Market Wrap

[pay]About that close (How the prior session ended)
A session’s last half-hour is a product of, or a reaction to, price action that precedes it. The price action that preceded Monday’s last half-hour wasn’t much to speak of. Having squandered the session’s earlier trending opportunities, there was no requirement to trend at all. And none was made.

Pattern points (And technical influences)
Monday’s cash session only repeated half of the overnight action, its probe of Friday’s 1138.75 last relative high. In fact, the cash session repeated this action twice, both in the morning and in the afternoon. Monday’s 1135.50 last relative low was only attacked within 2 ticks.

Probing the prior session’s highs and avoiding the lows is optimism. So is gapping up, and spending the entire session in positive territory. But not closing above the prior session’s highs is ineffectual. “Ineffectual optimism” identifies buyers making an effort, only to trap themselves. This usually resolves with the trapped buyers, scrambling to un-trap themselves, fueling a move in the opposite direction.

There is no unfinished business above the market. Friday’s high peaked at its target, which held probes by Monday’s highs. A test of Monday’s ~1140.00 highs would be likely to hold again, and now also likely to react down sharply. Sellers would be marginalized if not rejected through the first 30-45 minutes. There’s a relatively thick band of support at 1133.50-1135.50, and breaking under it through any relevant timing window would point down sharply.

Bottom line (My underlying premise)
In the absence of any econ reports, Monday’s session failed to rally. Tuesday’s calendar is like Monday, but with a couple of reports, which is to say that those reports aren’t very influential. Wednesday, too. Tuesday will be greeted by no news, no higher targets, and no momentum from the prior day. Except for a gap up that extends higher through the open, most other scenarios point flat to lower. [/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 1138.75 target was met as Friday’s last hour began. This measurement was the highest calculable target from the opening dip that held its 1125.75-1126.75 pullback limit. Proof of the target’s relevance came not from peaking precisely there, but from its reaction’s dive.

That dive could have broken under 1135.50 to trigger a much deeper slide. It would have been pretty deep, and it would have neutralized the overbought condition. The dip only touched 1135.50, and only 1-minute RSI became oversold. So, Friday’s 1138.75 high should be retested next, since RSIs were overbought there. The retest is likely to hold, since the 3:10-3:20 window trended down.

Pattern points (And technical influences)
Thursday’s last-minute optimism had reflected optimism among weak hands. That’s potentially bearish from a contrarian perspective. To be sure, the Employment Situation’s entire spike up was retraced entirely an hour later. But the overnight gains were preserved, and the cash session extended higher.

The entire upleg since Feb 25’s gap down has been characterized by optimism – gaps up, shallow dips, narrow consolidations. The gaps represent unfinished business below. “Lower prior highs” like 1122.50 and overnight lows like 1114.00 will attract price down. But not until there is a close under a prior low, which last week’s consolidation avoided.

A first step down would be to reject Friday afternoon’s rally, because its 1134.00 origin was in a narrow extended trading range. The minimum objective of gapping down under 1134.00 at Monday’s open would back to Friday’s 1126.00 lows. But it would be one giant step closer to 1122.50 and 1111.00.

An alternative first step down would first retest Friday’s 1138.75 high. But that’s also the next step to extending higher. The difference would be in whether 1141.00-1143.00 held as resistance. Extending above 1145.00 would target 1153.00, new highs for the year.

Bottom line (My underlying premise)
Friday’s test of January’s “higher prior lows” could have held as resistance, and left pent-up buying pressure to resume the rally Monday. Instead, Friday’s highs retraced into the range at January’s highs. All of Friday’s buying pressure was fulfilled intraday. A probe of January’s highs would be only a formality if the rally extended any higher through any relevant timing window Monday – there’s no unfinished business above, so extending higher would be bullish. And having no unfinished business above, a sell signal would be credible if triggered. [/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 last half-hour’s trending attempt validated my suspicions throughout the day that the narrow ranging had something in store for the last hour. It didn’t come until after 3:10-3:20, and not even before 3:30, when a break higher would have been reliable. But it did follow the path of probing session highs.

In fact, the trending developed during the position-squaring window. There certainly wasn’t much enthusiasm for going into the Employment Situation report exposed to the downside. Buyers were the weakest hands – desks and day traders that have to be done by the close, and speculators making a “bet” on a reaction to the report.

From a contrarian perspective, longs should be concerned. Or if given the opportunity to exit into strength, they might want to consider it.

Pattern points (And technical influences)
Had the late surge closed above the morning’s high after probing it, buyers would have gained traction. Had the morning’s high not been probed, then the surge would have been only noise. Instead,buying pressure was expended without gaining traction. That’s not a stable base for launching durable rally legs.

