Market Wrap

[pay]About that close (How the prior session ended)
Tuesday’s 1105.50 bias-down signal was probed during the no-bias environment. Its sellers weren’t trapped because the 1099.50 bias-down target was exceeded by a leg already underway when the bias environment started lapsing at 2:30. The break consolidated in a Flag pattern that resolved down to 1090.00. Sellers would have lost traction from only a  3-4 point bounce, which the entire last half-hour failed to do.

Pattern points (And technical influences)
So, sellers gained traction. Having tested relevant support at 1090.00, recovering to close back above 1093.00-1094.00 would have meant the late sellers were weak hands. Not being sponsored by weak hands, the drop can allow a brief bounce to refuel by trapping buyers.

The trick is in not letting those buyers gain traction. A test of the 1098.50-1101.50 area (beginning at the chart’s red line) would be likely to resolve down. An intraday rally could attack 1110.00 and still resolve down. Just closing back above 1098.50-1101.50 would trap Tuesday’s shorts for a squeeze.

This week’s Symmetrical Triangle (defined by green trendlines) is a pattern whose initial break tends to false in the wrong direction. The most common exception is when the break is premature. Overbought RSIs at the triangle’s 1114.50 high want to be retested, as does the gap back to Monday’s open (circled green). So does Sunday night’s “new Globex trend extreme” (not shown), but none has any particular timing.

Avoiding a recovery Wednesday would be very bearish, since the trend is trying to reverse down. Tuesday’s drop was the first to close back under a prior low (in red rectangle). No immediate lower close is needed for confirmation. Its signal can only be negated by Wednesday’s close recovering the ~1101.50 prior low.

Existing Home Sales data was surprisingly weak Tuesday. Don’t think this is already discounted for the New Home Sales data coming Wednesday – look for a negative reaction if it confirms, but not necessarily a rally if it doesn’t. Also, don’t forget about the language accompanying the afternoon’s FOMC rate decision.

Bottom line (My underlying premise)
There is plenty of unfinished business below to attract price down. Two outstanding gaps are circled. The first is from last Monday at 1086.00, and its test might trigger a temporary obligatory bounce. So long as a bounce doesn’t get carried away, the two-week old bounce has ended and a new downleg is 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)
Monday afternoon’s slide was signaled at 1117.00. It extended down through 3:10-3:20 to confirm that sellers were in control. A 3-point bounce off of 1105.00 resolved in fresh lows at 1103.25. RSIs made higher lows to trigger an 8-1/2 point surge into the close.

Pattern points (And technical influences)
Actually, futures bounced 8-1/2 points off the low at 1111.75. Only 1109.00 was reached before the cash session close. This spread reflects optimism, which was a common theme among several other moments Monday that continually undermined the rally effort.

Clearly buyers gained no traction for their efforts Monday. But they did leave at least two breadcrumbs above the market that might still attract price higher: The cash session’s 1126.50 opening gap hasn’t been retested since dipping back into Friday’s range. And the 1129.50 overnight high is a “new Globex trend extreme” that will require intraday retest eventually.

1126.50‘s retest is only an attraction, but it isn’t required. And 1129.50‘s retest can be delayed since it was itself a retest of prior highs. But although buyers gained no traction for Sunday night’s efforts, sellers have yet to gain traction from closing under a prior low.

Bottom line (My underlying premise)
The inability of a rally to exploit Sunday night’s opening surge suggests that pessimism remains alive. And that maintains the potential for ranging back to Sunday night’s highs. Otherwise, immediately resuming the decline Tuesday would be credible. [/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 action was choppy, but ultimately range bound, between 1110.00-1114.00. And Friday’s close was within 1-2 points of Tuesday, Wednesday and Thursday’s closes. Therefore, according to the transitive property of expiration characteristics (don’t bother to google it, I just made it up), Friday afternoon’s characteristic narrow ranging is likely to persist through Monday morning.

Pattern points (And technical influences)
If Monday morning’s action doesn’t prove to be a duplicate of Friday afternoon’s action, then it will probably be the inverse. So, the morning should either range relatively narrowly, or else trend sharply. By the way, gapping open sharply in either direction could still become narrow ranging.

Having closed within 1-2 points of the prior three closes (all circled red), Friday’s session proves the implication of Wednesday’s close: Tuesday afternoon’s breakout (circled green) didn’t gain traction. Not trending by Wednesday’s close made trending unlikely through expiration.

Four days without extending a breakout doesn’t speak well of buying pressure. It also suggests that sellers weren’t ready to retake control. Perhaps buyers or sellers have been waiting for expiration to lapse. Waiting for that, or for a steep surge or dip whose rubber band effect kick starts a reaction in the opposite direction.

Assuming that Monday morning’s price action is range bound, then the afternoon should try to trend. There is more vulnerability to trend down, and less vulnerability to to trend up. Plenty of unfinished business below (such as the outstanding gaps circled orange) has characterized the recent upleg’s sponsors as weak hands. The question is whether sellers are weaker.

Bottom line (My underlying premise)
What if last week’s narrow ranging above prior highs was the rubber band effect? After all, expiration’s influence can skew price action. Regardless, the general premise remains constant, that buyers have missed every opportunity to exploit the probe of new highs. They’ll have one more opportunity Monday, but then it should be all about sellers if a rally still hasn’t gotten 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)
Only 1-minute RSI had diverged positively at Thursday’s low testing 1102.00. But not 3-minute RSI, which wasn’t near oversold, so any bounce was likely to be shallow. That stopped me from buying it, but it didn’t stop the bounce from becoming a 10-point rally. Welcome to expiration.

Pattern points (And technical influences)
The deadline at Wednesday’s close had already determined neither buyers nor sellers had gained traction. And this being expiration week, that meant neither was likely to gain traction before Monday morning.

But volatility was still likely, and Thursday’s action didn’t disappoint. That was already obvious from overnight rally, and then from its early rejection by a steep and deep drop. Extending the last half-hour’s bounce into a squeeze was just more of the same.

One specific price at one specific moment is the most interesting part of Thursday’s volatile intraday reversals. The close. After all of that ranging in either direction, the day ended nearly unchanged. We’ll watch Friday morning’s first relevant data points (9:30, 9:45, 10:00, 10:15) for any commonality that might predict more of this attraction back to home.

Bottom line (My underlying premise)
Extended moves and premature reversals are not inappropriate for expiration, they’re not common enough to be required. This action is the exception, so by definition it defies posturing. But watch out for it, nonetheless. [/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 bounce was triggered by 1-minute RSI diverging positively at the 1105.50 low. Peaking at 1115.50, the bounce avoided recovering Tuesday’s high. And closing at 1109.75, it avoided confirming Tuesday’s breakout.

Pattern points (And technical influences)
The deadline for influencing expiration’s trending has passed. Buyers did not gain traction, but neither did sellers. Trending is unlikely, but volatility is not. Thursday’s session should be driven by retesting prior highs and lows, support and resistance.

Gapping down and extending lower through the morning would leave create a new gap, which could trigger a rally into the close, but afternoon rallies should be done this week.

Unless the open maintains a gap down under Monday’s 1101.75 high, sellers will need another intraday bounce to refuel. If buyers were  to gain traction due to some expiration-related anomaly, the follow-through could be very steep and substantial.

Bottom line (My underlying premise)
Trending into Wednesday afternoon on expiration week tends to extend through expiration. This week’s action suggests either that the upper-end of the range is being tested, or there will be no trending at all. Regardless, beware of unexpected or premature reversals as expiration comes to a head. And beware of Thursday’s disruptive econ calendar. [/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.