Market Wrap

[pay]About that close (How the prior session ended)
Tuesday afternoon’s no-bias trending had required a retest of its 1066.50 bias-up signal. Events (the Statue of Liberty evacuation and Bernanke’s Senate testimony) conspired to form a more violent retracement than normal. The no-bias trending’s weak-handed sponsorship played its part. Wednesday’s last hour ranged around 1065.00, where Tuesday’s no-bias trending had actually begun.

Pattern points (And technical influences)
The last hour’s 3:10-3:20 timing window started out bouncing, and ended by rejecting a probe above the 1065.00 prior low. That action didn’t need to end the bounce, but it did. It also forecast a coming probe under Wednesday’s 1061.00 low. Bouncing first would be no safer.

This ranging around the 1065.00 prior low also neutralized an oversold 3-minute RSI without becoming overbought. A lot of selling pressure was absorbed without much of a bounce. So there’s not much room to absorb new selling. A retest of Wednesday’s 1061.00 low is likely to be by a wide margin.

That wide margin could include a retest of Tuesday’s 1053.25 opening gap. RSIs had diverged positively into its pre-open lows, so they don’t require a retest. Just gapping down through 1055.00 could break free from any attraction to unfinished business above. Any milder initial selling pressure would still have a chance to try bouncing again intraday.

That unfinished business above is essentially Wednesday afternoon’s 1075.00 bias-down signal. Similar to Tuesday afternoon’s no-bias rally, Wednesday’s decline requires a retracement for having developed during a no-bias  environment. But only its bias-down signal requires a retest, and not its 1081.50 origin.

Bottom line (My underlying premise)
I don’t think anything Bernanke said was earth-shattering, surprising, or unusual. He only confirmed that the Fed’s thinking hasn’t changed. Perhaps the Statue of Liberty evacuation exacerbated the effect. Perhaps Tuesday’s rally was in anticipation of the earnings season’s rare bright spot (AAPL). Unless Thursday opens down hard and stays down, one more bounce attempt is likely.[/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 rally extended higher into the close. The prior hour’s Complex Ascending Triangle’s 161.8% target at 1080.00 was met and held while RSIs diverged negatively. Various price action intraday had indicated that weak hands were sponsoring the bounce. This was proved by a spike up to 1085.00 after the close on AAPL’s earnings, which was immediately retraced.

Pattern points (And technical influences)
Tuesday’s open did everything its pattern was supposed to do. A rally barely hesitated to get underway, and it extended higher through the morning. Various price action indicated that weak hands were sponsoring the bounce. So, the bounce’s only objective was to fill the gap back to Monday’s futures close. It was filled.

Tuesday afternoon also did everything the morning was supposed to do. It just didn’t need to. The morning’s bounce wasn’t necessarily going to be reversed. But the afternoon extended much, much higher.

Perhaps Tuesday’s rally is the start of a bigger upleg. That has to be said, because it did originate from a significant level (just above 1050.00) and rallied throughout the day. Regardless, its sponsorship was weak hands, and there’s now a gap outstanding at Tuesday’s 1053.50 open.

Gapping up Wednesday to and through 1085.00 would extend Tuesday’s rally. Serious selling could be marginalized until probing 1100.00 by 10-15 points. Opening weaker Wednesday – or under 1085.00 – could still extend into positive territory intraday, but probably not through the close.

Bottom line (My underlying premise)
If Wednesday ends without a reversal down, or without some distribution above Tuesday’s highs, then sellers will have abdicated for now. The earliest proof that a new rally leg is not underway would be to close under 1065.00. Earnings news gets blindsided Wednesday by Bernanke’s testimony.  Both sets of news might blindside the remnants of Tuesday’s rally. [/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 price action was on-track to form a Pivot Reversal: Gap up in a downtrend, reverse to new trend lows intraday, then recover to close above the morning’s high. At least two of its elements were lacking (the shallow new trend low and the weak intraday volume).

Forming a Pivot Reversal with these elements would have been surprising. This made the setup’s final element unlikely to hold if it appeared at all – a probe above the morning’s 1069.00 high. So fresh session highs up to 1071.00 reacted down.

Pattern points (And technical influences)
Avoiding a probe of the morning’s high would have left the Pivot Reversal lacking that element. Closing under the morning’s high would not have formed a Pivot Reversal, so there wouldn’t have been one to fail. But the high was probed, and it held, forming a failed Pivot Reversal. And it has very bearish implications.

The fresh session high’s reaction back down happened to be during the 3:10-3:20 timing window. Yet another failure – this time, it is Monday’s late-afternoon buyers who expended that energy for nothing. The failure’s timing confirmed that buyers weren’t gaining traction. The failed Pivot Reversal’s very bearish resolution was all but assured.

