Market Wrap

[pay]Pattern notes.
Since Tuesday’s session low didn’t print during its last hour, Wednesday was likely to compensate for the delay with a vengeance. Despite having bounced to 1097.50 before the open, a 12-1/2 point drop three hours later compensated for Tuesday’s delay.

The drop was more easily absorbed because it followed a probe of higher highs. This would be bullish if it had been exploited, by a close above a relevant high. That relevant high was 1095.25, and it held as resistance despite being pierced, prodded and probed. Turnabout is fair play, so the afternoon’s bounce is the most recent trending attempt to be absorbed.

The 12-1/2 point sell-off was absorbed because it began from the range’s upper-end. But a 12-1/2 point sell-off from the range’s lower-end would have satisfied selling pressure and neutralized the attraction down to 1078.75.

The morning’s drop was executed without damaging the chart, but that was already rewarded by the afternoon’s bounce. Now there’s no buying pressure left pent-up to help the rally persist into Thursday. And unfinished business remains outstanding below.

Wednesday’s new low didn’t extend down despite sellers having so much time available. Buyers had the same amount of time, and spent it rallying back up to Tuesday’s high, gaining no traction for their efforts. Similar to Friday’s “bottom,” neither is this.

Indicators and Internals.
RSIs were simultaneously oversold at Wednesday morning’s opening low. The timing made their retest likely, but not required. Their retest would have been moot had the session closed above prior highs, which it did not. Having missed that opportunity, now the low’s retest becomes required. RSIs weren’t clearly overbought at the last hour’s high, so its retest isn’t required.

Thursday’s opportunities.
A firm open could still extend up to 1096.00-1098.00 basis Mar (1101.00-1103.00 basis Dec) – perhaps up to 1102.00 (1107.00). There’s plenty of news due in the econ calendar. A firm open might be vulnerable to failing, but it would more likely extend higher. Meanwhile, a break under 1089.00 (1094.00) overnight might greet the open back under 1085.00 (1090.00) to trigger a session-long drop. [/pay]

[pay]Pattern notes.
The open’s gap down under Monday afternoon’s low signaled a session-long decline. The setup calls for the session low to print during the last hour, which then often ticks down into the close. When the last hour does not contain the session low, the next session tends to compensate for the delay – with a vengenace.

A 10-point bounce off of Tuesday morning’s 1087.75 low was retraced to 1088.75, within 1 point before the last hour. Just 1 point. That last point may have been another 10, since the next hour only ranged sideways. Bouncing from so close to a target without first testing it is optimism. So was the last-minute dip that stopped within 1 point of 1088.75.

Considering that the price only trended down since noon, it’s interesting to find so much optimism at its late lows. Perhaps it is no longer our little secret that Friday’s low wasn’t a bottom. But its bearish consequence doesn’t yet seem widely appreciated.

Under 1086.00-1087.00 through any relevant timing window could quickly extend down to Thanksgiving’s critical levels at Nov 27’s 1078.75 open, or even to its 1067.25 pre-open Globex low.

Indicators and Internals.
RSIs were simultaneously oversold at Tuesday morning’s low. Its low already requires a retest due to the open’s session-long decline setup, so this is further confirmation. It also characterizes the interim buying as being relatively weak-handed.

Wednesday’s opportunities.
The sooner that sellers can get their taste Wednesday, the more time available for a recovery to gain traction and launch a two-day corrective bounce. Opening lower wouldn’t require a recovery, especially if Thanksgiving Friday’s lows (1078.75, 1067.25) aren’t tested in the process.

Thanksgiving Friday’s lows will probably attract price down into the afternoon if Wednesday’s open can’t get above Tuesday’s 1097.50 high. Gapping up above Tuesday’s high would buy a little time, while extending only slightly higher to test 1103.00 before ultimately reversing down.

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[pay]Pattern notes.
There were a variety of reasons not to consider Friday morning’s low as being a bottom. (They’re listed in yesterday’s Trading Plan.) Now there’s more, since two more rally attempts have failed. Sunday night’s opening surge, and then Monday’s, each reversed down from tests of 1110.25.

There’s one reason why Friday morning’s low may be a bottom after all – it has yet to be broken. This delay has the hallmark of excessive pessimism, since the overnight low and afternoon low each stopped short of touching the prior low. A recovery wouldn’t be the product of strong buyers.

Now Monday’s last hour has avoided printing fresh lows. That’s not implicitly bearish, so long as buyers exploit the success by rallying above resistance. Buyers didn’t rally above resistance because it wasn’t their success to exploit. Monday’s last hour held up because of patient sellers. Recovering from a fresh session low would have reflected serious buyers at work.

