Market Wrap

[pay]About that close (How the prior session ended)
Hours of ranging sideways didn’t end when the afternoon’s no-bias environment lapsed. Trending wasn’t required, but it was finally attempted past the bottom of the hour. The late surge briefly probed session highs, then reversed back down. And like Tuesday’s close, firming into the cash session close then surged to fresh highs minutes later.

Pattern points (And technical influences)
Wednesday’s late surge ended an hours-long narrow trading range. Had it extended through the close, Thursday morning would extended the range, too. That would have been surprising ahead of Jobless Claims and a busy econ calendar otherwise.

The late surge also opened the door to a reversal signal. Gapping down under a narrow range would have undermined its severity. But gapping down under Wednesday afternoon’s 1075.00 low would not be consequential, and would trigger a session-long decline.

Potential for reversing down also comes from the intraday Running Correction. The setup reflects excessive optimism, so its breakout attempt is sponsored by weak hands. That characterization would have been served just by surging from a standstill, instead of trapping shorts first. Wednesday’s late breakout went further by starting later, well past any window controlled by strong hands.

Sellers really needed to be in obvious control near Wednesday’s open to be able to regain traction before the weekend. There is plenty of room for a steep dip. But the premise is that a dip is likely to be recovered. Breaking under 1066.75 through a relevant timing window would give sellers one more chance.

Bottom line (My underlying premise)
The breakout may extend higher. Wednesday’s ADP Employment report surprised negatively. But its reaction was limited and brief. Perhaps this market wants to absorb bad news. A rally’s bigger risk Thursday may be failing to maintain early gains, since Wednesday’s breakout came so late. [/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)
Tuesday’s FOMC reaction fell from 1052.75 back under 1043.00. Recovering 1045.25 aggressively and substantially would have triggered a bigger bounce targeting 1049.25-1050.25. Three false starts eventually succeeded by surging to 1050.50. A reaction down to 1046.00 spiked up to 1053.00 after the cash session close.
Pattern points (And technical influences)
The FOMC reaction from 1052.75 was never likely to gain traction to become a bigger downleg. It could have bottomed at 1049.00. Consequently, I had no sell parameter. That was frustrating as the drop extended down to 1042.50.

But the decline had the feel of being just that – a reaction. Ultimately the analysis was vindicated by its complete retracement. The pattern’s next higher target 1055.50 could still be fulfilled, too. Overnight would suffice. If not rejected, the bounce could extend higher to 1059.00-1060.00.

Tuesday’s cash session close equated to 1047.75. Opening Wednesday’s cash session under 1047.75 would negate any traction of the post-close spike up. Regardless of any higher highs overnight, opening under 1047.75 would reverse momentum down.

Dipping to fresh lows under the 1037.00 area intraday Tuesday would have run out of sellers. Instead, probing fresh highs ran out of buyers. Recovering from fresh lows would have attracted buyers for a bigger rally into the three-day holiday weekend. Instead, failing to extend higher Wednesday morning would help to begin the next downleg targeting the 1023.00 area.

Bottom line (My underlying premise)
Tuesday morning’s recovery started with a surprisingly favorable econ report. A modestly favorable surprise followed it. And then another. That’s some sort of pattern. Another favorable report Wednesday might not have the same effect. But negative surprise might be needed to trigger a decline. A decline into the weekend should be evident sometime Wednesday morning, or it might not happen at all.[/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 session trended down throughout every relevant timing timing window. The last half-hour’s drop was its steepest and more productive. It contained the last 25% of the 28-point drop from overnight highs. And it was the first time 3-minute RSI probed oversold territory since overnight.

Pattern points (And technical influences)
Monday’s decline had already covered a lot of ground before the last half-hour. Then the drop’s pace accelerated throughout the last half-hour. That reflects long positions exiting into the close. It’s not very productive timing for sellers to gain traction, so it tends to expend more energy than it creates.

Sunday night’s probe above Friday’s highs was rejected by opening back under Friday’s highs. This allows the session to be considered an inside day. Session-long trending on inside days is normally followed by a move in the opposite direction. That suggests Tuesday will trend up.

A bounce has room up to 1051.00 before gaining enough traction to trend up through the morning. Recovering the 1055.50 area would next target 1059.00. Regardless of whether a rally began by gapping up to leave unfinished business back to Monday’s close, Tuesday afternoon should already begin rejecting the bounce.

