Market Wrap

[pay]Pattern notes.
Tuesday’s session was never bearish. Long-entries were repeatedly identified, and a couple were triggered. None was very productive before reversing down- each peaked somewhere in the the 1105.00-1107.00 equlibrium zone – but the session was never bearish.

1105.00-1107.00 was probed briefly by the mid-afternoon high, and then by the last half-hour’s slightly higher high. But the earlier intraday action and overnight action already qualified the session as being “ineffectual pessimism.” Sellers tried repeatedly to gain traction, convincing to the point just short of being productive. The open gapped down, Monday afternoon’s low was probed, and (except for the afternoon’s two probes) the entire session developed in negative territory.

The last half-hour firmed up to new session highs. This underscored that the pessimism was ineffectual, but it also released some of the pent-up buying pressure. It’s net bullish, since the close did hold above the 1105.00-1107.00 equlibrium zone.

To refresh: 1105.00-1107.00 was the rally’s next target, and it contained Monday’s close. This creates equlibrium, which typically tries to trend away both directions, retracing entirely at least the first two times. Tuesday’s trending attempt was down, and it was retraced, so a rally is likely. Equilibrium isn’t enough reason for durable trending to begin, either up or down, but it is a useful guide to what the likely path is from here.

Indicators and Internals.
3-minute RSIs weren’t overbought or oversold at all intraday Tuesday. Not that 1-minute RSI set a great example, becoming extended only barely, and barely three times.

Wednesday’s opportunities.
A gap up Wednesday is likely, but not required. I will be monitoring overnight action for a long-entry opportunity. Pre-open econ reports are all but assured to stir things up for being high-profile.[/pay]

[pay]Pattern notes.
Monday’s first 15 minutes of volatility were all about extending through prior highs. Pre-open gains had probed both Friday and Thursday’s highs, pinning a rally’s hopes on extending forcefully through both (or patiently holding above one). And forceful it was, until piercing the 1105.00-1107.00 target.

The balance of the session ranged flat to higher, up to 1112.25. There were two exceptions: a noon hour dip whose timing helped to absorb it, and then a last-hour dive down to 1103.25. The last-hour dive was nearly a killer, because it had threatened to close back under the 1105.00-1107.00 target. This would have trapped all of the buyers since the open’s first 15 minutes of volatility.

While a close under 1105.00-1107.00 was avoided, the close was not above it. Sellers didn’t exploit the afternoon’s drop in any durable way. But buyers failed to exploit their own opening gain, or almost an entire session of hovering above the opening surge’s peak. That’s all interesting, but holding the 1105.00-1107.00 target makes it “equilibrium.”

For at least one day, usually two days and sometimes three, trending through the morning is likely to retrace entirely in the afternoon. And that retracement is likely to extend somewhat equally in the opposite direction. Typically there is at least one more move back to the 1105.00-1107.00 equilibrium, and possibly another round-trip.

The first trending attempt often seems very valid, and very productive. Until it isn’t. If this is not equilibrium, then the the morning’s trending won’t retrace. That possibility isn’t relevant until the noon hour, and we’ll look at it then.

Indicators and Internals.
The high’s negative divergence was clearly influential, and it was also fulfilled. Two positive divergences on the way down didn’t end the selling until the 3-minute RSI made a higher low. No unfinished business was left outstanding at the close.

Tuesday’s opportunities.
There is a steady flow of econ reports through the morning. This market has been doing better with news than without it, a pattern that would point higher, first. A retest of Monday’s high up to 1015.00 would be a likely candidate for the rally suddenly losing sponsorship. An initial drop would find support at 1099.00.[/pay]

[pay]Pattern notes.
Friday morning’s retest of Thursday afternoon’s 1083.25 low requires no further testing. Although ES E-mini contract stopped 1 tick short of even touching the prior low, the SP pit contract reached 2 ticks lower. And in any case, both dips were a retest of Tuesday’s 1086.25 and 1085.00 prior lows.

So, there’s no requirement to retest Friday’s low. There was no requirement to retest Thursday’s low, but it was retested anyway. One or two tests is all that a market can get away with. Any more is overkill. The question shifts from how big the reaction will be, to why wasn’t the reaction durable?

The support may have been strong to begin with, but one extra retest is still allowable. Friday’s retest, after all, took place on a Friday. Counter-trend sponsorship is difficult to attract when the weekend’s illiquidity is just hours away. Friday’s bounce back up to 1096.00 was respectable, but it was largely retraced. Why, if the low’s support was valid?

This, too, can be dismissed for being a Friday. Any bullish argument requires dismissing the bounce’s brevity and shallowness for being a Friday. And any bullish argument then requires the new week to make up for lost time. A break above Friday’s 1096.00 high would target a retest of Wednesday’s 1103.25 high – actually probing it, since Thursday morning’s surge already retested Wednesday’s high by the proxy of 61.8% retracement.

The alternative is that Monday’s open won’t be making up for lost time and gaining new ground. Then we’ll know that Friday’s redundant retest of the lows was for bearish reasons, and not because of reluctant sponsorship ahead of the weekend. A retest of Friday’s lows would be a formality, and its break a likelihood.

