Market Wrap

[pay]About that close (How the prior session ended)
Monday’s close ranged sideways above the noon hour’s 1160.50 high, and under the afternoon’s 1163.25 high. The afternoon was already likely to range sideways, albeit widely – both up and down, and not just up.

The morning’s no-bias environment had held a test of the 1151.00 bias-down signal, creating the objective to test the 1161.50 bias-up signal. The afternoon’s no-bias signal was fulfilled by ranging sideways. In the process, the morning signal’s objective was satisfied. No unfinished business was left outstanding.

Pattern points (And technical influences)
Monday’s post-expiration session was on-track to duplicate the expiration session’s pattern, whose trending in the morning was followed by afternoon ranging. Friday morning’s trending was down, Monday’s was up. Friday afternoon’s range widened around the noon hour’s range.

But Monday afternoon’s ranging only probed above the noon hour highs. The range didn’t probe under Monday’s 1157.50 low. This is unfulfilled pent-up selling pressure. It could have been neutralized, had buyers gained traction into the close.

Buyers didn’t gain traction because the afternoon’s no-bias high was tested as resistance when the bias environment had lapsed. And the test held. Having made the effort to extend higher, it became relevant whether the rally did actually extend higher. And whether it did not.

There is always the potential for a delayed reaction. That’s what bias signals are for. It’s essentially the same trigger that would have confirmed trending Monday afternoon. But it’s too late to neutralize Monday’s pent-up selling pressure – if it doesn’t influence Tuesday’s immediate open, then it’s likely to undermine an attempt to extend higher.

Bottom line (My underlying premise)
There’s no requirement to test last week’s highs, but they’ll probably be retested anyway if Tuesday’s open isn’t in decline or already rejecting initial strength. The economic calendar starts to come alive Tuesday, and its timing is interesting. Against its backdrop, Monday’s relief rally will be trying to prove whether it is just that, or more.  [/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 market didn’t immediately reject the no-bias environment’s last-minute blip-up to 1156.25 at 2:30. Trending down through 3:10-3:20 would have been optimal. But the market didn’t plunge until  3:30. That’s too late for any new sponsorship to gain traction.

Sellers weren’t satisfied easily, just quickly. A 10-minute plunge to within 1 tick of the 1150.00 bias-down parameter was retraced entirely after 1-minute RSI diverged positively at the low. The noon hour’s 1155.00 upper-end was recovered into the cash session close. The afternoon’s 1156.25 high was recovered into the futures.

Pattern points (And technical influences)
Friday’s narrow range at its lows – from 1155.00 down to 1152.00 – was already relevant before the morning’s drop even entered it. Wednesday afternoon’s brief failed rally put it into play, with potential to 1150.00, too. Testing each of these levels reacted like an inflated balloon pushed under the water’s surface. Even Thursday morning’s 1156.25 low. Each push down soon popped back up.

Each pop up also pushed back down. Friday’s last push down to 1150.00 could have greeted Monday’s open with pent-up buying pressure. The week could have started with a bullish element. Instead, the last pop up replaced an oversold condition with overbought.

To be sure, Friday’s late low fulfilled the maximum objective created by Wednesday afternoon’s brief failed rally. And last-minute price action doesn’t get a benefit of the doubt. This applies triply to the final 15-minute bounce, for being on a Friday and also on expiration. Similarly, Friday’s opening gap up was “clearly related to expiration’s rotation.”

Expiration’s characteristics tend to persist through Monday morning. Friday’s trending suggests that Monday’s open will try trending, too. Friday’s downtrend suggest that Monday morning will trend down, too. The session might also begin with a head-fake similar to Friday’s open, and its resolution could be very predictive of direction for the next several sessions.

Bottom line (My underlying premise)
No doubt this weekend’s legislative showdown has influenced recent price action. Rather than judge its merits, my purview is to assess any impact from anticipation of the event, and then to anticipate the reaction when the event becomes history. In my work, price doesn’t discount the legislation, it discounts the attention span. The character of last week’s price action suggests that attention has been straining to look up. After this event has exploited all available optimism, which may be sorely missed immediately after the event.[/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)
All of Thursday morning’s relevant timing windows were attracted back to unchanged levels around 1161.25. Both the noon hour and afternoon’s bias window were spent below it. But 1161.25 was retested as resistance when the afternoon’s bias environment began lapsing after 2:30. It held that test, and then another during the last half-hour lasting into the close.

Pattern points (And technical influences)
Thursday’s pattern consisted of a late dip into the noon hour, which was retraced into the afternoon. Both the morning and the last hour ranged narrowly. That’s quite a contrast from Wednesday’s gap up extension of Tuesday’s rally, and its wide intraday round-trip. The previous price action had suggested that Friday’s “quadruple witch” expiration could be volatile and/or trending.

Credible trending Friday would be underway at the open or within minutes. Trending on an expiration day is unlikely to wait beyond the first half-hour before beginning. A valid trending attempt on an expiration day would be likely to trend into the last hour, and out of Monday’s open.