Tuesday might simply extend Monday’s drop to probe last week’s lows under 1037.00. This would be too much selling pressure too soon to rely upon extending much further. And the impending three-day holiday weekend would help a more durable bottom to form.

Bottom line (My underlying premise)
Tuesday’s econ calendar is fraught with danger, so the morning should be volatile. The afternoon’s FOMC Minutes should inhibit any earlier trending from extending. Regardless, the next trending attempt is likely to be false, unless it gains traction by closing beyond a prior high or low. [/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’s no-bias environment had eked its way back to session highs. Limited selling pressure made the pattern vulnerable to a short-squeeze. The 1060.00 bias-up signal finally launched a 3-point rally at 2:30. But it lacked any big, consecutive up-bars, and it was retraced down to 1059.00. A 5-point rally from there did a little better to close at 1064.00.

Pattern points (And technical influences)
Friday’s choppy session ultimately rallied. And the rally was appropriate. But it included a lot of optimism that a durable rally might have wanted to suppress a little longer.

Friday morning’s dive stopped 1 tick short of touching Wednesday’s 1037.00 low. Somewhat oversold RSIs had improved enough to make the drop vulnerable to a bounce. But Wednesday’s low still should have been probed, and the difference reflects optimism.

Optimism was thick throughout the bounce, too. The bounce didn’t hesitate recovering positive territory above both Thursday’s 1044.75 futures close and its 1046.25 cash session close. A brief consolidation there was able to extend back to the opening highs. And only a shallow pullback preceded the next upleg back to Thursday morning’s ~1060.00 highs.

A price is usually paid for persistent optimism, eventually. But unchallenged weak hands can be productive at the right times, one of which is the week’s final hours. So, Friday afternoon easily ignored the 1-minute RSI diverging negatively, and cycled higher into the close.

The optimism might have a little more room to push higher at Monday’s open, but there doesn’t seem to be much more available. Friday’s late afternoon gains didn’t come in the form of an aggressive short-squeeze, which suggests the morning’s recovery wasn’t widely disputed. That reflects more optimism than pessimism. Recall that Wednesday afternoon’s rally was similar – it quickly released its pent-up buying pressure from the morning’s drop, instead of conserving it to fuel buyers at the next open. And the next open went nowhere, fast.

Bottom line (My underlying premise)
A push higher that ends soon after Monday’s open is likelier to be only a bear market bounce. The rejection need not produce new lows immediately to maintain the bearish scenario. Not being rejected early makes the bounce likelier to extend higher through Wednesday morning. That would become a problem for the bearish scenario, as a seasonally bullish three-day holiday weekend starts approaching. [/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)
Thursday’s drop into its last hour fell to 1043.00. The lowest oversold 3-minute RSI accompanied it, dooming any bounce to failure. Its 8-point bounce to 1051.00 was retraced to within 1 tick into the cash session close. It was probed by 2 more points after the Globex open.

Pattern points (And technical influences)
The 3:10-3:20 window trended up from under the afternoon’s prior consolidation, to above it. This degree of success during this timing window creates a bullish context. It doesn’t prevent a downleg (it might even invite it), but it does predict that the next downleg’s purpose is to refuel buyers.

The late-afternoon’s drop back to session lows took only 15 minutes. That’s a lot of selling pressure, in a short period of time, and not a very relevant time at that. The late drop may have been all about neutralizing the oversold RSIs at Thursday’s low. About that, and – according to the 3:10-3:20 window – about refueling buyers.

None of which is a buy signal, not without producing enough of a bounce, recovering at least 1049.00-1050.00. Thursday’s 1061.75 pre-open high would the minimum objective.

Meanwhile, dropping much further to test 1040.50 would be difficult to recover. Then, the impending weekend would become significantly more important than Thursday’s 3:10-3:20 timing window. Little or no support would stop the decline before touching 1026.00 or 1018.00.

Bottom line (My underlying premise)
The neutralized oversold RSIs left no unfinished business below. The late drop was sponsored by weak hands, perhaps weaker hands than those sponsoring the bounce it retraced. And the late bounce’s timing suggests it was all about preparing for a bigger rally effort. There’s no time ahead of the weekend for new lows to range sideway, or narrowly. If a recovery isn’t being attempted early, a bigger downleg would become much likelier. [/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.