Market Wrap

[pay]About that close (How the prior session ended)
The 3:10-3:20 timing window didn’t tip its hand until the final minute. A plunge tested May’s 1032.75 “Globex trend extreme” down to 1030.25. RSIs made higher lows to launch a brief 9-point surge that settled back down to 1032.75 after the Globex open

Pattern points (And technical influences)
Tuesday’s close was under the morning’s low, and the lowest of the decline from April’s high, and a new low for the year. So, sellers gained traction for their efforts. There’s no unfinished business below attracting price lower, so a corrective bounce is possible.

Markets will be closed Monday. Three-day holiday weekends resist trending, and they resist trending down. Neither is terribly rare, just less likely. Trending in place at Wednesday’s close is likely to persist into the weekend. Not trending by Wednesday’s close would be unlikely to trend before next week.

So, if the drop from last Monday’s high intends to extend into the weekend, then it has only limited time to bounce first.

If the market were going to squeeze in a bounce instead, then it should being Wednesday by gapping up above Tuesday afternoon’s 1044.00 highs. Just recovering 1041.00 would rob sellers of their traction. Otherwise, the trend is down, with sharply lower targets ahead.

Bottom line (My underlying premise)
The theme we’ve been discussing since last Monday may seem like it’s getting old – that more and more market participants are gradually realizing the trend has reversed down. But the drop wasn’t very pessimistic until Tuesday’s gap down. This seems more like the trend’s beginning than like its end.[/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 afternoon’s bias-down environment never traded lower. Tests of 1071.00 held as support. But probes above 1076.00 didn’t gain traction either. So the session ended by reversing down to fresh afternoon lows at 1069.75.

Pattern points (And technical influences)
Friday’s last dip tested the afternoon’s 1071.00 support. So did Monday’s last dip. So did Monday second-to-last dip, as did Thursday’s low. And by much wider margins, so did every day in the interim.

That’s a lot of probing. That’s a lot of attempted sell-offs. So, where’s the recovery? That’s also a lot of chipping away at support. So, where’s the decline?

Sellers already lost traction when Friday’s probe of lower lows didn’t close lower. The burden of proof is on buyers. But Friday afternoon’s recovery back above the morning’s highs didn’t hold, so buyers failed to exploit the opportunity.

If a decline isn’t obvious at Tuesday’s open, then sellers probably want to trap more longs. And if a decline isn’t obvious at Tuesday’s open, then 1080.00 is probably being attacked or probed as resistance. Monday’s session was an inside day, so any initial trending would be vulnerable to being false and unsustainable.

Bottom line (My underlying premise)
Be sure to check my Econ Calendar comments to be aware of the minefield coming – it’s very treacherous for a week without any FOMC news. The volatility would fit in well with the scenario of initially breaking falsely in one direction.[/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 afternoon’s trading range was much like the price action leading into Memorial Day. That setup also failed to exploit a short-squeeze opportunity, which confirmed the range’s upper-end was in. Friday’s recovery to the 1080.00 area was vulnerable to a squeeze, but fell to 1070.50.

Pattern points (And technical influences)
Setups that fail to form only their final element tend to have the opposite resolution. Friday’s session could have formed a Pivot Reversal, except the close was still in the process of testing the morning’s high instead of breaking above it.

Missing this one element that could have triggered a buy signal, means buyers are trapped. Gapping up Monday above Friday’s 1079.50 high would give the setup a second chance to extend higher, and also a second chance to trap more buyers.

No gap up is required at all. Friday’s probe of new intraday lows was all but required by its four previous sessions having established the tradition. The intraday recovery reflected patient sellers, which we now know because buyers didn’t gain traction.

A  lot of energy was expended in the 17-point midday rally. The decline is free to resume by breaking under 1071.00. There’s no requirement to retest Friday’s 1062.75 low. Recovering from its retest would be bullish. But a break would next target a probe under 1059.00 and then an outstanding gap at 1051.00.

Bottom line (My underlying premise)
Friday’s session had a great opportunity to trigger at least a bounce. While that still would have refueled sellers, plenty of buyers were trapped anyway. Gapping up might be credible if it isn’t quickly rejected. Otherwise, last week’s theme remains in-play, that more and more market participants are gradually realizing the trend has reversed down.[/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)
New session lows were probed through the 3:10-3:20 timing window. Buyers were marginalized for the day, and a short-squeeze would be impossible. But the dropping was done. A last-minute spike up ended under the morning’s low, so sellers gained traction for their efforts.

Pattern points (And technical influences)
Futures extended higher after the cash session close, but it was too late. Sellers gained traction. And they’ve yet to be rewarded for controlling the 3:10-3:20 window, other than marginalizing buyers. Meanwhile, the 1066.50 afternoon low’s oversold RSIs requires its retest.

Four consecutive sessions of lower intraday lows tend to produce a fifth. That doesn’t mean new lows Friday would extend down. A big target lies just under 1059.00, and probing it early enough would leave plenty of time for a short-squeeze. Avoiding new lows in the morning could reverse down with a vengeance before the close.

Friday might buck tradition and avoid new lows altogether. After all, this week’s drop has already retraced a healthy 61.8% of the two-week long rally. And since any bounce would only refuel sellers for next week, the decline would only be served.

Bottom line (My underlying premise)
My premise has been that market participants are gradually realizing that the trend has reversed down. Despite spending all of Thursday in negative territory and closing at fresh lows, there was no mad rush for the exits. A bounce to fatten up prices isn’t needed to refuel or to attract sellers when so much has been so controlled. If a drop isn’t avoided Friday then it can get ugly, and an ugly Friday would lead to an uglier Monday.[/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)
Wednesday’s late-afternoon 12-point round trip wasn’t unusually volatile for the aftermath of an FOMC report. But it was unusual for having fluctuated sharply from negative to positive territory and then back again. And the volatility was unusual for only narrowly avoiding a flat close.

Pattern points (And technical influences)
Like the “date with 1108” created from Friday afternoon’s pattern, Wednesday afternoon’s pattern created a target at 1083.00. They’re similar for not resolving in the same session.

A 19-point bounce delayed 1108’s eventual test until Monday, trapping more buyers to fuel its break to 1108.25. Only an 8-point bounce has delayed touching 1083.00. But oversold RSIs at Wednesday’s 1180.25 low make 1083.00‘s break likely, which would next target 1076.50.

More important than the path lower is that the path is just that, lower. Tuesday’s trend change wasn’t invalidated Wednesday, so all patterns are expected to resolve down. Counter-intuitively, the immediate reward to avoiding invalidation is being able to absorb a corrective bounce.

If buyers were to gain traction, then a bounce would likely target 1105.00. Otherwise, breaking under 1076.50 would next target 1058.25 and 1046.25.

Bottom line (My underlying premise)
If the trend has reversed so that all patterns resolve down, perhaps that’s because the narrative has reversed, too. The recent surprise in Retail Sales might not have been a one-off, now that Tuesday and Wednesday’s horrid home sales figures are setting a new trend. One more negative metric could push the market over the edge. [/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.