The bigger picture.
A retest of last week’s high would be similar to Thursday’s retest of Tuesday’s lows. Last week’s high was itself a retest of October’s high. Another retest would be similar to Friday’s retest of Thursday’s low. It would border on being overkill. There is significant resistance just above last week’s high at 1105.00-1107.00, and then 10-15 points higher.

Starting out the week on a sour note instead would mean testing Friday’s low. Testing Friday’s low would mean breaking it. And breaking Friday’s low would target a retest of last Monday’s opening gap at 1074.75. That’s pretty significant support. The big gap below it may look inviting, but it’s not, or else it would have been tested already intraday. Closing near the gap would be likely to break lower, but it wouldn’t be a signal.

Obviously, much depends on the $USD, currently trading inversely to S&Ps, almost tick-for-tick. And it is also in a very touchy position.

Indicators and Internals.
RSIs were simultaneously oversold at Friday’s late 1086.25 low, which printed right at 3:00. Several minutes later would have undermined the reading. Thursday’s late low was much later, when its RSIs were also oversold. It was retested. So, a retest of Friday’s late low can’t be discounted, although the weekend does have a way of dulling the influence of a three-day old late-afternoon technical reading.

Monday’s opportunities.
Be sure to note the odd timing of economic reports due out. Monday pre-open is unusual, and two simultaneously is even more disruptive. [/pay]

[pay]Pattern notes.
Thursday’s sellers went to great lengths to let in buyers. Wednesday’s failed probe of prior highs had introduced a vulnerability to an overnight drop. But overnight probes under Wednesday’s lows were recovered. The same pattern had opened the door to a severe sell-off at the open. But Thursday’s open was down only slightly.

And the open’s selling pressure was notably weak, practically begging buyers to pounce. They did, with a 9-point surge. But that was the session’s first half-hour. The open’s entire surge was retraced by late-morning. Lower and lower lows throughout the day hesitated to extend, and sometimes bounced. But the bounces all failed, and the decline extended each time.

It finally took a last-minute dive – an inappropriately time, second-to-last minute dive – before buyers finally bothered to push back. The dive was probing 2-1/2 points under Tuesday’s 1085.00 low. Buyers had to push back there, because closing under it could have gapped down Friday to 1075.00.

Actually, the cash session closed more at 1085.00 than above it. So, there’s no greater likelihood of rallying Friday, not even firming. Overnight noise has room up to 1090.50 before considering whether sellers may have decided to wait until the afternoon, or next week. But they gave buyers almost every opportunity Thursday. The last-minute save from closing under Tuesday’s low requires buyers to exploit it, or else sellers will.

Indicators and Internals.
Several intraday positive divergences were ignored Tuesday, or only temporarily productive. Yet more help given to buyers that they didn’t exploit. Simultaneously oversold RSIs at the low occurred during the last half-hour, which is too late to require the low’s retest, but it still undermines the credibility of buying that followed.

Friday’s opportunities.
This being a Friday, the morning’s bias is likely to persist through the noon hour. The day’s highest-profile econ report comes after the open, so initial trending might not be in the ultimate direction. Early strength that reverses down could trend down through the morning. Recovering an early dip could trend up, perhaps more effectively since buyers didn’t extend themselves Thursday. [/pay]

[pay]Pattern notes.
It’s all over but the waiting. The retest of prior highs, no overnight highs left untested, the morning’s bias-up target met and held. And as if to offer a parting gift, the session lows stopped optimistically short of filling the gap back to Tuesday’s cash session close. That could have been bullish, but it wasn’t exploited before the close, so it is considered “ineffectual optimism.”

There’s also the morning’s drop, whose selling pressure was fully absorbed by the morning’s rally that preceded it. The chart wasn’t damaged, and the rally was free to resume. But it didn’t. Again, what could have been bullish, wasn’t.

The bigger picture is that the rally from Nov 2’s lows has been a corrective bounce. A couple of optimal candidates for its peak have come and gone, at 1071.00 and 1083.00. The correction’s next stop was prior highs, which Wednesday fulfilled.

A retest of prior highs, and a probe of the range’s upper-end, are both forms of a correction. This probe of new highs originated from under the prior high closes. Closing back under them in the same session reflects solid resistance and expended buying pressure, which is a “Gotcha!” setup.

These prior high closes equate to 1094.50 and 1096.00, which were still being tested at Wednesday’s close. But it is important to note that this setup either signals the trend reversing down, or it doesn’t. Failing to trigger the setup does not equate to being a buy signal.

Indicators and Internals.
Technicals left no unfinished business. Their last indication predicted the recovery from Wednesday’s lows, which was productive, if not lackluster.

Thursday’s opportunities.
Here comes the news. The silence of practically three days without much economic indication will be broken loudly by some high-profile items, and a 30-year Treasury auction. Immediate weakness at Thursday’s open would be credible for extending down sharply through multiple sessions. In the Gotcha! setup, the selling pressure should be apparent overnight. Considering the news situation, aggressive selling that is delayed until 8:30 would still be credible. But escaping the open unscathed would mean sellers missed their chance to retake control, pointing higher, instead.[/pay]