Market Wrap

[pay]About that close (How the prior session ended)
Tuesday’s late surge began too late to be sponsored by durable buyers. The expectation was for it to be no more than a short-squeeze. This is confirmed by its trajectory and relatively sizable gain. The squeeze did produce new session highs, and a probe above the overnight highs, although the latter held as resistance on a closing basis.

Pattern points (And technical influences)
Officially, closing above the open’s peak completed a Pivot Reversal. Technically, the setup is suspicious. Its last element was the close above the open’s peak. That leg originated too late to be sponsored by durable buyers. It doesn’t help that RSIs diverged negatively.

Even if the late surge were valid disaster was not averted. May 25’s prior lows weren’t probed first, so Tuesday’s “recovery” didn’t actually recover anything. A lot of unfinished business below has been neutralized recently, but more remains. And Tuesday’s session developed entirely within May 25’s range, making it an inside day that can’t signal much anyway.

Tuesday’s late surge may yet extend higher to fulfill the setup targeting 1073.50. It might only jump momentarily during Wednesday’s opening 15 minutes of volatility. But considering the late squeeze’s shakiness, immediately reversing down would also be credible – perhaps most credible.

Bottom line (My underlying premise)
The market’s current weakness is interesting in its timing. These first two weeks of the quarter’s last month typically find analysts checking in with the companies they cover. I look at a lot of stock charts, and there are plenty of ‘accidents waiting to happen.’ This is foreboding for July, to the degree that the past year’s rally was based on improving fundamentals. [/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, May 25 was the market’s low. Its 1046.00 opening gap has required a retest. Monday’s late slide to new lows stopped just 1 point short of neutralizing it. Just 1 point. That’s pretty optimistic after falling 22 points from the noon hour.

Pattern points (And technical influences)
Even after bouncing into the close, an early evening attack on the low stopped 2 ticks short. Optimism at the end of a very pessimistic slide suggests the optimism is far from over. May 25’s 1036.75 pre-open low is a “new Globex trend extreme” with oversold RSIs that also requires a retest.

Add these to the 2-3 other pieces of unfinished business below that were neutralized recently. As discussed here for the past week, visiting new relative highs first means the retests probably aren’t retests, but a new downleg. That’s not quite the mainstream opinion, yet S&Ps have already dropped 60 points in two days.

Bottom line (My underlying premise)
At this stage it’s possible to reverse near-term momentum upward by gapping up sufficiently. But this would leave outstanding a gap back to Monday’s close, and more unfinished business below.[/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 1059.25 low printed during the last hour, as is appropriate for a session-long decline. It was the session’s first low not accompanied by oversold RSIs. A bounce into the futures close tested 1067.50, shaving the day’s loss from 44.25 points to 37.50. The Dow’s 323-point loss was itself a 42-point improvement off the low.

Pattern points (And technical influences)
The last-minute bounce was only noise, since the bounce peaked below prior highs. The bounce did recover back above prior lows, the only factor that might have argued against holding short through the close. It could still be considered, but the percentages weren’t their most optimal as might be desirable for being exposed through a weekend’s illiquidity.

Two of the four pieces of unfinished business below were neutralized during Friday’s decline – the gaps back down to Tuesday’s 1071.00 close, and to the prior Wednesday’s 1061.00 close. Two more pieces remain outstanding from the prior Tuesday’s 1046.00 cash session open, and its 1036.75 pre-open low whose RSIs were oversold.

Wednesday’s 1056.00 post-open low might fight back if tested. But its support should be only obligatory and temporary. Having delayed the retest below to probe the range’s upper-end, the other unfinished business below is also likely to be retested by the same downleg. And also thanks to the same detour, the retests of unfinished business below is likely to be more than just a retest.

Bottom line (My underlying premise)
Last month’s low held a retest of February’s prior low. Its eventual break is a formality – its timing is less assured. This area has fought back previously, and may fight back again. Friday’s drop overcame a similar challenge at 1070.00. But then, what better opportunity is there to finally break under relevant support, other than the Friday afternoon of a session-long decline? Well, the Monday following a session-long decline. So, this week either starts out ugly, or it gets pretty, pretty fast.[/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 afternoon’s bounce recovered from 1091.00 to 1104.25. Along the way, the cash session’s close equated to 1101.50. And one hour following the cash session close, a dip is already testing 1101.50 as support. All of which is evidence that sentiment didn’t really change from the cash session’s 1101.50 opening print.

Pattern points (And technical influences)
Thursday’s session bordered on being “equilibrium.” Trending attempts are still likely Friday, and the first 2-3 attempts are likely to fail. The attempts are also likely to alternate in direction. Unless the open were overcome by a different setup, Friday morning should be very choppy.

Reacting positively to the Employment Situation report could probe new highs around 1110.00, but then become vulnerable to reversing back down into negative territory. Reacting negatively would be likely to recover, and then reverse into positive territory.

Oversold RSIs at Thursday’s 1090.75 low require its eventual retest. This unfinished business can be neutralized overnight, or in reaction to the Employment report. Either would allow time and room for a positive reaction to launch an opening rally. Not recovering quickly could be a problem.

Equilibrium could be replaced by a session-long decline setup. Since Thursday’s closing action trended up, gapping open under Thursday afternoon’s 1094.25 low would put sellers in permanent control for the day.

Bottom line (My underlying premise)
This being a Friday, the morning’s bias signal tends to persist through the noon hour. Equilibrium can co-exist in this environment, but it’s not pretty – think volatility, on steroids. Alternatively, triggering a session-long decline on a Friday could undo the past two days’ corrective bounce.[/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 break above the 1085.00 buy signal came with a change of character. A 15-minute 5-point gain from 1080.25 suddenly steepened. The gains extended as the last hour began, until the last half-hour began. The 1093.00 target had been met, but another surge began when the position-squaring window ended, gaining 7 points to test 1098.00.

Pattern points (And technical influences)
Tuesday morning’s failed rally had begun from a drop to 1070.00. Wednesday’s rally began from another drop to 1070.00. Tuesday’s rally was signaled by RSIs diverging positively, oversold RSIs preceding Wednesday’s open created a vulnerability to rally. Tuesday’s RSIs left no unfinished business below, so there was no reason for its rally to fail unless its lows would eventually be probed. Wednesday’s oversold RSIs do require a retest, and so does the gap back to Tuesday’s close.

Like Tuesday’s 1070.00 low, its 1094.00 high didn’t require a retest Wednesday either. And I’m surprised that it was retested at all. But I’m not surprised that its retest originated after the position-squaring window, and by a last-minute surge. These characteristics identify the retest’s sponsorship as being weak hands.

Wednesday’s open can still validate Tuesday’s late surge by extending higher without delay, and not looking back. Objectives would include May 19’s “higher prior lows” at 1107.00, and gaps back to the 1109.75 and 1113.00 futures and cash session closes.

Extending higher, and then looking back – i.e. probing prior highs but reversing into negative territory – would let sellers gain traction. An initial pullback otherwise could retrace Wednesday’s last-minute surge down to its 1091.00 origin without rejecting it. Any lower through the opening minutes would threaten the afternoon’s 1080.25 low.

Bottom line (My underlying premise)
Bullish scenarios rely largely upon tempered gains. First, avoiding weakness at Thursday’s open could marginalize sellers through the day. Second, closing Thursday above prior highs could be bullish if higher targets are left in-play. Carrying this momentum overnight would help to absorb Friday’s pre-open Employment Situation report. And that would marginalize sellers into the weekend. If sellers are going to retake control this week, it should be obvious by the 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.