Market Wrap

[pay]At the close (How the prior session ended)
Perhaps I shouldn’t be surprised that the decline into Monday’s close wasn’t much more pronounced. A 15-point drop from morning highs at 1068.50 had touched 1053.00, probing the morning’s 1056.00 retest of overnight lows.

My theme for the day was “disappointment,” its intended victim being the optimism generated by Friday afternoon’s recovery. We already knew that buyers gained no traction for their efforts. And resistance at 1067.50-1069.50 had held a couple of tests.

Apparently the surge from Friday’s lows generated a lot of optimism. Despite most of Monday trending down, no doubt there were hopeful buyers all the way. Unless the afternoon drop is rejected at Tuesday’s open, the theme of disappointment should become more prominent intraday.

Pattern points (And technical influences)
Where Friday afternoon’s buyers failed to gain traction, Monday afternoon’s sellers succeeded. Friday’s rally tested prior highs but closed under them. Monday’s decline probed prior lows (the morning’s retest of the 1056.00 overnight low) and closed under them.

There is no unfinished business above the market. So, opening forcefully higher – above the afternoon’s 1063.75 high – would require sponsorship. Almost any shallower opening strength would be a temporary reaction bounce. A bounce isn’t necessary before extending down. But considering the slow onset of disappointment, perhaps it shouldn’t be surprising.

Bottom line (My underlying premise)
Assuming that a better rally effort doesn’t get underway, I’m very eager to learn how a retest of Friday’s lows is handled. It’s too late for a positive divergence with Friday’s reading. And even a shallow bounce would still be near Friday’s low – launching a downleg early enough would have plenty of opportunity to extend down sharply. So great is the opportunity for extending the decline, that a failed attempt would be considered bullish. [/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]At the close (How the prior session ended)
1-min RSI had improved into session lows at 1040.75, formed a reversal pattern, and violated its bounce limit. The pattern’s 1048.00-1049.00 target was met, and definitely influenced price action for a half-hour into 3:00.

Resuming the decline would have produced a 15-point dive to 1034.00. Not resuming the decline produced a 15-point rally up to 1064.00. Such is the weirdness of Friday afternoon. Even after testing 1058.00 through 3:20, a dive to new session lows would not have been surprising.

Pattern points (And technical influences)
A return to Friday’s lows remains possible thanks to its last-minute action. The recovery’s ultimate 1064.00 high was part of a structure that included two prior highs. And Friday’s close reversed back under both. It’s not a sell signal, but it opens the door to one. Buyers responsible for the last push higher gained no traction for their effort, wasting any traction gained by earlier buyers. Closing before making that last push higher would have been more bullish.

All of the last two hours’ rally makes matters more difficult on buyers going forward. The low’s oversold condition creates pent-up buying pressure, and that might be sorely missed at Monday’s open. That said, it’s probably not a factor if ignored. through Sunday evening.

Meanwhile, RSIs were oversold at Friday’s bottom, enough to require a retest. The 3-minute RSI had been persistently oversold into the low, which undermines the quality of the recovery’s sponsorship.Friday’s base is too unstable to launch a durable rally. Without an immediate 8-10 point gain above 1067.50-1069.50, the three-week long decline remains especially vulnerable to probing new lows Monday or Tuesday.

Bottom line (My underlying premise)
A two-hour, 24-point rally is nothing to sneeze at. But recovering ground lost in the same session is bullish if extended on a closing basis. Yet, only S&P Cash closed positive, let alone above the morning’s high, and then only in Friday’s last several minutes. That can be accomplished after the fact by proxy, by spiking or gapping up at Monday’s open, above Thursday’s next resistance. Otherwise, much lower lows lie ahead. [/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]At the close (How the prior session ended)
Thursday’s open reversed Wednesday’s last surge by gapping under its afternoon low, triggering a session-long decline. Wednesday’s last surge was contained within the afternoon’s range, but that didn’t stop the setup from  trending down into Thursday’s close.

Bounces throughout the decline were relatively shallow, none probing a prior high. Thursday’s second-to-last hour was the most serious bounce attempt, touching the 1069.50 level that earlier would have called off any shorts. But it failed to recover, and launched a 10-point dive to 1059.25.

