Market Wrap

[pay]Pattern notes.
Tuesday’s session could have slid under 1087.00 to reverse momentum down, however briefly. Testing it deeply enough, early enough – under 1083.00 through 10:15 – could have reversed momentum down permanently.

But 1087.00 was tested too early, overnight, for several hours without breaking lower. Chipping away at its support all but required probing it, which it was. But not until there was a no-bias environment in place, when trending would be undermined. And then not again until the noon hour, when noise is more easily absorbed.

Also, 1087.00 wasn’t probed until after the open’s rally up to 1093.00-1094.50. That created room to absorb 7-8 points of selling pressure without damaging the chart. Turnabout is fair-play, and the morning’s drop absorbed a late-afternoon bounce back up to 1093.00.

Tuesday’s sound and fury was just that, and only that. The cash session closed at the 1091.25 target met at Monday’s close. Neither buyers nor sellers gained any traction. Extending higher Wednesday would get a benefit of the doubt. It would also get a relatively tight pullback limit since Tuesday’s ranging didn’t confirm this to be any more than an extended corrective bounce, or just a retest of prior highs.

Indicators and Internals.
RSIs were fairly predictive Tuesday. Only one signal remained outstanding, which was the noon hour’s low being accompanied by oversold RSIs. Its relevance is already undermined by the timing, so there is no requirement for a retest.

Wednesday’s opportunities.
Tuesday’s close was barely positive on the day. But it did avoid triggering a Pivot Reversal setup under 1088.50. That would have been bearish, and still could be – by proxy, on an opening break under Tuesday’s 1085.00 low. Otherwise, like Tuesday, any shallower opening weakness would be unlikely to trend down.

Tuesday’s probes into 1093.00-1094.50 did clear the way for extending the rally above it, if recovered immediately at Wednesday’s open. Having hesitated there already, breaking higher should find little resistance at October’s 1097.00-1098.00 prior highs.

Government is largely closed for Veteran’s Day. The economic calendar is otherwise empty, and no news has been good news this week. That’s convenient, since bond pits are closed (electronic trade remains open), and unavailable to lay-off risk in case of decline. Maybe no news is good news, when the bond market is open… [/pay]

[pay]Pattern notes.
All four of Monday’s timing windows trended in the same direction. This combination is rare enough that no single resolution is likely. The session does have other influential properties that should be considered.

Perhaps most important is that the 1083.00 corrective bounce target was exceeded. The next higher target was met and essentially held at 1091.25, but this was beyond corrective retracement measurements. Closing Tuesday back under 1083.00 would help to reinstate the bounce characterization.

The objective of extending Monday’s rally would be to retest October’s prior highs above 1097.00-1098.00. Not a correction, but also not a recovery. This current leg’s intent would not be to renew sellers, and it wouldn’t be a new upleg’s breakout. It would be the upper-end of a bigger, and more distributive range, probably up to 1105.00-1107.00.

Monday’s substantial gain and steep slope expended a lot of energy. But it also gained traction if not invalidated back under 1083.00. Whether still a corrective rally, or a retest of prior highs, sell signals don’t get a benefit of the doubt until sellers regain traction through a timing window.

Meanwhile, it should be noted that the Dow made new highs. S&Ps did not. The outperformance means that bullish sponsorship is cautious. It may not matter currently since bearish sponsorship is hibernating. This relationship often appears towards the end of extended runs, and was a big clue in identifying October’s top. The indicator is not a sell signal until the relative performance persists through a down-day.

Indicators and Internals.
RSIs diverged negatively two or three times during Monday’s rally, but never in combination with 1-minute to the point of being a sell signal.

Tuesday’s opportunities.
Closing back under 1083.00 would help to reinstate the bounce characterization. So, a recovery would still be possible from any pullback shallower than 1083.00, or from its brief test as support. In case of higher highs, easily exceeding resistance at 1093.00-1094.50 would forecast the retest of October’s 1097.00-1098.00 highs being brief. The econ calendar is busier than Monday, which is to say it actually has an item or two, before Wednesday returns to radio silence. [/pay]

[pay]Pattern notes.
Friday’s opening dip was the week’s third sell-off attempt (all highlighted green on the chart below). Each reaction was increasingly determined, and increasingly brief. Monday’s intraday recovery inched its way higher into the close. Wednesday’s sell-off came last-minute, but its recovery was well underway by Thursday’s open. Friday’s sell-off and recovery lasted all of 90 minutes.

The three latest sessions probed the prior session’s high. No day since Monday has made a lower low. Each day last week ended higher. After Friday’s open made quick work of absorbing pre-open buyers, there would be only one excuse for extending higher – anxiousness ahead of the weekend. And that excuse disappears Monday.

The weekend’s impending illiquidity didn’t trigger a short-squeeze, which suggests that buyers aren’t overly-optimistic. Monday’s open might unleash that optimism with an opening rally. Friday’s optimism was somewhat ineffectual, its morning high not broken by the afternoon’s gains. An opening rally Monday would neutralize the ineffectual aspect of this optimism.

If it seems like much depends upon an opening rally, that’s because it probably does. A fourth sell-off could recover, and reverse into a rally, as well. Any setup that shows buyers either gaining traction or recovering would be bullish. Another dip unanswered would not.