IBM’s earnings pushed S&Ps lower to 1062.25 into the futures close. And then down to 1060.00 afterward. Simultaneously oversold RSIs there make the pattern vulnerable to a bounce.

Regardless, support at 1060.00 has been chipped away, making new lows likely. If the 1052.25 bias-down target doesn’t end this leg of the drop, then its next objective is under 1040.00. Recovering Monday’s 1071.00 high would insert a detour.

Bottom line (My underlying premise)
Expiration sessions rarely contain a trend extreme. Monday’s retest might have sufficed, but its margin was so shallow. Despite it all, a rally would get a benefit of the doubt. Otherwise, the trend points down, and seems already to be underway. [/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)
When expiration clenches something in its jaws, it just won’t let go. The open’s trending and the morning’s bias-down extended lower through the noon hour. The afternoon’s bias-down fell into the last hour. And the 3:10-3:20 timing window probed fresh session lows.

Friday’s last 45 minutes only ranged sideways. But it ranged sideways around the 1060.00-1062.50 target area, which also wouldn’t let go. It’s unlike the prior three days that tested the rally’s 1093.00 target. Its tests pushed back into the close, so buyers lost traction. Sellers didn’t lose traction after Friday ended while still testing 1060.00-1062.50.

Pattern points (And technical influences)
Expiration is done, but its traces linger on through Monday morning. Often its characteristics are duplicated – big down Monday morning follows big down Friday. Occasionally the price action is mirrored, which in this instance would produce a morning-long bounce.

Big down, or big bounce. Neither resolution seems very likely after Friday’s late consolidation formed a Symmetrical Triangle. The pattern tends initially to break falsely in one direction before reversing more substantially in the opposite direction. Trending momentarily in one direction doesn’t fit the normal resolution.

Symmetrical Triangles have an exception. Since the pattern is essentially a congestion of overlapping bars, it forms a mass that has its own gravitational pull. The only other way to break free from it is to gap open beyond its orbit. The minimum requirement is 61.8% of the triangle’s middle swing – that’s either 1066.50 above, or 1056.50 below. (Levels depicted on chart to the left.)

Gapping up sufficiently would trigger a significant retracement of Friday’s drop. But only a retracement, and only temporarily. Gapping down would resume the decline, next targeting 1040.00-1041.00. Both 1-minute and 3-minute RSIs were oversold at the last hour’s low. Its retest should be part of any scenario, whether immediate or eventual.

Bottom line (My underlying premise)
Regardless of how Monday plays out, last week’s pattern has to be recognized for reversing the trend to down. Its close under last Monday’s prior low now has every right to extend down without interruption. Delaying the decline longer than temporarily, or falling only slightly further, would undermine whether the corrective bounce had in fact ended.[/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)
A 3-point bounce ahead of Thursday’s close became a 14-point surge. The 3:10-3:20 drop to fresh afternoon lows had ignored 1084.50 as support, requiring a bounce to acknowledge it as resistance. Some resistance. “Positive” news from Goldman Sachs to the Gulf of Mexico exacerbated the bounce. So did expiration’s influence, sending price up to 1095.50. It was a perfect storm. But it was not accumulation.

Pattern points (And technical influences)
The 3:10-3:20 window dropped to fresh afternoon lows. This setup might launch a recovery attempt, but not a durable recovery. The late bounce up to 1084.50 should have triggered a drop to fresh afternoon lows. The “perfect storm” only made the bounce bigger. The bounce might take longer. But it is still just a bounce, having originated from the 3:10-3:20 drop to fresh afternoon lows.

Thursday closed at or under 1093.00 for the third consecutive day. Buyers once again failed to gain traction. Intraday action could probe higher highs above 1098.00 resistance – perhaps this time even close above it. But the origin of such strength already characterizes that strength as being likely to resolve down.

Just as a gap down under prior lows can reject the surge, a gap up above prior highs could reject its tainted origin. Pre-open news might yet do that. A negative reaction to Google’s earnings hasn’t sent futures down. Maybe that’s because overbought RSIs at the surge’s 1095.50 high require its retest.

1095.50‘s retest can be neutralized overnight. Reversing back under 1087.00-1088.00 would then signal momentum reversing down. Alternatively, Thursday’s late surge can be rejected by gapping down Friday, at least under 1084.50. A new downleg would be underway once 1082.00 were to break as support.

Bottom line (My underlying premise)
No matter how impressive Thursday’s late bounce was or becomes, its origin is tainted. If a big enough gap up overcomes that, expiration’s influence could exacerbate the reaction further. Regardless, another upleg here would only extend the bear market rally.[/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.