Market Wrap

[pay]About that close (How the prior session ended)
Wednesday’s close was nothing. And that was something. Closing under 1093.00 failed to invalidate Tuesday’s bearish close, so buyers have failed to gain traction on two consecutive days. Closing under 1088.00 would have resumed Tuesday’s pre-open decline, so sellers are conserving their energy. The rally didn’t resume, but a new downleg has yet to begin.

Pattern points (And technical influences)
The rally’s 1093.00 target was met Tuesday, and probed twice, but held on a closing basis. Buyers expended a lot of energy but gained no traction for their efforts. Wednesday’s test of Tuesday’s lows didn’t extend down, but it wasn’t recovered above any relevant level. Sellers chipped away at support, making it less likely to stop another challenge.

Wednesday morning’s test of Tuesday’s low stopped just short of touching what should otherwise have been probed. That was excessive optimism, and it cried out for another test. It was satisfied by Wednesday afternoon’s probe of both lows, but its shallow bounce suggests the probe isn’t done.

Meanwhile, having held Tuesday’s lows on Wednesday, the market is still within the orbit of Tuesday night’s interim highs (i.e. the INTC earnings reaction). It may yet be retested, but its retest should resolve in a downleg.

Bottom line (My underlying premise)
Buyers lost traction Tuesday and failed to regain it Wednesday, with expiration Friday. That makes it very difficult to resume the rally, and easier to start a downleg. Plenty of unfinished business below remains outstanding – from Monday morning’s oversold 3-minute RSI at 1066.50, to the outstanding bias-down signal test at 1060.50. It’s just a matter of sellers gaining traction…[/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 rally’s next higher target was 1093.00, and it was probed Tuesday morning up to 1094.00. Overbought RSIs made its retest likely. Its retest held through the 3:10-3:20 timing window to signal that buyers had lost traction. A fresh high would be doomed to failure, and blip-up to 1096.00 was reversed down to 1089.25 as futures closed.

Pattern points (And technical influences)
Probing a target, and then closing back under it, indicates that the target held. The rally’s 1093.00 target held as resistance Tuesday. Closing above 1093.00 would have renewed the rally’s momentum. Instead it held as resistance by a decisive margin.

The ultimate reversal back under 1093.00 originated too late to signal that momentum had reversed down. In fact, last-minute fear ahead of INTC’s earnings motivated the dip. The immediate reaction gapped up to 1095.00, and attacked 1098.00.

Buyers won’t regain traction so long as Tuesday’s 1093.00-1094.00 highs hold tests as resistance through Wednesday’s open. Closing under Tuesday afternoon’s 1088.00 low would seal a top and start to reverse momentum down. Otherwise, sellers will remain marginalized through Wednesday’s close or Thursday’s open.

Bottom line (My underlying premise)
Front-loading the earnings season with excessive optimism will only serve to stretch the rubber band tightly for a more severe snap back down. Meanwhile, I’ll consider any long-entry opportunity that appears. But that’s all Tuesday provided, which tends to be the case near extremes.[/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 last 60-90 minutes wasn’t required to trend either way. But a retest of the morning’s 1077.25 high was likelier than another downleg. The 3:10-3:20 timing window didn’t probe fresh afternoon lows or highs. So trending wasn’t attempted until after the cash session close. It touched the morning’s high.

Pattern points (And technical influences)
The post-close firming extended to 1081.00 soon after the Globex open. Both were too late to gain traction. Monday afternoon’s price action only hovered at Friday’s 1075.00 high, which the cash session close was still testing.

When it mattered, buyers expended energy without gaining traction. And the attraction up to the morning’s high has been neutralized. Its outstanding retest could have triggered another rally attempt Tuesday.

Now another rally attempt depends upon maintaining the Globex open’s gain. A shallow dip to the afternoon’s 1075.00 “lower prior highs” would be likely to hold as support. But the late rally can be rejected by opening Tuesday back under Monday afternoon’s 1070.00-1071.00 lows.