Indicators and Internals.
Friday’s extremes were marked by 1-minute RSI being overbought or oversold, while 3-minute was not That, or oversold 1-minute and 3-minute RSI were making higher lows. There is essentially no unfinished business from Friday’s intraday technicals.

Monday’s opportunities.
An immediate rally Monday is possible, if not likely, in light of the discussion above. It would also be vulnerable to failure, as with the prior two Mondays (highlighted yellow on the chart). Reversing from higher highs to close down negative would not be bullish. Back under Friday afternoon’s 1062.00 low could see sellers pick up where they left off Friday. Gapping under 1062.00 would signal a session-long decline.

Just closing positive on the day would generally be bullish, subject to the character of price action above 1071.00. But the next higher corrective bounce target is 1083.00, and it will be in-play if buyers gain traction Monday. The econ calendar is dry – pretty much through Wednesday – so initial trending should be able to run.[/pay]

[pay]Pattern notes.
Thursday morning’s probe above Wednesday’s high peaked at 1062.00 – its reaction dipped back under Wednesday’s 1058.50 high. A close above 1062.00 would have qualified as a breakout.

That should have been easy enough. The first dip of 6 points was retraced by 7 points. The next dip of nearly 5 points was retraced by 5-1/2. Then a final, shallower dip was also retraced into fresh session highs at 1064.00. But despite each recovery’s productivity, their interim dips each overlapped 1062.00. The morning’s high was still being tested throughout the afternoon. This doesn’t qualify as a breakout.

Too bad. A clean break above Tuesday high would have signaled that buyers gained traction intraday. And that would have helped Friday’s session absorb any selling pressure that might come its way in reaction to Friday’s Employment Situation report.

Yesterday’s Trading Plan detailed all of the selling pressure that was satisfied or otherwise neutralized by Wednesday’s last-minute plunge. Thursday’s buyers weren’t any more productive than Wednesday’s – whether Thursday’s close was under Wednesday’s high, still ranging around it, or ranging around the 1062.00 peak of its first breakout attempt.

This doesn’t prevent a positive reaction to Friday. A convincing breakout might have been restrained by the impending news. Regardless, Thursday’s rally was just part of a corrective bounce. Extending higher would next target 1071.00 and potentially 1083.00. Otherwise, the decline’s next downleg could be underway within hours.

Indicators and Internals.
RSIs spent the day rejecting the lower-end of its possible range. Much more time was spent above the range’s midpoint, reflecting buying pressure. But buying never got overbought to reflect accumulation.

Friday’s opportunities.
Thursday’s upward slope makes it easier to react positively to the Employment report, since it wouldn’t originate from a standing stop. But that upward slope also borrowed from future buying pressure. Beware of a break higher that soon reverses negative, whether before or after the cash session open, in any case before a bias-up can be triggered.

Retracing the initial reaction need not reverse much beyond unchanged. Trading out the day Thursday around its prior high is potentially equilibrium, whose first few trending attempts away from 1062.00 will tend to retrace entirely.

An negative reaction could be the product of an initially positive reaction that reverses into negative territory before the open. Either way, maintaining a gap down under Thursday afternoon’s 1058.25 low would signal a session-long decline.

This is a Friday, so the morning’s bias is likely to persist through the noon hour. The bias isn’t triggered until 10:15, so don’t forget about another econ report due at 10:00.[/pay]

[pay]Pattern notes.
Don’t blink, you’ll miss it. Monday and Tuesday’s pattern had required a corrective bounce to being forcefully, if at all. Wednesday’s gap up was above 1044.50, and it didn’t let buyers gain traction at a critical level. So, despite extending higher intraday, the rallies were largely retraced. Several times, including in the wake of FOMC’s news.

The last downleg’s depth surprised me. It was easily a risk that 1051.00 wasn’t going to hold as support, but the morning’s 1048.00 low shouldn’t have been in jeopardy. In fact, 1041.50 was touched. That’s a lot of pessimism.

This drop filled the gap back to Tuesday’s close, and also tested Tuesday afternoon’s “lower prior highs.” Left outstanding, at least one of these two landmarks would have tried to attract price down for a retest. That attraction has now been neutralized.

The entire session essentially traded in positive territory to be “ineffectual optimism” and vulnerable to reversing down. But that late downleg might have saved the rally. Simply closing under 1051.00 Wednesday would have been far enough under session highs to mean sellers hadn’t gained traction. The late extended drop might have borrowed from future selling pressure and neutralized it.

Indicators and Internals.
All intraday divergences were satisfied by the close, leaving no unfinished business that might be due to technical extremes.

Thursday’s opportunities.
We’re getting close to Friday’s Employment Situation report. And all other jobs reports are having double impact, including how their metrics may be causing economists to tweak Friday’s expectations. Thursday’s Jobless Claims is another big number in that regard. It’s also Thursday’s only big number.

Wednesday’s futures did finish under 1048.00, and hadn’t recovered above 1044.50 at the cash session close. I’ve been discussing the floor at 1039.00, and its break would signal that sellers had regained control. Otherwise, although Wednesday’s corrective bounce fell flat, I can’t yet dismiss whether buyers will make another run at starting a corrective bounce. [/pay]