Market Wrap

[pay]About that close (How the prior session ended)
The risk was definitely to the upside during Monday’s last hour. Sellers had lost traction when the noon hour’s new low at 1179.75 was recovered back above prior lows. A dip to 1181.00 was already recovering when the afternoon’s no-bias environment started lapsing. The cash session close was in the process of testing 1193.50, and the futures close surged to touch 1196.50.

Pattern points (And technical influences)
Monday’s session formed the basis for a bullish “Pivot Reversal” setup. The open’s gap down recovered into positive territory, but reversed down to probe Friday’s prior low. The pattern identifies momentum shifting from one direction to the other if the close then recovers above the morning’s high.

Since Monday’s close was probing the morning’s high, the Pivot Reversal setup gets at least some benefit of the doubt. Some… Extending higher into the futures close doesn’t give the setup any extra benefit. In fact, extending higher borrowed from the pent-up buying pressure needed to maintain the buying pressure overnight.

In addition to the borderline close, the Pivot Reversal is only as meaningful as the leg it is reacting to. The most recent downleg began Thursday, so extending higher early Tuesday should find out soon enough whether Monday’s bottom is only temporary.

Bottom line (My underlying premise)
Recovering 1198.50 at Monday’s open or close could have signaled that Friday’s selling was absorbed. Decisively recovering 1193.50 would have been interesting. But the lateness of the excess reflects weak hands buying. This sponsorship may yet be leveraged by stronger buyers if Tuesday’s open were to recover from a deep enough pullback. But simply extending higher from Monday’s close would stretch buyers thinly.[/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)
There wasn’t much to Friday’s close, which is normal for expiration. The session’s last 90 minutes began just as a test of 1193.50‘s resistance was ending. Its reaction quickly fell back under the noon hour’s high to 1188.00. That left another hour, time enough for another round trip up to 1193.50 and back down to 1188.00.

The last hour’s last test of 1193.50 came too late for its recovery to have been credible. Its recovery could still be accomplished by proxy Monday closing above 1198.50. This was the high of 1193.50‘s first test. The presumption otherwise is that 1193.50‘s support failed to hold.

Pattern points (And technical influences)
Closing back under 1193.50 is a problem for the rally this week. It’s not the only problem. Friday’s close was also back under Monday and Tuesday’s 1192.75 closes (circled red), two sessions whose intraday probes above 1193.50 (red line) had failed. The upper-end of their consolidation can offer support when tested from above as “lower prior highs.” But closing under their closes indicates that their test as support Friday was not just arbitrary noise.

Meanwhile, there was no unfinished business left above. The only two higher closes were Wednesday and Thursday. Thursday’s attempt to extend higher flashed warning signs when its buyers failed to gain traction (highlighted red).

Although Friday’s gap down under Thursday’s lows neutralized Thursday’s new high close, I am a little uncomfortable that the gap back to Thursday’s close wasn’t entirely filled (circled green). Only its prior low was touched before extending down, and that’s a lot of pessimism to leave above the market. Nevertheless, its retest isn’t required.

Still, the most interesting feature to last week’s action is that the three-week old Complex Triangle pattern may be influencing a top. The brief time spent above its 1193.50 target last week was nominal and suspect. Friday’s sudden, steep and substantial drop was the exact character of a Complex Triangle’s reaction. Extending down Monday would confirm a much more sizeable decline underway.

Wednesday’s excess above 1193.50 makes a recovery possible, because it gave that much more room to absorb selling pressure. Monday will offer proof either way. Extending Friday’s drop intraday would be normal after an expiration. Intraday won’t be predictive, not like the close – not like a close under 1185.00.

Bottom line (My underlying premise)
1185.00 is the latest qualifying prior low. Closing under it would qualify as a trend reversal. It would be the first prior low broken on a closing basis, but not the first try. In fact, Friday’s low already took a swipe at it. So, it would be an understatement to call its retest “pivotal,”as breaking lower or not could determine the next major move.[/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 price action ranged exclusively in positive territory above Wednesday’s 1207.00 high. And it meant nothing, since neither end of the morning’s range was probed. The morning’s gain had also meant nothing, since it was retraced when the bias timing window started lapsing. In spite of their efforts Thursday, buyers gained no traction.

