Market Wrap

[pay]At the close (How the prior session ended)
The afternoon’s suspicious 1083.75 bias-up signal kept sellers from gaining traction. But it didn’t produce higher highs during the afternoon’s bias-up environment. And it didn’t produce higher highs when the bias-up started lapsing after 2:30.

Nevertheless, repeatedly testing resistance does tend to “earn” at least a brief breakout attempt. So, Monday’s final minutes did eventually print fresh highs up to 1086.50.

Pattern points (And technical influences)
The corrective bounce potential to 1082.00-1083.00 was a function of Friday’s pattern. It attracted the cash session’s first hour higher, and then it restrained trending  for the balance of the day. Until the final minutes.

1086.75 is the noise range’s upper-end around 1082.00-1083.00. This is where a higher high could still be considered noise around the bounce potential. Breaking it any earlier could have been considered a breakout. Monday’s break originated too late for its sponsorship to be credible.

Monday’s bounce narrowly avoided being “ineffectual optimism.” But it was still only an “inside day” whose rally didn’t gain any traction. A lot of buying energy was expended just to fulfill the bounce potential.

The gap back down to Friday’s close under 1069.00 isn’t the only unfinished business below. RSIs were oversold on the last overnight dip under 1069.00, as well. Monday’s bounce isn’t the start of a durable bounce. But the bounce needs to end Tuesday or else possibly delay the decline’s resumption until Thursday afternoon.

Bottom line (My underlying premise)
Tuesday’s opening 15 minutes of volatility might probe 1-2 points higher, still. Delaying a dip any longer would mean a bigger corrective bounce – next targeting 1091.75. Gapping down Tuesday under Monday afternoon’s last relative low (1080.00-1081.00) would reject Monday’s last-minute surge, and reverse momentum 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]At the close (How the prior session ended)
Thursday’s 1074.25 low wasn’t tested until the afternoon’s bias environment was lapsing. And then the 1070.25 overnight low’s required retest delayed a recovery attempt. The drop finally found a low at 1067.50 after 3:30. It was too late to launch a short-squeeze, and any bounce was doomed. In fact a round-trip up to 1075.00 resolved in fresh lows at 1066.50.

Pattern points (And technical influences)
Had Friday retested Thursday’s low in the morning, then sponsorship for a bounce would have been much more likely to appear. Friday morning dives can get ahead of themselves, exacerbated by sellers who want to avoid the afternoon rush. If the drop doesn’t follow-through, which it rarely does, then the weekend’s impending illiquidity suddenly makes traders fear not being long.

But this Friday morning was spent barely triggering a weak bias-up signal and and barely fulfilling its target. The afternoon’s decline started much later, and from a detour well into positive territory. Its sponsorship was real sellers. Weaker sellers eventually joined in, with too little time remaining to later become disenchanted with their trade. And it was already too late in the day for counter-trend buyers to welcome the risk.

The Christmas rally was already living on borrowed time. The prior week’s dip had stopped short of testing prior lows before recovering, so its recovery was suspicious. Last Thursday’s close signaled the trend had reversed down. It was the first to break back under a prior low, which was last Friday’s lower close confirmed.

Now September’s high is being tested as support. Thursday’s low was first, and then Friday’s lower close confirmed. No net improvement after four months is rare enough, and rarer still to reverse back under two prior highs – in a single downleg. This is the first dip since March’s low to actually test two prior highs as support. This is the biggest threat yet to the rally’s momentum.

So pivotal is this test of “lower prior highs” that it could produce an obligatory bounce back up to 1082.00-1083.00. Otherwise, the new drop’s next landmarks are 1048.00 and 1037.00. A close under Nov 2’s equivalent low of 1026.00 would confirm a more serious downtrend in-play.

Bottom line (My underlying premise)
If sponsorship for Friday’s sell-off is real, as described above, then it is likely to extend into next week. A bounce Sunday night or at Monday’s open would likely resolve down, probably from 1082.00-1083.00. The next lower major support is 1065.00, and its break would target 1056.50. These two levels serve the dual purpose of signaling and confirming the next portion of the downleg is underway, having potential to 1037.00 and 1026.00. [/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 afternoon’s 1088.50 high came after retesting the afternoon’s 1085.50 prior high. This was no arbitrary prior high, but the “head” of an Head & Shoulders pattern that defined the afternoon’s bounce.