Yer, the late buyers might be right, at least initially, momentarily – and possibly in a relatively big way. After all, sellers still haven’t gained traction in three days of ranging sideways and repeatedly testing Tuesday morning’s 1116.25 low as support. Most of those tests have bottomed impatiently, without first probing a fresh low. A knee-jerk reaction up or early rally to 1129.00-1130.00 is possible.

Thursday’s last-minute surge opened door to an overnight dip. Since it originated during the last half-hour, it can be rejected by Friday gapping down under its 1120.75 or 1119.00 origin. There would be no unfinished business above.

Bottom line (My underlying premise)
Fridays are always interesting, but less so on Employment Situation reports. That’s because the initial reaction can play out before the open. So any trending intraday will need a solid reaction or whipsaw to precede it, to avoid momentum dying on the vine before the weekend.[/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 slide from Wednesday morning’s 1125.00 highs slid to its most pessimistic extreme at 1115.50. Falling any lower would have given buyers a chance to undermine sellers, by recovering back above 1117.25, and trapping shorts.

RSIs were oversold at the 1115.50 low. A retest could have formed a positive divergence, and a durable bottom. Anyway, only weak-handed sellers would have sponsored the bounce’s retracement so late in the day. Even a lower close would have been suspicious, and vulnerable to recovery Thursday.

Pattern points (And technical influences)
Instead, the 1115.50 low’s oversold RSIs still require a retest. The late bounce’s buying was sponsored by weak hands. The bounce neutralized the low’s oversold condition, instead of letting an oversold bounce get the day started bullishly on Thursday. Sellers didn’t gain any traction on the positive close, but they didn’t lose any, either – and buyers didn’t gain any traction that they didn’t already have.

There is no unfinished business above. It has been resolved almost as quickly as it was created – from Tuesday’s pre-open surge to 1122.75 being retested that afternoon, to Tuesday’s opening gap being tested at Wednesday’s open, to any semblance of overbought RSIs Wednesday morning.

Gapping down Thursday under the 1115.00 lows could create new unfinished business back to Wednesday’s ~1118.00 close. Filling it quickly enough would invite durable selling. A gap under 1112.00 would not require filling any gap above 1114.50. By the same token, gapping up would leave open a gap back down to Wednesday’s close, unless the gap were above Wednesday’s 1125.00 highs.

Bottom line (My underlying premise)
There is a cornucopia of econ reports and related items Thursday, so a flat open is unlikely. Some sort of gap will be made, and it will probably influence the initial path to reaching the pattern’s eventual resolution. Regardless, unless the open does gap up above Wednesday’s highs, this pattern is still positioned to resolve 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)
Tuesday afternoon was unlikely to range narrowly because that’s what Monday afternoon did. There’s more to it than that. Both mornings had already tracked the same template, recovering from an opening dip, only to run out of buyers when probing session highs. Setups rarely repeat consecutively.

A slide into the session’s last half-hour fell from new session highs at 1122.75 to new session lows at 1115.25. That barely touched Monday’s high – which was itself only a momentary spike up – conspicuously avoiding the gap back to Monday’s close. It was hardly sufficient for a bottom, but the late timing fostered a slight bounce into the close.

Pattern points (And technical influences)
The noon hour had already attempted to trend down, but was only able to briefly probe its 1120.25 trigger. Its next break came as the afternoon’s no-bias environment was lapsing. This time there was no unfinished business above – the pre-open spike’s overbought RSIswere retested at 1122.75 during the no-bias environment.

Had the afternoon’s slide violated 1117.00 before the session’s last half-hour, the results could have been disastrous. Monday’s session would have been sliced through, on the way to Friday’s highs at 1105.00. Piercing 1117.00 so late helped Monday’s highs to hold as support.

Having closed back within the morning’s range after probing it, sellers did not gain traction. But the impatient bounce at Tuesday’s low suggests that buying isn’t very deep, either. A gap down under Monday afternoon’s 1111.50-1112.00 lows would inject sellers with traction, and put into play 1105.00.

Absent gapping down, Wednesday’s open is likely to retest Tuesday’s 1118.75 opening gap up. There’s room up to 1121.25-1122.00 before buyers gain traction to extend the rally. Even then, Tuesday afternoon’s slid gives cover to absorb much of a rally’s buying pressure. Any rally attempt that doesn’t trigger a breakout would be vulnerable to reversing down.

Bottom line (My underlying premise)
Tuesday’s pre-open surge was odd. There was no basis for it. Despite its complete retracement, after retesting its overbought high, it’s still suspicious. Fresh highs that immediately recover it would be really suspicious. Between the Greek debt crisis, and the administration blatantly managing down expectations ahead of Friday’s Employment report, I wouldn’t entertain shorting if another one of these rogue surges appeared. [/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.