Market Wrap

Friday’s Employment Situation report was approached optimistically. Not so much restrained, but certainly not excessive. Goldilocks might have described it as: just right. The news triggered a 7-1/2 point spike up that immediately peaked, and retraced entirely through the open. Like the approach, the reaction was no so much restrained, and certainly not excessive.

Neither was the reaction reversed. The open recovered through the knee-jerk reaction’s 2893.50 high to a fresh high at 2896.50. Then we saw the definition of restrained, excessive restraint, as the balance of the session ranged narrowly sideways.

Trading narrowly sideways into the weekend isn’t surprising for Fridays. A little more surprising was trading narrowly sideways at early fresh highs. So, a little less surprising was firming to 2898.00 through the close.

The next higher objective at 2902.00 is officially in-play, all of 4 points higher. Not that Friday’s glacial momentum ensures resuming the rally after the weekend. Regardless, closing at a fresh trend extreme on Fridays requires an eventual higher close, even if the weekend were exited in pullback mode — which touching 2902.00 might inspire.

Details and other markets coverage are discussed in the post-market Wrap recording here.
Monitor overnight Globex trading in the chaRTroom here.

Thursday’s session had one job. It wasn’t even required to be done that day. Wednesday’s 2884.75 open above all prior highs in a trend required a retest from below. Greeting the open unchanged from Wednesday’s close quickly surged to 2885.75, where the gap-fill was done.

Reacting down avoided triggering the bias-up signal, instead putting into play a test of the 2872.50 bias-down signal. The noon hour’s 2871.00 low met it, twice. And recovered before the noon hour’s exit. