finally printed when the afternoon’s bias environment started lapsing after 2:30. A recovery above 1117.00 had signaled the likelihood for filling the gap back to Wednesday’s 1120.50 cash session close. Its test consolidated through the last half-hour. A last-minute setup rallied 5 points to test 1124.50 at the futures close.

Pattern points (And technical influences)
Thursday’s session was working on “ineffectual pessimism.” The open had gapped down, and the entire session was ranging in negative territory. Continued through the close, this setup would have carried pent-up buying pressure overnight.

But the afternoon’s rally squandered that good will without even probing positive territory. And a 4-5 point surge through 1120.00 followed the cash session close, taking sentiment full-circle to being optimistic.

Basically, Wednesday night’s template applies to Thursday night, too: probe fresh highs overnight up to 1124.50, dip to the 1118.00 area, retest the overnight high at the next open. So far, so good: Thursday’s post-close surge tested 1124.50, and the Globex open dipped to 1122.25.

There’s a twist to the template. Retesting the overnight high would have been likely to hold, and then trigger a sizable downleg. It still could, but only if its retest were rejected early. Being a Friday and being expiration, opening strength to new highs could gain traction to become a runaway rally.

Bottom line (My underlying premise)
I noted here Thursday morning that this market was embracing volatility. The morning’s choppiness and the afternoon surge proved it. Friday’s expiration probably will, too. The morning’s two econ reports will keep things lively. And although volatility might end early (many traders leave early for evening worship of the Yom Kippur holiday) that could drive up the interim volatility, which would be very unusual for a 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 afternoon’s bias environment lapsed, and trending was free to resume. Its first attempt was down, which bottomed retesting its 1115.25 low when 1-minute RSI diverged positively. The second trending tested 1118.50 during the 3:10-3:20 timing window. Then it surged to 1121.50 and ranged sideways through the close.

Pattern points (And technical influences)
The 3:10-3:20 timing window all but signaled the next bounce’s purpose would be to refuel sellers. The window ranged around a relevant level (1118.00), first probing it, then rejecting it, and then trying to recover before the window closed. The last element undermined the first two, by “trying to recover” instead of clearly not recovering.

Since the last element “barely recovered”, it barely undermined the otherwise bearish setup. A bounce to refuel sellers may be underway already. It could extend higher overnight to either 1122.25 or to 1124.50, and attract price back to it Thursday for having probed above Wednesday’s high. An interim overnight dip to the 1118.00 area would be likely to launch the overnight high’s retest.

Regardless of whether Wednesday’s late bounce is retraced (or how deeply) before being retested, its ultimate rejection would initially target a retest of the 1110.00-1111.00 area lows. Extending the bounce into an upleg isn’t likely, but can happen anyway into this week’s expiration.

Bottom line (My underlying premise)
Trending during expiration is difficult to begin if not already underway 48 hours before expiration’s opening rotation. That was Wednesday morning. This is Quadruple Expiration, and gapping open sharply could have different plans. Thursday’s econ reports might make it appear those plans are playing out. [/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)
The afternoon’s 1115.00 bias-down signal was attacked twice, while testing uptrending pivotal support off the morning’s lows. At least an obligatory bounce was likely. A recovery above 1118.50 through 3:00 could have marginalized sellers for the day, but only reached 1121.75 after 3:30. Despite being so late, the bounce was rejected by a drop back down to 1115.50.

Pattern points (And technical influences)
We knew since Monday morning that buyers weren’t gaining any traction at these levels. But Tuesday was the first day to probe a gap up’s highs, instead of gapping up altogether. Buyers were growing more impatient.

The morning’s fresh high was rejected, so impatient buyers were finally suffering a consequence. The bounce out of the afternoon’s bias environment was retraced, too. In fact, post-close action has already extended down another 2 points to 1113.00.

We also knew that Tuesday morning’s low did not form a durable bottom. Its oversold RSIs and Ascending Triangle are likely to be retested. Having probed new highs in the interim, the low’s retest will probably be done by a downleg – retesting the low from a lower level would have been intended to refuel buyers for a bigger rally.

