Market Wrap

[pay]At the close (How the prior session ended)
Friday’s close was bouncing off of the 1127.50 session lows. This tracked the reaction upleg defined in the “cave drawing” I had posted here. Back under 1131.00 would have retraced the bounce, a threat made by RSIs diverging negatively into Friday’s close.

1131.00 wasn’t tested until Sunday night’s opening dip. The test held and the bounce resumed up to 1137.00 through Monday morning’s Globex close (highlighted green on the top chart).

The cave drawing’s Complex Triangle probably wasn’t still an influence Sunday night. Bigger patterns have formed over longer time frames. Even if the Triangle’s reaction up remained influential beyond Friday’s close, the follow-through since then has either fulfilled or neutralized it.

Pattern points (And technical influences)
Friday’s low held a test of Tuesday’s prior low, whose dip had tested the prior Monday’s breakout highs (highlighted green on the second chart). Tuesday’s complete retracement already undermines the breakout’s integrity; Friday’s redundant test (highlighted red) has now chipped away at its support.

Revisiting chipped away support on normal volume would be likely to break lower. But the three-day holiday Globex session was low-volume, so it produced the opposite reaction and rallied. Trending up on low-volume reflects optimism. Then there is last week’s repeated avoidance at testing the 1126.50 lower prior highs (red dashed line). The narrow margin also reflects optimism.

The optimism is helpful to a rally, until it becomes excessive optimism. Then the optimism stops attracting more buyers, and starts to drain buying pressure by avoiding a dip. The rally’s most important ally is momentum, and perhaps the attraction back up to the 1148.00 Globex high (annotated on the first chart). Its intraday retest at some point is almost historically mandated – but no time soon if 1126.50 gives way as support.

Bottom line (My underlying premise)
The holiday Globex bounce greets Monday night’s Globex open at interesting levels. It isn’t yet above resistance, but its indicated position (blue dashed line) is not part of the low’s structure, so it isn’t necessarily attracted by the low’s gravitational pull. Remaining aloft through Tuesday’s open would mean optimism remains alive and well.

This week’s news flow can get heavy, especially combined with quarterly and annual earnings reports. The 1148.00 Globex high’s retest is likelier than a downleg, unless/until there is a break to fresh lows. The high’s retest is also likely to produce a durable top that does launch a sizable downleg. Every positive reaction to news would bring that turn nearer. [/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)
New highs into Thursday’s last hour helped to marginalize sellers. There wasn’t much follow-through, peaking immediately upon probing Monday’s 1146.75 intraday high. Price dipped through the 3:10-3:20 window, robbing buyers of their traction. It was too late for sellers to gain traction, so the last hour only ranged sideways back down to 1144.25.

1144.25 had been the last productive pullback limit – “productive,” meaning that a pullback touched it, then recovered to a higher high. There is no reason to revisit a productive pullback limit unless the rally’s momentum has ended. The 3:10-3:20 action already indicated as much.

Perhaps the rally’s momentum was inhibited by anxiousness ahead of INTC’s earnings. Indeed, S&Ps gapped up back to Thursday’s high when trading resumed after the news.  One hour later, price has yet to extend higher.

Pattern points (And technical influences)
Thursday’s opening and closing highs each probed Monday’s 1146.75 intraday high. The prior high held as resistance through the close. Buyers gained now new traction, but neither did sellers. Sellers can regain traction by spiking or gapping down under 1138.25. Almost any lesser weakness would still be likely to recover and continue probing prior highs.

Bottom line (My underlying premise)
Three-day holiday weekends tend to inhibit volatility. The impending illiquidity inhibits sponsorship that might otherwise be willing to risk the exposure. And this being a Friday, the morning’s bias signal tends to persist well past the noon hour. Limited selling at the open would limit the potential for sellers to regain control. Sunday night’s 1148.00 Globex extreme is likely to be probed in this scenario, but actual trending cannot be assured.[/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)
S&Ps ended the day backing off of the session high. The 1145.25 session high was also Monday’s opening gap, which had yet to be retested intraday. Minutes earlier the gap had been filled back to Monday’s 1142.50 close.

RSIs deteriorated there, dooming to failure any higher high. In fact, the upleg launched there was entirely retraced into the close. Before retracing, the rally was smart to leave a couple of breadcrumbs to help find its way back up to Wednesday’s high.

First, the impatient, instant dip came after barely touching Monday’s 1145.25 open. This reflects pessimism, which doesn’t often accompany durable peaks. Second, RSIs were overbought at the 1145.25 high, making its retest likely.