Pattern points (And technical influences)
The corrective bounce from last Friday’s low stuck to its template, except for resuming the decline before Thursday afternoon. A session-long decline reflects pessimism, and Thursday’s particular trending does, too. Starting the decline ahead of schedule certainly isn’t optimistic.

None of which is a buy signal. But it does argue for staying on guard for a bottom. Otherwise, there’s nothing bullish about greeting the Employment  Situation report from under prior lows, especially on a Friday.

Unless Friday’s open is a gap up above Thursday afternoon’s 1069.50 high, the decline should resume to lower lows. A favorable reaction should have already reversed down by the open, or be well on its way.

The next major target is 1056.00, so it is likely to be defended with gusto. The greater the optimistic hesitation there is in approaching it, the more likely it will break sharply. Lower support is few and far between, essentially every 10-11 points at 1046.25, 1037.00 and 1026.00.

Bottom line (My underlying premise)
There was nothing bullish about Thursday’s decline. And no durable bottom can form without first probing lower lows. Overnight action tends to be subdued ahead of the Employment report, but the Employment report isn’t often preceded by the biggest decline in months. And being a Friday, the morning’s bias signal should persist well through the noon hour. [/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]At the close (How the prior session ended)
Wednesday afternoon’s narrow range, like the morning’s slightly wider range, did everything the market was supposed to do, and nothing it wasn’t supposed to do. That was the problem. The corrective bounce maxxed out at Tuesday’s highs, and sellers are marginalized through Thursday afternoon, so trending wasn’t likely.

The close also attacked the critical 1097.50 area. And like the afternoon’s prior attacks there, the 1097.50 area wasn’t touched. This reflects pessimism, which is potentially bullish from a contrarian perspective. In fact, S&Ps quickly recovered to 1098.25 at the Globex open.

Pattern points (And technical influences)
Wednesday’s gap down recovered briefly into positive territory. The balance of the session ranged in negative territory. That brief probe of positive territory disqualifies the session from being labeled ineffectual pessimism.

Recent highs around 1101.00 is likely to be probed at some point, probably Thursday morning unless the open gaps down under Wednesday afternoon’s 1092.00 low. And so long as the open doesn’t gap down so strongly, or above recent highs, Wednesday’s lows can be probed down to 1087.00-1089.00.

While the window re-opens Thursday afternoon for sellers to regain control, it’s not required. Especially since volatility often subsides ahead of the Employment Situation report.

Bottom line (My underlying premise)
A higher high Thursday may be obligatory for having traded mostly in negative territory on Wednesday’s inside day. But buyers weren’t put to much of a test, so their reward should be commensurate. The template being most closely tracked points higher initially, and then lower in the afternoon, but still without trending. [/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]At the close (How the prior session ended)
Recovering 1097.50 would confirm what Tuesday’s open already signaled, that sellers were marginalized until Thursday afternoon. It was Tuesday afternoon’s bias-up signal, but didn’t trigger. It was probed twice during Tuesday afternoon, and retraced each time.

The second retracement was after the cash session close, so its recovery wasn’t clearly rejected. But neither was its recovery decisive. Instead of triggering the signal, or letting the next timing window challenge it, Tuesday’s close was still testing the signal.

While this is not a sell signal, it undermines the rally’s momentum. Buyers ultimately gained no traction for their efforts.

Pattern points (And technical influences)
There was a window of opportunity for Monday’s bounce to fail, and that window slammed shut soon after Tuesday’s open. Wednesday’s session could still sell-off immediately, or fail an opening surge. But it wouldn’t likely launch a new downleg or resume the decline.

A pullback would likely recover from testing 1089.00. Any dip to 1087.00 should be quickly rejected, or else delayed until Thursday. Breaking 1087.00 any earlier would suggest that Tuesday morning’s surge was, in fact, too aggressive. Under 1083.00-1082.00 would confirm.

Had 1097.50 been recovered decisively, this week’s bounce would have next targeted the mid-1130.00‘s. While flat to lower ranging is now likely, I would still be prepared for probing higher highs Wednesday morning.

Bottom line (My underlying premise)
The two-day rally hasn’t recovered any level that would signal more than a bounce was underway. Not even close. However, Tuesday’s rally did come close to triggering a much bigger recovery attempt – still doomed to failure, but from much higher levels. While the burden of proof is still on sellers when it comes to reversing momentum down, buyers are far from proving this week has been anything more than a corrective bounce.[/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.