Gapping down under Monday afternoon’s 1070.00-1071.00 lows could even form session-long decline setup. The afternoon’s narrow range undermined the setup – gapping from one end of a narrow range to the other isn’t very meaningful. But now it would measure at least 10 points.

The 1079.00-1081.00 area was likely to present a stiff challenge. Its resolution Tuesday could determine whether 1093.00 will be put into play, or if the bear market rally has ended.

Bottom line (My underlying premise)
The initial Globex gain was inspired by a favorable reaction to AA earnings, kicking off the quarterly earnings season. If sellers aren’t retaking control soon after Tuesday’s open, they might not be able to until Wednesday afternoon or Thursday morning. None of which changes that this is only a 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.

[pay]About that close (How the prior session ended)
Friday morning’s price action tracked a template that made its last 60-90 minutes vulnerable to trending sharply. The mid-day consolidation had formed a Complex Triangle (outlined in green) by not including the trend’s extreme (red X). Three attempts to extend above the breakout’s 1073.50 minimum target (circled green) each failed, finally from the triangle’s maximum 161.8% target at 1074.75.

Pattern points (And technical influences)
Several factors suggested Friday’s resolution would be down. The resolution was up, for now.

Oversold RSIs at Friday’s 1063.25 pre-open low doesn’t require a retest, but it’s likely. The morning’s 1060.50 bias-down signal became an objective of the morning’s no-bias environment. Its test was delayed to probe resistance above, resistance whose tests held through all relevant timing windows.

The last hour’s detour came from a Complex Triangle, whose target tends to produce a larger decline. Each probe above the pattern’s 1073.50 minimum target failed. Its 1074.75 maximum target was satisfied in the process.

The breakout’s sponsorship appeared literally from nowhere, after hours of unending non-committal RSIs. The 3:10-3:20 timing window signaled buyers weren’t going to gain traction for their efforts, which didn’t stop them from trying. And the market often punishes wasted efforts.

Friday’s open also filled the outstanding gap back to Jun 28’s close. It didn’t require being filled, and Friday’s close exceeded it. Slightly higher highs intraday Monday are likely, and likely to encounter a stiff challenge at 1079.00-1080.00. Any higher would start to put into play 1093.00.

Otherwise, back under 1069.00 would signal momentum reversing down, confirmed under 1065.50 and targeting 1056.50. Closing any lower would signal that the bear market rally had ended.

Bottom line (My underlying premise)
The quarterly earnings season gets underway in earnest this week. Recall that price action into and out of Memorial Day suggested results would be more surprisingly weak than strong. BP’s latest attempt to cap its well won’t be a game changer, but its results are sure to impact price action. Whatever gets it there, any probe above prior highs or below recent support is likely to attract more sellers.[/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 finally rallied back to the morning’s high. The afternoon held tests of the 1056.50 area to avoid sellers gaining control. A 10-point surge to 1066.50 eventually extended to probe the morning’s 1067.75 high by 2 ticks. But that came after the cash session close, and it was rejected to also close under the morning’s high.

Pattern points (And technical influences)
Wednesday’s cash session had peaked just short of touching the bear market rally’s 1058.00-1059.00 objective. Thursday morning’s rally was its first test, and it peaked at 1067.75. The high held when its resistance was probed after having dipped to 1058.00-1059.00.

So the afternoon’s buying was only noise. Had the afternoon’s rally stopped short of touching the morning’s high, then buying would not have failed. Had the probe of the morning’s high been broken at the close, buyers would have gained traction. But buyers didn’t gain any traction for their herculean effort.

The rally can extend higher either by resuming without delay Friday, or by limiting any early dip to the 1061.00 area. Having robbed buyers of their traction upon testing 1058.00-1059.00, the path lower should quickly fall back under it.

Bottom line (My underlying premise)
This being a Friday, any initial trending should into the afternoon. A firm open that isn’t rejected immediately could extend higher to the next possible objectives at 1076.00 and 1080.00. Given a good tailwind, a drop could test 1042.00 before the close.[/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.