Market Wrap

About that close (How the prior session ended)
It was already apparent by the First Trade blog post that Friday’s breakout wasn’t gaining traction. But it still needed to try, and Friday’s equilibrium close still needed time to be absorbed. Along the way an objective was created at 1208.00, which Monday’s last hour tested down to 1207.50.

Oversold RSIs at the low warned of the sudden potential for a bounce. They also doomed the bounce to failure. In fact, a 3-1/4 point bounce was retraced entirely when futures closed at 1207.50.

Pattern points (And technical influences)
Monday’s 3:10-3:20 window dropped to new session lows, which confirms that  momentum reversed down. And since downlegs come in multiples of two or three, Monday’s single downleg fulfilling 1208.00 suggests at least one more downleg will develop.

Lower targets would include unfinished business below from last week’s rally at 1198.50 and 1186.25. Likely to be met as they may be, they’re not considered to be in-play until triggering Tuesday’s bias-down.

Recovering 1213.50 would rob sellers of their traction. That said, not recovering 1213.50 within minutes of Tuesday’s open is unlikely to recover it intraday, at all. Regardless, recovering 1213.50 through any relevant timing window would at least point higher near-term.

Bottom line (My underlying premise)
Tuesday’s hearing for GS in front of the Senate Permanent Subcommittee On Investigations is televised. It wouldn’t be surprising for price action to appear as if the session had been halted. Some news events are still scheduled before then.

Don’t get too caught up in the soap opera on TV, when your chart screens promise there to be some excitement soon:

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 1208.00 bias-up signal held a test as resistance through 1:20. It wasn’t even tested until the noon hour had ended. By then it is more appropriate for successful signals to already be serving as support.

1208.00 was being tested as support when the bias environment started lapsing after 2:30. So, that attempt succeeded, trending higher until fulfilling its 1213.50 bias-up target where the cash session closed.

Pattern points (And technical influences)
The post-open dip and late-morning sell-off both held 1202.00 as support (circled green in the above chart). The template for rejecting a probe of new highs was otherwise tracked almost perfectly. It’s nearly impossible to introduce a new trend on Fridays if the morning hasn’t started it. A break under 1202.00 would have started it.

The close above last Thursday’s prior highs constitutes a breakout (highlighted green in chart below). It’s not very credible because fresh highs didn’t print until the session’s last 60-90 minutes, of a Friday. But the breakout would get every benefit of the doubt if confirmed by a higher close on Monday.

And Monday should try to confirm. While analytically a late-Friday breakout tends to fail, behaviorally it initially extends at Monday’s open. Only gapping under the afternoon’s 1206.25 low would reject Friday’s late rally, its breakout, and its likely follow-through.

There’s another challenge undermining an attempt to extend higher Monday. The 1213.50 bias-up target was fulfilled, and it also held on a closing basis. This is “equilibrium.” A close above the target would have left pent-up buying pressure to resume the rally. That’s not going to be available.

Bottom line (My underlying premise)
The two bullish scenarios or at opposite ends of the behavioral spectrum. The first would simply resume the rally and close decisively above 1213.50. The second would first dip to 1208.00 or 1206.50 and then recover. There is otherwise no unfinished business above attracting price higher, but oversold RSIs at Thursday’s 1286.25 low still want to be retested.[/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’s closing action ranged narrowly around Wednesday’s… wait, no… Thursday’s last hour extended into positive territory above… nope, turned again… Thursday’s closing action retraced a probe above 1202.00 that had reached 1207.00. The cash session close equated to 1205.25, but futures fell to  1200.25.

Pattern points (And technical influences)
Wednesday’s close had failed to recover 1202.00. The immediate consequence was that futures dipped to 1199.50, and then Thursday’s open extended down to 1186.25.

Thursday’s close seemed like déjà vu. Not the cash session, which ended comfortably higher. But a post-close dive to 1200.25 left the futures session testing 1202.00 as support. Thursday’s futures close isn’t outright bearish like Wednesday’s signal. But it still contradicts the cash session close.