Monday and Tuesday’s price action have potentially formed an Island. Gapping down Wednesday under last week’s 1106.00-1107.00 lower prior highs would confirm. Testing 1106.00-1107.00 Tuesday would have refueled buyers for a bigger rally leg. Now, brief support there would be followed by a substantial and steep drop. Sliding down to 1106.00-1107.00 now might still launch a bounce, but not necessarily.

Rallying out of Wednesday’s open could extend higher, and would deserve that benefit of the doubt. It would also get a tight stop, as buyers have yet to prove they’ve gained traction while expending all their energy.

Bottom line (My underlying premise)
Gaps up above prior highs, shallow dips, then gaps up. This is a self-preservation tactic of failed rallies. It can continue indefinitely, but only ends one poorly. The early evening rejection of Tuesday’s higher high confirms its rejection, and its distribution. It has yet to signal trend reversing down for anything more than intraday.[/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)
The late-morning dive to 1110.75 required a retest for its simultaneously oversold RSIs. Meanwhile, they made the pattern vulnerable to bounce. Firming throughout the no-bias environment made the bounce unlikely to gain traction. But the window for sellers to gain traction had essentially closed. So the balance of the session rallied back to the morning’s 1118.50 target.

Pattern points (And technical influences)
Reversing down at Monday’s open was very unlikely. Friday’s rally had left targets outstanding up to 1110.00. Its test at Sunday’s open rallied further after holding briefly as support.

But extending higher had no traction from last week to create a durable rally. Friday’s highs had stopped short of probing Thursday’s 1106.00-1107.00 prior high, let alone closing above it. Now Monday’s highs have held 1117.00 prior highs throughout multiple morning checkpoints, and then at the close. Again, buyers gained no traction.

The rally could advance again, and again fail to retain any improvement above the open. Gapping up Tuesday might extend higher intraday, but it would likely Double Top with August’s highs.

Gapping down under last week’s 1106.00-1107.00 highs would form an Island of Monday’s pattern. And having formed within the range of consolidation at August’s highs, the Island would not require being retested. Meanwhile, a drop would unfold fast.

The bullish path would more likely dip to test last week’s 1106.00-1107.00 highs as support, and then launch another rally leg above August’s highs. It might suffer the same fate as if gapping up Tuesday, but it would at least buy the rally more time.

Bottom line (My underlying premise)
Several consecutive sessions that fail to gain traction are not a sell signal. They just warn of a sell coming. And if failing to gain traction couldn’t prevent gapping up, then an uptrending morning sponsored by weak hands is common. Alternatively, a sudden dose of reality from a steep morning fall. [/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 afternoon only firmed. “Bounce” and “rally” don’t apply. Nonetheless, the afternoon firmed to fresh session highs, recovering the noon hour’s dip. Friday’s last 60-90 minutes really only ranged narrowly around 1104.00.  Thursday’s 1106.00 opening gap wasn’t filled, missed by a single tick.

Pattern points (And technical influences)
What Thursday’s drop taketh away, Friday’s close returneth. Almosteth. It was an inside day, and it essentially trended up. That means the next trending attempt beyond the range is unlikely to gain traction. A probe of higher highs would neutralize the attraction back to Thursday’s 1106.00 opening gap, its 1107.00 pre-open high, and perhaps also 1110.00.

An immediate attempt to trend down can gain traction temporarily by gapping under Friday afternoon’s ~1099.00 low. That would be a rare Friday-Monday sequence, and a gap down that holds the 1100.00 hour would likely reverse up to fresh highs.

Gapping down under Thursday’s 1095.75 low would be more serious. That dip already tested “lower prior highs” and its reaction filled the gap back to 1106.00 (close enough to more concerned with the gap down’s sponsorship). This is also a rare template, but serious if encountered.

I don’t consider it pessimistic to have missed filling Thursday’s opening gap by 1 tick, not excessively pessimistic. But not rejecting fresh highs by noon would suggest the rally is extending to eventually probe August’s 1122.00 highs. An early higher high that stumbles would likely continue reversing down.

Bottom line (My underlying premise)
Fresh highs remain the likely next objective for Monday morning. This rally is getting so dangerously close to August’s high, that the path lower almost requires gapping and spiking down sharply without delay… Next week’s econ calendar looks busy, but it is full of low-profile items and/or orderly timing, hampering its ability to disrupt price action.[/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.