Still, sellers have yet to gain new traction. Meanwhile, there’s still room for another doomed rally. A bias-up would get a benefit of the doubt if triggered. A sell-off isn’t any more likely until sellers gain traction, but it would be more appropriate at this stage of the pattern. The biggest concern is that one thirty minutes were spent trending Monday, making it difficult to start trending Tuesday.

Indicators and Internals.
A fresh low during Monday’s last hour would have been accompanied by RSIs diverging positively. Technical improvement was non-existent despite price firming into the last half-hour. Sellers must fulfill this signal early Tuesday.

Tuesday’s opportunities.
Final trending was sloped upward, and the afternoon’s 1100.00 low printed prior to the last half-hour. Gapping down under 1100.00 would signal a session-long decline. A well-time break under 1096.75-1097.50 could trigger a retest of the 1087.00 area. Back above 1108.25 would resume Monday’s bounce efforts, probably without success if begun by gapping up.

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[pay]Pattern notes.
Friday’s intraday sell-off dodged a big bullet, when it avoided closing under 1104.25. This is the interim low of the two prior highs. Closing under a prior interim low isn’t necessarily bearish, except when preceded by a probe of the two prior highs that originates from under them.

Another bullet dodged was the Gotcha reversal, a similar setup that simply fails to maintain a probe of the highest close. Friday’s open disqualified the Gotcha by gapping up above the highest close.

The mid-morning plunge had already dodged a bullet by stopping at 1095.00 instead of break it. This level was made relevant at Thursday’s close: gapping under it Friday was the only path to resuming Thursday’s late decline. So, falling to 1095.00 stretched sellers to the furthest possible point before gaining traction, and then trapped them.

Obviously, their short-covering helped to fuel the afternoon’s recovery. That’s nothing to gloat about. The weekend’s impending illquidity exacerbated the sell-off so its sponsorship was in weak hands. The maximum amount of shorts were trapped, and the morning’s plunge originated during a bias-up environment, so the “recovery” should have been quite substantial. All it really did was prevent the sell-off from resuming.

The noon hour’s bounce was retraced entirely back to the morning’s low, which did hold its retest as support. And the futures session ended above the noon hour’s high. But the noon hour’s high was still being retested at the 4:00 cash session close. The afternoon’s range was truly resolved. None of which requires the drop to resume Monday, but leaves the door open.

Indicators and Internals.
Technicals left no unfinished business at Friday’s close. If anything, overbought RSIs at the last-minute post-close high reflect just that – extended and perhaps expended buying pressure. The timing isn’t intraday, so it offers no pullback protection that would require a dip to recover.

Monday’s opportunities.
Friday’s cash session gapped up to 1113.50, which might attract price higher for a retest. It would serve by proxy as a retest of the high, which would also be a retest of the two prior highs, and a fourth consecutive opportunity to reject opening buyers. Exceeding 1113.50 through the opening sequence would target 1121.75, and another chance for sellers to trap themselves with pullback down to 1111.00… Simply breaking under 1101.00 would signal that Friday morning’s decline had resumed, confirmed under 1098.00, and targeting a day that could live in infamy. [/pay]

[pay]Pattern notes.
Thursday morning’s open surged to a new high, fulfilling the bias-up target, and then reversed down back under prior highs without recovering. The same can be said for Wednesday’s open. I sense a pattern. Until Thursday’s last half-hour, the pattern almost repeated the last several sessions’ aspect that had repeatedly prevented sellers from gaining traction. Not this time, far from it.

Or did it? The last half-hour’s plunge from 1108.50 tested 1099.00 by 2 ticks. A bounce into the close didn’t get very far before reversing back down to 1098.00. But the session ended while still in the process of testing 1099.00. So, not only was a relevant support being tested and potentially holding, but it was also being tested by a deep uncorrected drop during an unreliable time. It might even have been a knee-jerk reaction to an official’s statement.

All of which would suggest sellers were lucky to get away with what they got Thursday afternoon. Friday’s session might yet be all about testing 1105.00-1107.00 as resistance. A gap up into or above that zone could even probe new highs.

Otherwise, extending the drop Friday would require either a quick bounce and back up to 1105.00-1107.00 and its rejection, or a gap down maintained under 1095.00. Sellers would lose a lot of traction by holding an opening test of 1095.00 instead of breaking it. And breaking it could be disastrous going into the weekend.

Indicators and Internals.
RSIs were oversold throughout the dive, dooming any bounce to failure, but that can be resolved overnight. The 1-minute RSI made a higher low into Thursday’s final minutes when the last-minute bounce fell to a lower low. The only way to extend the drop Friday without a bounce is to gap down under 1095.00.

Friday’s opportunities.
Employment Situation report. Employment Situation report. Employment Situation report. Impending two days of illiquidity. I’ll expand on this overnight if price action merits it.[/pay]