If retested, the “head” was likely to hold. In fact, the 3:10-3:20 window was essentially a drop back down through 1085.50. RSIs diverged negatively on the doomed higher high at 1088.50, triggering a 10-point dive through the cash session close.

Pattern points (And technical influences)
Thursday’s last half-hour reached the same 1087.25-1088.50 area that has been pivotal since Tuesday’s close. This was at the end of a 14-point bounce from 1074.00-1075.00, and the bounce went through hell and high water to get there. It was Wednesday’s constant return to this area at each timing window that had predicted the failed overnight rally.

The reaction down from retesting 1087.25-1088.50 is interesting because it ties Thursday afternoon’s price action to Wednesday’s. This suggests that Wednesday night’s rally and Thursday morning’s reversal to new lows are still part of the same pattern. If the 29-point drop from Wednesday night’s high was part of the pattern, imagine the next trending leg’s measurement.

Thursday’s low appeared suddenly at 1074.00-1075.00 after a 23-point dive. This area had been identified as the next target. Wednesday night’s rally undermined the area’s ability to serve as more than temporary bottom. A significant recovery Friday from fresh lows would be more bullish. But otherwise, lower lows would target 1065.00 and ~1057.00.

RSIs diverged positively three consecutive times into Thursday’s low. This often means that market facilitators are aware of much bigger inventory coming down the pipeline. If that supply doesn’t appear by the next day, then it would more likely mark a significant bottom.

Bottom line (My underlying premise)
Thursday morning’s slide was a very frustrating development for its quick rejection of the overnight rally. The Globex highs were above the prior session’s range, which doesn’t require a retest, but it does argue for remaining vigilant in case sellers lose traction Friday. And as this is a Friday, the morning’s bias signal is likely to 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 ended with an 11-point surge to new session highs at 1096.00. The morning’s low had been retested, tracking the template whose next leg is a sizable rally. It would be triggered by extending Wednesday afternoon’s rally through Thursday’s open.

Pattern points (And technical influences)
The rally could lose traction if overnight gains test either Tuesday’s 1100.00 intraday high, or Monday’s 1103.00 Globex high, without extending higher. Extending higher through the night would eliminate that risk.

Otherwise, a flat open Thursday should eventually attract an influx of buyers that suddenly resumes the rally at an accelerated pace. A shallow overnight dip that recovers pre-open would help this setup.

A shallow overnight dip would hold 1091.00, or recover it after attacking 1088.00. Back under 1086.00 would question whether the rally template was still in-play.

Bottom line (My underlying premise)
Any reaction to the President’s address will play out overnight and won’t be relevant at Thursday’s open. The two 8:30 econ reports will be more influential. The rally’s first milestones are 1107.50 and 1112.50, either of which could end it there. Any higher could put into play 1128.00 before the decline resumes.[/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)
Tuesday’s last hour extended the prior two hours’ drop from session highs at 1100.00 down to 1087.50. But the last hour’s pace was much more aggressive, more than doubling the prior two hours’ drop in half the time.

A last-minute bounce to 1091.00 originated too late to be accumulative. The low’s retest was all but required. The drop resumed before the cash session close, and probed fresh session lows down to 1086.50 before the futures close.

Pattern points (And technical influences)
The 1081.00 overnight low was barely threatened. Its retest is almost historically mandated for being a “new Globex trend extreme.” A break under 1087.00 would have signaled the afternoon’s leg was on its way there.

1087.00 held a test at the close. Delaying its test or breaking it decisively would have made a test of 1081.00 unlikely to recover. Its test is still likely, and its test could still resume the decline. But having held one test, recovering 1087.00 after testing 1081.00 would trigger a sizable bounce.

Lower lows would next target 1074.00-1075.00 and then 1064.00. A gap open above 1100.00 Wednesday would trigger a corrective bounce, but wouldn’t avoid eventually resuming the decline.

Bottom line (My underlying premise)
Wednesday morning’s news environment is dominated by earnings announcements, and none of them very high-profile. After the 10:00 econ report, if no new targets are in-play, things might slow down before the afternoon’s FOMC news. Regardless of its knee-jerk reaction, greeting the news at or around a new trend extreme tends ultimately to extend the trend.[/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.