The last hour had launched a probe above the afternoon’s prior high. Had it been maintained, then Friday’s open would have quickly probed last Thursday’s 1210.50 high. Potential remains alive for an opening surge because at least the cash session close wasn’t retraced. An opening surge would have also been likely had futures held up, too.

Bottom line (My underlying premise)
Simply firming throughout Friday’s open would at least marginalize sellers for the day, and keep alive potential to new highs. An opening surge would be vulnerable to retracing – and retracing quickly through the 10:15 bias timing window would be very bearish.

Almost any initial weakness Friday would essentially confirm that Thursday’s futures close overruled its cash session close. Whether or not “lower prior highs” at 1194.00 produced an obligatory bounce, the oversold RSIs at Thursday’s low would be in-play, to be met intraday or Monday.

One final note: Thursday’s “session-long decline” setup would have clearly failed if positive territory were clearly recovered. It wasn’t. The setup’s failure would have resulted in new highs. It might still. But if the session-long decline hasn’t failed, then Friday will fulfill it, with a drop that compensates for the delay. [/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)
Like the noon hour’s 1205.00 high, Wednesday afternoon’s bounce peaked upon testing 1202.00 as resistance. Its recovery would have robbed sellers of their traction. That would have been surprising since oversold RSIs at the afternoon’s 1195.00 low require its retest. The cash session’s close equated to 1201.75 but the futures close dived to 1199.50. S&Ps re-opened to a gap down that slid to 1196.25.

Pattern points (And technical influences)
A lot of news accompanied the post-close slide. That news was earnings announcements. But overwhelmingly, estimate had been beat. In other words, Wednesday afternoon’s bounce discounted the news more favorably than it delivered. Two of the higher profile announcements came from EBAY and QCOM, each of which reacted down sharply to its own positive earnings “surprise.”

NDX futures gapped down below Tuesday’s cash session low, triggering sympathy from the broader-based S&Ps. Duplicating this action at Thursday’s open would trigger the session-long decline that Wednesday’s open avoided. Near-term targets would be 1176.00, 1170.00 and 1156.50 – essentially every relevant price point from the last month’s Complex Triangle.

If Friday’s drop was only exacerbated after all by the GS news timing, then its low shouldn’t be retested. Recovering above 1205.25 would suggest as much, putting into play new highs. But the burden of proof is on buyers.

Bottom line (My underlying premise)
Isolating the damage to NDX might help to launch another rally leg fueled by rotation out of the Tech sector. That may be the only way to avoid extending Wednesday’s decline. Justification for the bearish posture was only enhanced by Wednesday’s drop.[/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)
An opportunity to reverse down before noon was missed when the morning’s bias environment lapsed after 11:30. Another opportunity arose when the afternoon’s bias environment started lapsing after 2:30. But trending down through 3:10-3:20 bounced off of 1202.00 instead of breaking it.

The cash session closed under session highs at 1203.75, right at the afternoon’s bias-up target. Futures added 2 points to probe session highs into the Globex open, and another 2 points to 1208.50 reacting to AAPL’s earnings.

Pattern points (And technical influences)
The gap back to Thursday’s ~1208.50 close was Tuesday’s potential upside. It has now been filled. It wasn’t filled intraday, but that won’t matter if Wednesday’s open gaps down under Tuesday afternoon’s 1201.25 low. In fact, this setup would trigger a session-long decline.

There is otherwise room down to 1203.00 before sellers even begin gaining traction. Dipping into this area at Wednesday’s open would still be likely to retest the overnight high – whether 1208.50 or higher.

But a post-open bounce from the 1203.00 area during Wednesday’s initial 15 minutes of volatility would also be vulnerable to reversing back into negative territory through the open. Tuesday’s template that would have rejected the open’s gap up could still take effect, albeit one day later on Wednesday.

Not rejecting a higher open, or maintaining a recovery from an initial dip, would next target a probe above last week’s highs. A reaction down would be likely, and sellers could gain traction from it, but probably not.

Bottom line (My underlying premise)
Gapping up Wednesday won’t determine the balance of the morning, but it would at least make any morning sell-off likely to recover. If this week’s bounce is only corrective, and a bigger top is forming with last week’s high (as already suggested by Friday and Monday’s closes), then it should be obvious before 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.