Market Wrap

[pay]About that close (How the prior session ended)
Monday afternoon’s no-bias environment lapsed without yet fulfilling a reaction from 1195.75 down to 1192.25. Its target was finally touched by a drop that trended down through 3:10-3:20. The drop also touched Monday’s 1191.00 pre-open lows. A bounce into the close held 1193.50 as resistance.

Pattern points (And technical influences)
1193.50‘s significance was depicted again in the chart accompanying yesterday’s Trading Plan. The objective was met and held on a closing basis. In fact, the objective’s noise up to 1198.50 was met overnight and held.

Having met and held its objective(s), the Complex Triangle pattern’s downleg is now free to begin. A more conservative objective derived from the same Complex Triangle previously reacted down, so some sort of drop is likely. There’s another setup making a drop likely: the current Fri-Mon price action on Apr 9-12 compared to the Jan8-11 template.

The last half-hour surge Friday extended only into Sunday night in both instances. January’s drop was delayed until Tuesday’s open, after Monday’s session formed “ineffectual optimism.” In fact, the ineffectual optimism is more prevalent this week. Unlike January’s dip, Monday’s low didn’t even touch Friday’s highs.

Monday’s close was high enough to maintain potential to retest Sunday night’s 1198.50 high. But it would have to begin by gapping up above Monday’s high, because buyers didn’t gain traction. (Despite gaining ground, Monday afternoon’s fresh session high was rejected to close back under the morning’s high.) Otherwise, any early weakness would be credible for extending down into the noon hour.

Bottom line (My underlying premise)
It’s difficult to see a bearish resolution starting to form when new highs just printed several hours earlier. But Friday’s late breakout from a stand-still, and the lack of sustained follow-through, don’t suggest that a runaway rally is underway. A higher close could be bullish, but the greater vulnerability is 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)
Dow 11,000 came Friday not with a bang, but with a whimper. The last half-hour of any session is not reliable unless a pattern’s breakout is already trending. Friday’s two consecutive no-bias environments held Tuesday’s 1188.00 high as resistance and didn’t trigger any higher target. But the surge’s cash session’s close met the afternoon’s 1190.50 bias-up target, and the futures close touched 1193.00.

Pattern points (And technical influences)
Friday’s open filled the gap back to Thursday’s 1183.50 close twice. This overkill typically means a much deeper third test is coming. One attraction lower could be that Friday morning’s no-bias environment has yet to meet its 1179.50 objective.

Another attraction lower could be the two-week old Complex Triangle. It 161.8% Fibonacci extension at 1193.50 was nearly touched after Friday’s close. A conservative calculation was met and held by Tuesday’s highs. At least some negative reaction is likely again.

Gapping down Monday under 1185.00 would trigger that negative reaction, and a session-long decline. Such a reaction would be very negative initially, but ultimately it would be bullish – its gap would create unfinished business back to Friday’s 1192.75 close. Extending higher first before reversing down Monday would be bearish.

Friday’s late surge already meant little before it even started, having waited so long before beginning. The narrowing intraday trading range formed a Triangle that already suggests the breakout is false. Nearly touching the 1193.50 objective while briefly piercing Dow 11,000 suggests that its peak is already printing.

Bottom line (My underlying premise)
Monday’s only alternative to producing a noticeable peak should be noticeable, itself. Not just trending higher, but also trending throughout the morning. Maintaining new highs going into the noon hour would help greatly to marginalize sellers. [/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 highs met the afternoon’s 1184.50 bias-up target just before Thursday’s last hour began. But it held as resistance, and the balance of the session ranged narrowly back down to prior highs around 1183.00. Since the two timing windows ranged around the same level, all price action since first meeting 1183.00 can be considered as noise.

Pattern points (And technical influences)
If is no unmet target outstanding above, and not resistance is recovered through the close, then buyers gained no traction. This wouldn’t be too significant if Thursday’s intraday action had not trended up throughout.

At least all of Thursday afternoon’s price action was just noise. It’s two timing windows that buyers didn’t exploit, but they didn’t expend any energy needlessly.

So, Friday is equally free to resume either Thursday’s rally, or Wednesday’s decline. A significant attempt at one or the other is likely, if one or the other is obvious at the open. Otherwise, price action through the noon hour would more likely duplicate Thursday afternoon’s narrow ranging.

Bottom line (My underlying premise)
With the exception of Bernanke’s overnight speech, only one minor econ report remains this week. No news had better be good news if Thursday’s rally intends to extend higher. This being a Friday, the morning’s bias is likely to extend through the noon hour. Trending through the noon hour would remain vulnerable to being retraced into the close. [/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)
The afternoon’s no-bias environment lapsed into a test of the morning’s 1182.50 bias-down signal. Its retest into the session’s last major timing window was redundant, and reflected shallow sponsorship among buyers. The drop extended down sharply to attack 1173.00.A bounce off the low peaked upon testing 1179.00 as resistance, which was still being tested as resistance into the close.

Pattern points (And technical influences)
A close under the morning’s 1179.00 low would have triggered a very bearish setup. While the close didn’t clearly break under 1179.00, neither was 1179.00 clearly recovered. A signal that tries to form, but does not, often signals the opposite resolution.

Like Wednesday morning’s indecision at 1182.50, Wednesday’s close at 1179.00 might still bounce a little further. But a rally environment would have clearly recovered 1179.00, or avoided probing 1179.00 altogether.

Last week’s complex pattern projected several candidates for new highs, with the likeliest resolution being a major downleg. The first two targets were met Tuesday and held on a closing basis. Wednesday afternoons sudden and steep rejection of its intraday recovery could be serve as the resolution’s first downleg. The next one would be substantial.

Having avoided closing decisively under 1179.00, there’s still a window open for resuming the rally. Now that sellers have come out into the daylight, they can’t afford too much of a bounce before pressuring price lower. Buyers would start gaining traction above 1182.50.

Bottom line (My underlying premise)
The market is at a critical juncture, vulnerable either to dropping sharply or else to extend the rally substantially. Steep drop, or higher targets. Wednesday’s behavior is entirely appropriate for this stage of the pattern that preceded it, and for launching the decline scenario. So if sellers can’t find sponsorship to exploit the setup, then they’ll pay a heavy price with a bigger rally.[/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 last action was to retrace the afternoon’s no-bias trending. FOMC’s news had triggered a rally from 1183.25 to 1188.00. That was retraced back down to the morning’s 1184.50 high.

The late action also tested 1185.50 as support. This important target was hardly acknowledged on the way up. It deserved recognition, so after dipping under it, Tuesday’s last half-hour ranged narrowly around it.

Pattern points (And technical influences)
In fact, both Tuesday’s cash and futures sessions closed within 1 tick either way of 1185.50. Virtually no pattern allowed a downleg prior to somehow visiting 1185.50. It was tested. It was probed. And it ultimately held and defined the close.

Last week’s interim consolidation between its two highs formed a Complex Triangle. Its 1193.25 target can still be met intraday. If not rejected suddenly by a steep and substantial drop, then a much more substantial rally is underway.

Bottom line (My underlying premise)
The past two sessions opened lower and held critical support, then triggered buy signals that extended much higher. Third time’s a charm? Yes, and no. More likely is that the Pavlovian response prevents an initial dip. An opening surge is vulnerable either to extending up sharply, or else to reversing down sharply. So likely is an immediately gain to new highs that its failure to appear would be very bearish. [/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.