Market Wrap

[pay]About that close (How the prior session ended)
1-minute and 3-minute RSIs were simultaneously overbought at Wednesday’s close. An immediate pullback would be likely to recover, at least to retest the session’s 1059.75 high. And there is potential for an immediate pullback because RSIs were overbought at the high.

Pattern points (And technical influences)
The 1059.75 high printed after the cash session close, thoroughly probing the rally’s 1058.00-1059.00 objective. The cash session high was only 1057.50. The 1058.00-1059.00 area should be tested intraday.

From gapping up to the prior afternoon’s last relative high, to printing its own session high into the close, Wednesday’s session behaved like a session-long rally. Session-long rallies tend at least briefly to produce a fresh high the following day. Session-long rallies aren’t followed by another session-long rally.

An overnight dip would be likely to recover back to at least the 1058.00-1059.00 area. Preferably a dip would bottom around 1051.00. Any lower would start to gain traction for a decline.

There’s no particular limit to an intraday probe above the rally’s 1058.00-1059.00 objective. Closing above it would put into play targets at 1076.00, and potentially 1080.00. Extending higher Thursday morning without dipping first to refuel buyers might end the day back in negative territory.

Bottom line (My underlying premise)
Don’t forget we’re in a bear market, and this is a bear market rally. Its intent is to aggressively expend all available buying energy, attracting all available buyers. Being a bear market, that buying energy doesn’t last long. And rally ends abruptly, reversing steeply, and dropping deeply[/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 positively into the two-hour consolidation’s low under 1014.00. The consolidation’s pent-up buying pressure wasn’t saved for Wednesday’s open. Instead, the setup was already fulfilled by bouncing to just under 1026.00. The bounce began too late and from too low for its close just above 1022.00-1023.00 to be bullish. So the buying pressure was expended for nothing.

Pattern points (And technical influences)
Tuesday’s session was another reminder that this is a bear market. Rallies can be brief, and can end abruptly. Sellers may not have gained traction from Tuesday’s ultimate dip, but the burden of proof was on buyers.

Not having gained traction, sellers must assert themselves at Wednesday’s open to resume the decline. Dropping under 1018.00 would likely be within the context of a slide back to the 1003.00-1007.00 lows.

Otherwise, a flat environment could attempt to rally again – if only to retest Tuesday’s overbought RSIs at its 1038.50 high. Recovering 1028.50 would signal and 1031.00 would confirm.

Bottom line (My underlying premise)
Probing Tuesday’s highs by more than a couple of points for more than a couple of minutes could develop into the bear market rally that Tuesday’s open tried to be. There’s no requirement to retest it, but much more delay in extending the decline would suggest sellers were hibernating. If they’re not, then their presence should be obvious by Wednesday 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.

[pay]About that close (How the prior session ended)
Friday’s last-hour surge was triggered at 1017.00, trended up through 3:10-3:20, and extended to 1026.00. That’s where buyers lost traction before. Having expended so much buying energy so quickly made the bounce vulnerable to falling again.

The surge’s last productive pullback limit at 1023.50 broke lower to signal momentum reversing down. Such little time remaining made any reversal likely to be severe. In fact, the cash session close pierced 1017.00, on the way to 1013.25. Only one bounce of more than 6 ticks between them.

Pattern points (And technical influences)
Friday’s session was an inside day, except for the pre-open spike up, which doesn’t require a retest. The open’s gap up to 1026.00 was under Thursday’s high, so it didn’t require a retest.

The open’s gap up didn’t require a retest, but it was retested anyway – after the post open dip, and again at the afternoon’s high. Although it pushed both tests back down, the tests have chipped away at 1026.00‘s resistance. One more test would be all but assured to break higher. But since the bigger picture remains bearish, bullish setups should fail, if attempted at all.

So the break higher described above is unlikely. That said, Thursday’s low tested a big target at 1007.00. A break higher would trigger an Ascending Triangle pattern targeting 1040.00 or almost 1058.00-1059.00. In any case, the resolution would still be down.

Meanwhile, the daily chart is forming a “Rubber Band.” The setup is analogous to stretching a rubber band so far that it should either snap back, or break sharply in the direction it is being stretched. It forms when all but 1-2 of the prior 10-11 sessions close in the same direction. The holiday weekend might absorb enough energy to neutralize the stretch. Beware if not, as the next lower target is 980.00.

Bottom line (My underlying premise)
Rubber Band is vulnerable to a very steep move. Either the existing decline extends down at an accelerated pace, or it reverses sharply. Any time from Sunday night through Wednesday’s open would fit the template. If the holiday weekend has absorbed the Rubber Band’s energy,then price should range sideways at least through Tuesday’s open… Check back after Sunday night’s Globex open for comments on any interesting price action.  [/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 likelihood of reacting poorly to the Employment Situation report depended greatly upon closing under 1018.00 Thursday. But the entire afternoon ranged sideways with only one dip under 1018.00. The 3:10-3:20 timing window failed to signal any trending. Recoveries were unable to gain traction above unchanged levels.

Pattern points (And technical influences)
The complete recovery from Thursday’s sharply lower lows is not necessarily bullish. A lot of energy was expended, but buyers didn’t gain traction for their efforts.

And that’s really the question: What was underlying Thursday’s bounce? Either it failed to gain traction because its purpose was to refuel sellers, or because of pessimism ahead of Friday morning’s pre-open Employment Situation report.

The first premise has been the premise. Sellers gained traction at Wednesday’s close to allow trending into the weekend. Extending down Thursday, is confirmation. Buyers failing to gain traction doesn’t invalidate the premise.

The second premise must be considered, too. Thursday’s drop fulfilled a lot of selling pressure at 1007.00. It was thoroughly tested, and launched a complete retracement. Not gaining traction could be due to pessimism ahead of Friday’s report – which is potentially bullish from a contrarian perspective.

Bottom line (My underlying premise)
We’ll know soon enough. Either way, there is potential to trend sharply intraday. Recovering ahead of a three-day holiday weekend would be likely to lose momentum by noon. But new trend lows on a Friday morning could extend through next week’s opens.[/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)
Having hidden their intent through the afternoon’s bias environment, sellers would need to compensate for the delay. They did. The last hour plunged 16 points to new lows. A last-minute retest of the low neutralized its oversold RSIs, narrowly avoiding a relatively clear signal for holding short overnight.

Pattern points (And technical influences)
Buyers weren’t gaining any traction for their efforts Wednesday. Sellers had to regain control by the close to avoid being marginalized through the weekend. Done.

Sellers could have waited until Thursday’s open to regain control by proxy, gapping down to new lows. By the same token, buyers can still invalidate Wednesday’s late decline by gapping up above prior lows. Otherwise, one word sums up the rally’s prospects. Done.

Last Monday’s close was the first in two weeks of higher highs to close under a prior session’s low. That signaled the trend reversing down. Tuesday’s close was a new low close for the decline from April’s high, and Wednesday’s lower close confirmed. The theme since last Monday has been more and more market participants gradually realizing the rally had ended. Now that theme is done.

The next lower target area is 1003.00-1010.00. Unless 1045.00 is recovered without delay Thursday morning, then 990.00 could be tested by week’s end. And the selling still wouldn’t be done.

Bottom line (My underlying premise)
Another market theme forming has to do with econ reports painting the picture of a slowing economy. Fear ahead of Thursday’s full calendar could be responsible for Wednesday’s late plunge. But the real issue is how this macro deterioration influences the coming earnings announcements, and the warnings that will accompany them.

[/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.