Market Wrap

[pay]About that close (How the prior session ended)
Like the session before it, Wednesday afternoon’s probe above 1094.00-1095.00 failed to gain traction. It held as resistance through the cash session’s last 45 minutes, which ended back under the noon hour’s 1092.00 high. Futures then plunged down to 1086.00.

Pattern points (And technical influences)
Holding 1094.00-1095.00 resistance confirmed the two-day range’s upper-end remained intact. The timing is critical, because its recovery through Wednesday’s close would have signaled the rally’s resumption into expiration.

Falling back under the noon hour’s 1092.00 high through the cash session close signaled that buyers gained no traction for their efforts. Another rally attempt is possible, but it isn’t likely to gain traction without an interim probe of lower lows.Those two items would have made the past two sessions’ 1083.50-1098.50 range likely to hold through expiration. The post-close plunge breathed life into the potential for declining, instead. But it requires extending down immediately through Thursday’s open.

“Lower prior highs” at 1081.50-1085.00 from last Thursday through Monday has been tested thoroughly as support. The gap back to Monday’s 1077.50 close would be influential. Breaking under it Thursday would leave only obligatory support at 1070.25 and 1066.25 prior lows (the latter’s oversold RSIs still require its retest). Obligatory support is no match against an expiration decline.

Bottom line (My underlying premise)
Extending down at Thursday’s open is far from assured. The gap back to Wednesday’s close is 5-6 points higher. Its attraction will try to force a rally at Thursday’s open, which could marginalize sellers through the weekend. But if last Wednesday’s trend change means anything, it should mean more of a reversal than this week’s prior lows. And if this week’s prior lows are broken during expiration, then they should be broken substantially through Monday morning. [/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 next higher target above 1087.50 was 1094.00-1095.00. Despite being exceeded in time for the 1:20 timing window, it was retested after a 1:30 peak at 1098.50. The balance of the afternoon slid lower. The cash session close barely bounced off of 1098.00. Futures fell to nearly 1088.50, but the cash session closed 2 points higher.

Pattern points (And technical influences)
Tuesday’s afternoon slide began well before the close. The prior target at 1087.50 was attacked within 1 point. It rejected a probe above the morning’s high, and not by a little. The intraday range was retraced by 61.8%, and the range back to Monday’s close was retraced by 38.2%. Also retraced was all intraday price action after the session’s first 90 minutes.

In other words. Tuesday’s probe above 1094.00-1095.00 was rejected decisively. That’s important. Recovering it would have put into play 1101.50, awfully close to invalidating last Wednesday’s trend change.

Like Monday’s session, buyers did not gain traction. Session highs were rejected back under the morning’s highs and also under the noon hour’s lows. Buyers might gain traction by gapping up Wednesday, like Tuesday’s open. But any lesser opening strength would be vulnerable to failure.

A mildly weaker overnight drop would also be vulnerable to failure. But the recent gaps down and weak intraday bounces is a pattern crying out to be probed, forcefully. This is regardless of the 1070.25 low’s oversold RSIs that require a retest.

Bottom line (My underlying premise)
The premise is that Tuesday’s rally (and Monday’s post-open rally, for that matter) are part of a corrective bounce. Gapping up, extending higher, and failing to hold most of a probe higher reflects thin buyers. Absent a gap up, Wednesday’s close should prove this out by retracing perhaps the rest of Tuesday’s gains..

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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 afternoon’s fresh lows  at 1072.75 made the drop’s most recent bounce limit productive at 1074.75. Both 1-minute and 3-minute RSIs diverged positively at the low, and the prior hour’s low was recovered through 3:10-3:20. None of which was a buy signal. But the productive 1074.75 bounce limit was recovered by more than 2-3 ticks, eking out a flat close on the day.

