Market Wrap

[pay]About that close (How the prior session ended)
It took awhile for the morning’s no-bias drop to recover. But Monday’s last 90 minutes did rally from the morning’s 1139.75 bias-down signal back to Friday’s 1146.50 futures close. And that was up from the morning’s 1136.50 low.

The oversold condition at Monday’s low is now overbought. Similarly, having filled the gap back to Friday’s close, its attraction is neutralized. And the recovery failed to close in positive territory, so its buyers gained no traction.

Pattern points (And technical influences)
Even before Monday afternoon’s rally began, the setup had already warned the same thing as late Thursday – that a rally’s sponsorship would be weak hands. Naturally then, the rally’s weak handed sponsorship has nothing to show for the energy it expended.

Of course, sellers didn’t gain traction either. And Monday’s close held Friday’s lows as support. This keeps price in the orbit of Friday’s 1150.00 opening gap. Unless Tuesday’s open were to reject Monday afternoon’s rally (by gapping under its 1138.25 origin), there’s still potential back to 1150.00-1152.00.

Meanwhile, the session’s volatility keeps alive the “rubber band” setup. The analogy loses its meaning a little here – so long as the market is still reverberating. The optimal bearish setup would quickly reject an early surge. A bullish setup would recover from another dip to 1142.00.

Bottom line (My underlying premise)
While the optimal resolution would begin early Tuesday, Monday’s volatility did buy the pattern some time to rest. Tuesday afternoon’s FOMC meeting would be an well-timed catalyst, able to jump start a flat market, reverse a trending attempt, or else accelerate one.[/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 pre-open rally probed Thursday’s high by 6 points up to 1152.00. Half of that was a spike up on news an hour before the open. An hour later, price was 10 points lower probing overnight lows down to 1142.00.

There was no other trending attempt through any other timing window, and none was required. In fact, none was likely before the last 60-90 minutes. Finally the last hour did dip 3 points, and then retraced it when RSIs diverged positively.

But it was all noise within the range. The last-minute retracement did probe the afternoon highs up to 1147.00 after 4:00. But its timing qualified it as noise, too. The cash session close was essentially unchanged from Thursday’s close.

Pattern points (And technical influences)
The sponsorship of Thursday’s late rally was characterized as being weak hands before it even started. Completely retracing it back to the 1142.00 breakout point at the next open confirmed it. The spike up to 1152.00 was a reaction to news, disqualifying it from being a “new Globex trend extreme.” Its retest isn’t required, but it’s still an attraction.

Reacting down sharply from 1152.00 would confirm that its buyers were weak hands. Any attraction to it, or to the open’s 1150.00 gap, can be neutralized by retesting it overnight, or by gapping down under Friday’s 1142.00 low. Either scenario would conform to the “Rubber band” setup forming:

The “rubber band” setup identifies extreme optimism and impatience just before price either reverses direction sharply, or accelerates in the current direction (more often the former than the latter). S&P futures have closed higher for 11 consecutive sessions. At least twice during that time, S&P cash was essentially unchanged. No lower low to recover from, no dip that touches a prior high before bouncing. “Unchanged” is the only correction, and there have been only two.

Even if the rally stumbles Monday, there’s room down to 1131.00 before signaling the trend has reversed down. A lot of damage would be done in the process, but it could still be repaired during several days of ranging sideways. Meanwhile, accelerating the current rally would next target 1160.00 and 1166.00.

Bottom line (My underlying premise)
Friday’s flat session on the sequence’s day-11 doesn’t invalidate the setup. A second consecutive flat session would. This is a challenge, since narrow range-bound Friday afternoons often repeat on Monday morning. So, in the context of the “rubber band” setup, a volatile open Monday that extends the rally would be more appropriate than opening flat to lower. Even more appropriate for the “rubber band” setup? A steep sell-off, regardless of initial price action.[/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 began lapsing after 2:30, freeing its narrow trading range to begin trending. It was greeted by an uptick, and not a down tick. The morning’s no-bias environment had created the objective to test 1142.75, and it was tested by a surge at 3:00 that extended to 1144.00.

Overbought RSIs at the high prevented a dip down to 1142.00 from gaining traction. Any lower was unlikely, because any lower would have signaled momentum reversing down. Meanwhile, the dip formed a bullish Falling Wedge continuation pattern. The required retest of its high extended up to 1146.25.

Pattern points (And technical influences)
The timing of Thursday’s late surge is revealing of its weak-handed sponsorship. Waiting until there was too little time for the opposition to mount a defense allowed the classic short-squeeze. Clever. Not well masked – the timing, its inflection point and its behavior all developed on cue – but clever nonetheless.