There’s a requirement to probe at least several points into Tuesday’s range. So, it was excessively optimistic for Wednesday’s lows to narrowly avoid even touching 1155.00 Tuesday’s high. This reflects optimism, and the unfinished business below keeps alive the potential for a decline. But if that decline isn’t underway at the open, then expiration’s influences could magnify the optimism for a retest of Wednesday’s 1165.00 highs.

Bottom line (My underlying premise)
No matter how much less likely Friday trending has become due to Thursday’s inaction, trending is still possible. And it would be difficult to stop. Expirations can give false signals within the range, but not beyond the range. The narrowest definition of the range is 1158.00-1162.50, and a probe of either would be assessed for its trending potential.  [/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)
Had buyers waited for the afternoon’s no-bias environment to lapse after 2:30, their probe of higher highs would have gained traction. Impatient weak hands lack durability, limiting their gains to just 3-4 points at 1165.00. RSIs diverged negatively there, and the afternoon’s false break was retraced back down to the 1158.00 opening print.

The opening print was a gap, and a gap offers natural support. Its test produced a bounce probed the open’s 1161.50 high, which was still being tested into the close. Again, weak hands. Had this late bounce not touched the open’s high, then it wouldn’t be judged by whether the open’s high held as resistance. It was tested, reflecting that sellers were the patient ones. Its test held, reflecting that the buyers involved were weak hands.

Pattern points (And technical influences)
Bigger sell signal averted. Closing under 1158.00 might have merited holding short through the close. RSIs were oversold at the low, making its retest likely. Had it been retested before the close, RSIs could have easily diverged positively. Again, patient sellers left that test for later – keeping the bearish attraction alive overnight, all but invalidating the potential for a positive divergence.

Ill-timed effort. Notice that the afternoon’s no-bias rally was retraced when the no-bias environment lapsed, instead of waiting for another day. While this prevented buyers from gaining any traction, it also cast those buyers as weak hands. So the consequence isn’t just the no-bias rally’s retracement back to its 1162.25 origin, but the retracement of all of Wednesday’s rally from Tuesday’s 1154.75 close.

Tuesday’s rally didn’t extend immediately higher on existing sponsorship, nor did it first dip to refuel buyers. It extended higher eventually, without the benefit of either. Its complete retracement back to pre-FOMC highs is 1152.50, which was reached originally Tuesday in the process of neutralizing what was unfinished business above. The domino effect would only begin there, and not end.

Where’s the beef? Meanwhile, sellers lack one very important asset: Actually triggering a sell signal on a closing basis. Wednesday’s high can be retested, probed and extended – and may yet be – until the thinness of the stretched rubber band either snaps back, or breaks.

Expiration influences. If counter-trend sponsorship isn’t obviously retaking control Wednesday afternoon of expiration week, then it’s probably not a meaningful force. It didn’t, but Wednesday afternoon’s reversal buys a little time through Thursday’s open. This wouldn’t necessarily default to being a runaway rally, but it wold makes dips likely to recover.

Bottom line (My underlying premise)
For all this talk about “weak hands,” I should take a moment to be clear about the implications. It’s not just that weak hands don’t lead durable trends. It’s that weak hands don’t take the lead if stronger sponsorship is available. Price is rallying instead of declining, not because stronger sponsorship is accumulating, but because sellers aren’t presenting much opposition.

Does that matter if the intraday ends higher anyway? Well, yes, because it helps to define the character of that intraday, i.e. it made Wednesday afternoon’s rally suspicious before it happened. It also tells us that all of Wednesday’s rally must be retraced, not just the no-bias portion.

And it tells us – well in advance – that when the trend does reverse down, it will reverse down in a very, very big way. [/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 morning’s 1153.00 high was retraced down to 1149.00 ahead of the FOMC news. Its reaction probed the morning’s high by 1 point before again retesting 1149.00. The highs were retested again into the close.

Instead of refueling by trapping shorts under its its interim low, buying pressure was expended to probe the range’s upper-end. Tuesday’s last half-hour probed the morning’s high up to 1155.75, but the fresh high was only 61.8% above the 1149-1152 range, so it still qualified as being noise – not a breakout.

Pattern points (And technical influences)
The news is out, and when the dust settled on its reaction, price remained higher. This tends to be one of the market’s behaviors that is self-fulfilling. Higher highs are likely Wednesday, even if only temporarily.

Extending to new highs without delay would be more bullish than pulling back first. It may seem counter-intuitive, but an early dip would confirm that the FOMC news didn’t attract new buying sponsorship.

A weaker open should recover from testing 1150.00-1151.00 – again, even if only temporarily. Almost any higher close Wednesday would extend the rally to 1170.00 and potentially 1179.00.

New highs are not a sell signal. A break lower requires a break (of support) lower. Intraday moves don’t necessarily hold through the close. Wreversal Wednesdays are vulnerable to reversing the prevailing trend. But a sell-off that wasn’t substantial enough to reverse under 1146.00 would be suspicious.

Bottom line (My underlying premise)
Buyers still get a benefit of the doubt as they did at Monday’s open, Tuesday’s open and Tuesday’s mid-day dip. But that benefit remains narrow, as narrow as Tuesday afternoon’s higher highs. The rubber band is still stretching.[/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.