Market Wrap

[pay]About that close (How the prior session ended)
Wednesday’s last hour remained under pressure, probing lower lows. The 3:10-3:20 window’s bounce above prior lows was rejected when the window closed. Any bounce’s purpose would be to refuel sellers. A bounce was attempted, though not required, and it was pretty shallow. It resolved in new session lows into the close.

Pattern points (And technical influences)
Wednesday closed under Friday’s 1103.75 prior relative low to signal a trend change. Monday’s interim new high close was the first to be rejected so forcefully. Similar setups have identified this rally’s prior turning points.

Signaling a trend change is step one. Step two is not invalidating it by closing back above the prior relative low. Notice that I don’t refer to “confirmation,” which is associated with a breakout, meaning that the second session should extend the first’s. A trend change need not extend any lower, and must simply close for a second consecutive session under the same level that signaled the trend change.

The July 23-29 prior lows around 1084.50 were barely touched at Wednesday’s futures close. That’s about 36 handles under Tuesday’s closes. A lot of selling pressure was expended just to get back to prior lows, not including a spike down to 1073.25 after the close. Recovering into positive territory at Thursday’s open – after the Jobless Claims report has been absorbed – would rob sellers of their near-term traction.

Invalidating Wednesday’s trend change by closing above last Friday’s 1103.75 low could produce a substantial rally leg. Otherwise, any pause in the decline would be just that, a pause. The trend remains down, and next targeting the 1065.00-1068.00 area.

Bottom line (My underlying premise)
Overnight action can offer clues of what to expect at Thursday’s open. Global markets are sure to react in sympathy to Wednesday’s S&P losses. The question is whether S&Ps extend down, as well. Firming would suggest that sellers might be getting ahead of themselves. That is, firming enough. The extra post-close dip to 1073.25 creates a lot of room to absorb an overnight bounce. It also puts 1065.00-1068.00 into “spitting distance” (please don’t try that at home).[/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 peak filled the gap back to Monday’s 1124.50 cash session close. It only filled gap, and only to the cash session close. A better test would have probed the gap by 2-3 ticks instead of just touching it.And Monday’s futures close was just 4 ticks higher. That’s not enough pessimism to prevent a downleg, but it did limit the drop to only 1116.25, and only through 3:20. The balance of the session ranged sideways.

Pattern points (And technical influences)
The 3:10-3:20 window trended down throughout, securing a bearish resolution. A subsequent bounce’s purpose would be to refuel sellers. A bounce wasn’t required, and it wasn’t substantial, but it was retraced back down to the 1118.00 area.

1118.00 is Monday morning’s low. Holding its recovery through the close allows another bounce, whether overnight or at Wednesday’s open. Its potential is 1125.50-1126.00, and any higher would signal a bigger move underway. The 3:10-3:20 signal suggests that won’t happen.

Under 1116.25 would trigger another attempt to resume the decline. Tuesday’s low barely touched the 1108.50 upper-end of Friday afternoon’s ranging, so a test of its 1105.50 lower-end is likely. And that’s unlikely unless a new downleg is underway.

Bottom line (My underlying premise)
The bigger picture says the ultimate resolution is down. There shouldn’t be much delay in proving this out, if this will be proved out. Perhaps another bounce is needed, but too much or too much longer probably can’t be tolerated if this week intends to resume the decline.[/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)
RSIs diverged negatively at Monday’s 1126.50 highs, producing a drop down to 1123.75. RSIs diverged positively to trigger another bounce that essentially retested the high. This resulted in a Double Top whose 61.8% retracement was still being tested at the cash session close. Closing under it would have robbed buyers of their traction. Still testing it at the close doesn’t suggest otherwise.

Pattern points (And technical influences)
The triangle at Monday morning’s lows could have been retested during the afternoon’s no-bias environment. That is, if a serious rally effort were underway. Inappropriately timed selling pressure would have trapped shorts. Instead, fresh session highs expended even more buying pressure.

That buying pressure would have gained traction if its retracement limit were recovered decisively at the close. But it was still being tested. Not fulfilling a signal at the close tends to signal the opposite. At the very least, it undermines the attempted signal from performing. Anyway, the 3:10-3:20 timing window was exited back under prior highs.

Bears have secured a negative outcome. A subsequent bounce’s only purpose is to refuel sellers. Hovering almost all of Monday above Friday’s highs reflects excessive optimism, but it also keeps alive potential for more optimism and for higher prices. Already falling back from probing higher highs would help the news to trigger a negative reaction.

Bottom line (My underlying premise)
Trending ahead of a weighty high-profile news item like Tuesday afternoon’s FOMC announcement is still possible – whether overnight, or at Tuesday’s open. But extending higher through the close is unlikely.[/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 narrow extended ranging under 1108.50 suddenly broke higher from a dead stop. Persistently overbought 3-minute RSI kept the ground fertile for higher highs to probe 1118.00 by 2 points. Simultaneously overbought RSIs became negative divergences, but then the cash session’s close prevented sellers from retaking control.

Pattern points (And technical influences)
The “session-long decline” setup has several characteristics. There’s “decline,” which the morning certainly delivered. There’s also “session-long,” which the last hour stole. In those rare cases, the following session usually delivers on the setup, compensating for the delay.

Meanwhile, another characteristic of the session-long decline is trending into the close. The setup may have inverted, trending up 10-11 points to 1119.00-1120.00 instead of down 10-11 points to 1098.00-1100.00. Its influence would be fulfilled and neutralized without letting sellers gain traction.

Resolving a setup by inverting its direction is rarer than delaying its resolution. We’ll look for signs of either throughout Monday morning. Extending above 1121.75 would at least retest Thursday’s 1127.75 high. Back under 1114.50 would start to unwind Friday’s late surge. Resuming the decline would then become likelier.

Bottom line (My underlying premise)
Signs of ineffectual optimism were rampant throughout last week’s ranging. They continued Friday, from the gap down’s initial reaction up, to the session low holding above lower prior highs and nearby gaps. The closing surge was kind of optimistic, too, but not necessarily “ineffectual,” not yet. [/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)
1124.00 was the only predictable or reliable resolution for Thursday’s opening measurements. It was finally met just before the session’s last half-hour. RSIs diverged negatively into its test. A reaction down to 1120.75 was recovered back up to 1124.00.

Pattern points (And technical influences)
Thursday’s session was very pessimistic. Most obvious is the open’s gap down, and spending the entire session in negative territory. Peaking just two ticks short of filling the gap back to Wednesday’s close is also pessimistic. All that pessimism was ineffectual, since the close recovered from probing prior lows as support.

Both Wednesday and Thursday’s closes failed to hold their brief probes above the morning highs. Buyers failed to gain traction for their efforts on both days. Thursday’s resolution was down. Friday’s resolution should be down, too, although not necessarily immediately.

Thursday’s ineffectual pessimism does keep the door open for a positive reaction to Friday’s Employment Situation report. Being a Friday, a positive reaction could become a positive day if not rejected quickly. The same can be said of a negative reaction that gaps under 1118.00. Regardless, a trading range into the afternoon would be likely if either support or resistance were to hold a test through the open.

Bottom line (My underlying premise)
Friday’s Employment Situation report is clearly feared. Thursday’s Jobless Claims triggered a fall that could hardly get up all day. Actually, almost all of the Jobless Claims reaction was recovered. But pessimism kept the session negative.

Like paranoia, which is reasonable when they really are out to get you, sometimes ineffectual pessimism is vindicated after a long enough wait. And now it’s all over, but the waiting.[/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.