The cleverness was self-defeating, because it borrowed from Friday’s buying pressure. “Ineffectual pessimism” had formed from gapping down and ranging exclusively in negative territory. Pent-up buying pressure would have fueled the rally’s resumption Friday. Instead, Wednesday’s 1143.25 high wasn’t exceeded until Thursday’s last ten minutes, which is hardly timing for a reliable breakout.

Thursday’s clever last-minute optimists are benefiting from patient sellers, and might continue benefiting. S&P cash (SPX) has returned to January’s high, which is likely to at least be probed. Meanwhile, my “Rubber band” crash setup has completed with at least nine of ten consecutive sessions closing higher. Avoiding a deep sell-off Friday could extend the rally three more days.

Only 3-minute RSI remained overbought at Thursday’s 1146.25 closing high. A shallow pullback has room down to 1142.00-1143.00 without sellers gaining traction. Gapping down under 1139.25 would reject the last hour’s rally altogether as if it had never happened. Otherwise, the rally’s momentum remains intact.

Bottom line (My underlying premise)
This being a Friday, the morning’s bias signal is likely to persist into the afternoon. A bias-up then at this stage of the pattern could marginalize sellers through next week’s open. A bias-down could punish the sponsorship of Thursday’s last-hour rally, and also the sponsorship of the morning’s recovery. If this rally isn’t rejected forcefully with little delay before the weekend, then it could extend up sharply through Monday’s 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 close was still testing Tuesday’s 1145.25 high. The two prior sessions had probed the two prior sessions’ highs, and each had held as resistance. Still testing the prior session’s high isn’t much different – in neither case did buyers gain traction.

Pattern points (And technical influences)
That wasn’t even the session high. It was an attack on the afternoon’s high, which was itself an attack on the morning’s high. The afternoon’s high could have extended higher instead of diving 6 points. So, an opportunity to rally was ignored.

No new trending before the close left the third possible scenario for this stage of the pattern. Its bearish resolution called for ranging sideways into the close. It’s not a sell signal, and it doesn’t prevent a buy signal from appearing. But it does clear the way for selling to gain traction if a decline were attempted.

Bottom line (My underlying premise)
Gapping down at Thursday’s open to Wednesday’s lows would leave no unfinished business above in this pattern. But I’ll be watching overnight in case of a failed probe of Wednesday’s highs that’s already in decline before the morning’s news. There’s a steady flow of news, very little of it high-profile after the pre-open Jobless Claims… The front-month rolls to Jun at Thursday’s open. Its pricing is 4-1/2 points under Mar.  [/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 recovery to new relative highs tracked an intraday pattern that included one more trending leg. Typically that leg is in the direction of the morning’s trend. And when that leg is delayed by a narrow range, its rally tends to be substantial.

The session’s last trending leg was delayed by a narrow after bias environment, and so it trended sharply. But it didn’t resume the morning’s rally.

The drop was still a product of the price action preceding it. So it is relevant that the 1139.75 close was still in the process of testing Monday’s highs as resistance. Buyers didn’t gain any traction. The substantial morning-long rally and the probe of prior highs expended a lot of buying pressure. But the ranging that began at Friday’s high is still forming.

Pattern points (And technical influences)
Although Tuesday afternoon’s bias-up environment didn’t hit its target, it did touch the 1145.25 bias-up target of the past several bias timing signals. And the bias-up environment ended within a tick or two of session highs. There is no unfinished business above.

The afternoon’s drop did retrace 61.8% of the morning’s rally, so there is potential for bouncing overnight, but no requirement.

The drop bottomed 1 tick short of 1136.00, whose break would have merited holding short through the close. Optimism prevented touching it despite coming so close and so forcefully. Despite the potential to bounce overnight, it would be likely to fail. In fact, oversold RSIs at the drop’s low 1136.25 require its retest.

Since Tuesday’s session closed with a bounce, and the afternoon’s 1136.25 low printed prior to the last half-hour, a gap down under 1136.25 would trigger the session-long decline setup. Like Tuesday’s open, a gap up is needed to extend the rally.

Bottom line (My underlying premise)
Tuesday afternoon’s highs consolidated around 1143.00, which is essentially the “higher prior low.” Its retest overnight would be likely to push price back down. Its recovery would give a rally another chance at gaining traction. Like Tuesday, most other scenarios simply point down… The front-month rolls to Jun at Thursday’s open. Its pricing is 4-1/2 points under Mar.[/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.