Pattern points (And technical influences)
Extending the rally Thursday requires gapping up. There is a consolidation (circled in orange) that formed overnight before Monday’s cash session even opened. Wednesday’s high pierced this consolidation’s 1144.75 lower-end (red line). Not having closed within the consolidation, it can now be exceeded only by gapping above its ~1147.00 upper-end (green line).

While the rally’s resumption depends upon gapping up, a gap up isn’t required. But a gap up is likely, since that would also test Sunday night’s 1148.00 high. This is a “new Globex trend extreme,” almost historically mandated to be retested intraday.

Reversing down from the 1148.00 Globex high’s retest would not reverse the trend down, not without also closing under 1138.25. The next higher target is then 1157.00-1159.00. Otherwise, an dip Thursday wouldn’t be credible unless it almost immediately broke under 1137.00.

Bottom line (My underlying premise)
If Thursday’s open isn’t gapping up or selling off, the 1148.00 Globex high could still be in-play. Its test would likely hold – and if pushed back hard enough, the test could form a durable top without leaving any unfinished business above.   [/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)
Except for a little noise above and below 1128.25-1131.25, the afternoon only ranged sideways. The decline’s resumption was likely since the afternoon was a bias-down environment. Even after the bias-down had lapsed, during the last half-hour, the session low was attacked within 1 point (highlighted green).

It was too late for a short-squeeze, but price could still firm. In fact, the afternoon’s 1132.25 high was barely touched at the cash session close (circled red).

Fresh afternoon highs printed only after the cash session close (highlighted yellow), and then only back up to the noon hour’s high (red dashed line). Buyers expended energy without being rewarded for their effort.

Pattern points (And technical influences)
Tuesday’s open had gapped down, and consolidated between 1134.25-1137.75. This area’s lower-end was attacked at Tuesday’s futures close (circled green). Gapping up Wednesday above this area’s upper-end would give buyers traction and marginalize sellers. The gaps back to Monday’s 1143.00 close and its 1146.25 open, and the 1148.00 overnight high would all be in-play.

The alternative is to resume the decline. If Wednesday’s open isn’t gapping up or surging, then it’s probably tumbling. Gapping down under Tuesday’s 1128.00 lows would trigger a session-decline setup.

Bottom line (My underlying premise)
Last Monday’s breakout was always suspicious. Tuesday’s confirmation was minimal, and the delayed follow-through wasn’t trending quality. It was never considered durable. The peak may seem premature, but the decline seems pretty serious – last Monday’s breakout highs are already being tested (highlighted red). And there’s little below except several prior lows (underlined red) that can offer only temporary obligatory support. 2010’s gains might soon disappear if there’s no rally out of Wednesday’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]At the close (How the prior session ended)
Monday morning’s 1143.00 bias-up signal had been recovered overnight and then tested as support through the open. A rally from 1137.75 had recovered up to 1144.25, and Monday’s close was testing 1143.00 again.

So, Monday’s close was in positive territory. This followed dips into negative territory that tested Thursday and Friday’s “lower prior highs.” Despite having expended a lot of energy intraday, sellers did not gain traction for their efforts.

Pattern points (And technical influences)
Decisively recovering 1143.00 would have all but ensured the recovery of any overnight dip. This is similar to Thursday’s close above 1134.50 that predicted Friday’s pre-open dive would be recovered. Not decisively recovering 1143.00 made at least a dip likely.

In fact, Alcoa (AA) earnings after the close triggered a drop to 1139.50. This was the afternoon rally’s original buy signal. It can be probed by 1 point down to 1138.50 without sellers gaining traction.Gapping down Tuesdsay would create unfinished business back up to Monday’s 1143.00 close. There is already Monday’s opening gap up at 1146.25, and the 1148.00 overnight high’s “new Globex trend extreme.” Even the “higher prior lows” overnight around 1145.00 could stand to be retested – it is odd for a recovery to come so close, and yet peak without touching it.

Bottom line (My underlying premise)
After so deep of a pullback, recovering Sunday night’s 1148.00 highs would be unlikely to stop there. I define the overnight high’s actual range as 1145.00-1147.00, and gapping up above its upper-end could fulfill the 1157.00-1159.00 target intraday. Retesting Monday’s 1138.00 area lows during the open should still recover. If not, then a significant top may have already formed.

PROGRAMMING NOTES: Apparently there was an automated dismissal based on attendees inactivity. Its setting was entirely too brief for our purposes. It is now set to 18 hours… The Morning Market Tour download is quite lengthy, and will be for at least another week. Meanwhile, we’ll limit the recorded portion to only S&Ps. [/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.