Pattern points (And technical influences)
The afternoon’s no-bias environment had ended by probing fresh lows, back under the morning’s 1074.75 bias-down signal. Its recovery through the morning’s bias timing window had created the objective to at least touch 1081.25. It was missed by only 2 ticks, so the well-timed rejection back under 1074.75 does indicate that buyers did not gain traction.

The burden of proof was on buyers to gain traction since sellers were still in control. The reactions up from each lower low had not recovered any prior high through their closes. Buyers might seem productive for having prevented the open’s gap down from extending. But their efforts recovered no prior high. All of that buying pressure was wasted.

Oversold RSIs at Monday’s opening low require its retest. Breaking under 1074.00 would indicate the retest underway. Gapping up Tuesday above 1082.00 would help to marginalize sellers through at least the morning. Any less opening strength would be likely to reverse down sooner.

Bottom line (My underlying premise)
Bonds stole all the oxygen from the room Monday. It gapped up to new recovery highs and extended higher. If stocks start falling hard, bonds may have priced themselves out of being a destination for a flight-to-safety. It will be difficult to absorb the next sell-off attempt. Failing to hold any key support or lower objective through a relevant timing window could mark the beginning of a much deeper intraday drop. [/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 door had slowly shut on potential for a late-afternoon downleg Friday. There’s always time for a very late-afternoon downleg. Unfortunately, it’s not very reliable. Friday’s price action weakened soon after its afternoon bias signal failed to clearly trigger a bias-up. Supports weren’t broken early enough to generate much momentum. But the session ended at its lows nonetheless.

Pattern points (And technical influences)
Friday afternoon’s action didn’t really trend. It was more about falling back to the intraday range’s lower-end. This is an important distinction for an inside day that ends at its extreme. Inside days that trend tend to be reversed. Friday’s inside day didn’t trend, so it only paused the decline.

Inside day’s aren’t predictive, other than for what they leave outstanding. The gap back to Thursday’s 1071.25 open remains unfilled. And now “ineffectual optimism” can be added to the mix. Despite falling 16 points overnight, Friday’s pre-open low stopped 5 ticks short of filling Thursday’s opening gap. That’s optimism. The 12-point reaction up was retraced to session lows. That’s ineffectual optimism.

Bottom line (My underlying premise)
Wednesday’s trend change now has two days behind it. There’s nothing accumulative about the pattern since then. Although a bounce Monday morning can’t be discounted, only a gap up above the 1087.00-1089.00 area might launch a corrective bounce. Otherwise, lower targets are in-play, if only slightly lower at 1068.00, or much lower at 1053.00 and 1035.00… Check back Sunday for information on the Hindenburg Omen recently noted. [/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 afternoon’s bias environment was exited at 1080.00. Thursday’s cash session closed at 1080.00. No net move during the timing window is made all the more relevant when considering its 7-1/2 point range in the interim. A range that included a failed attempt at trending up. A failed trending attempt that was contained entirely by the 3:10-3:20 timing window.

Pattern points (And technical influences)
Wednesday’s close under Friday’s prior low had signaled the trend reversed down. Thursday’s session could have rallied throughout, and sharply, and still not invalidated the trend change – not so long as its close was under Friday’s prior low.

Thursday’s session can be characterized as having rallied throughout, but all in negative territory. The trend change is not invalidated.

Since bears have secured their position, a rally effort Friday can’t be discounted. But its purpose would be only to refuel sellers. It’s similar to a bearish 3:10-3:20 timing window, which was also bearish Thursday.

That having been said, spending the entire session rallying in negative territory is not bullish. Rallying throughout Thursday morning’s bias-down environment wasn’t bullish either. And now two days of illiquidity is approaching. If there is a path lower into the weekend, it should be another rush to the exits.

Bottom line (My underlying premise)
A probe above Thursday’s highs could play out overnight, reversing back into negative territory at Friday’s open. This would be the clearest sell signal. Gapping down on a Friday is always difficult to extend. But early strength that isn’t retraced could marginalize sellers into late-afternoon.[/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.