Pattern points (And technical influences)
Buyers not gaining traction isn’t that unusual. But price did gain ground, resulting in pent-up selling pressure. Not that it will be relevant before Monday, since Wednesday’s action marginalized sellers for the week. Friday’s version of bearishness might be limited to a probe of Thursday’s highs, or to ranging sideways.

Friday’s version of bearishness might also appear to be normal. For example, overnight action through midnight has trended down. The 1201.25 low has come within 1 point of testing the prior night’s 1201.00 low whose RSIs were oversold. Recovering to open essentially flat from Thursday’s close would then leave no unfinished business below. Friday’s expiration continues to be a wild card in that respect.

Bottom line (My underlying premise)
Sellers should be marginalized, so the only way they’ll be productive is by gapping. This being a Friday, the morning’s bias signal is likely to persist through the noon hour. So, it’s not how likely trending is, it’s how likely trending is to persist if it begins – and how unlikely it is to begin if it’s not underway through the open.[/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 last hour was entered after spending a half-hour ranging narrowly around the 1204.25 prior high. That had been the prior timing window’s high, so its break would have been very bullish. Instead, the next half hour continued ranging narrowly. Not until Wednesday’s last half-hour did trending resume, touching 1207.25.

Pattern points (And technical influences)
A surge above prior highs delayed until the session’s final half-hour. Sound familiar? It’s emblematic of weak hands. Friday was this setup’s previous instance, and its extension Sunday night immediately peaked.

Excessive optimism is another hallmark of weak hands. They dominated Wednesday’s double-digit gain to new highs. From shallow dips both overnight and post-open, to the mid-day series of carefully controlled higher highs and lows – not to mention rallying into the afternoon’s Beige Book report.

Nevertheless, sellers are probably marginalized until after Monday’s open. Trending through the Wednesday of expiration week tends to do that. Extending above the two-week old Complex Triangle’s 1193.50 target has negated its bearishness, assuming Wednesday’s excess isn’t retraced immediately Thursday. In either case, the rally need not extend higher, but dips should be recovered.

Bottom line (My underlying premise)
Meanwhile, quarterly earnings news is coming, and the quantity of econ reports is suddenly rising. Either of these is potentially a wild card, let alone combined. And expiration’s influence can be reversed if Wednesday’s gain is retraced.

PROGRAMMING NOTE: I will not be available during the last 90 minutes of Thursday’s cash session (2:30 through the close). There will be no closing market tour, and Friday’s Trading Plan will be published Thursday evening. I apologize for any inconvenience this might cause.[/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’s probe into positive territory was brief, limited to a test of 1194.75 resistance. The close dipped to test the 1193.50 level, and then another point lower before INTC announced earnings – as deep as possible without letting sellers gain traction. INTC’s news triggered a gap up that probed Tuesday’s high to 1196.25.

Pattern points (And technical influences)
RSIs were simultaneously oversold at Tuesday’s 1185.00 low, requiring its eventual retest. The interim detour suggests that the retest will be in the context of a new downleg, and not just to neutralize the attraction.

Meanwhile, Tuesday morning’s first four checkpoints were each a test of 1121.25 where the cash session opened. Having recalled the morning’s steep drop, it should be expected to attract price back down, too.

Which leaves one piece of business above, Sunday night’s 1198.50 high. It’s not “unfinished,” because it doesn’t require a retest. Its retest would have been in-play had Tuesday’s probe of Monday’s 1195.75 high closed higher instead of holding. But a retest of 1198.50 nonetheless would target either 1200.00 or 1201.50.

A window remains open for starting a new downleg. It’s not open very wide, but it is very high up. Whether as a rejection of early strength, or as early weakness, Wednesday’s session needs to leap out of that window to maintain the topping pattern.

Bottom line (My underlying premise)
After nearly a week with few high-profile econ reports, the calendar gets busy Wednesday. It also finds more high-profile earnings coming before the open. Buyers still haven’t gained any traction since Friday’s late surge – in fact, the surge was retraced to Friday afternoon’s lows. If buyers can’t exploit the setup within a day, then sellers are just getting started.[/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.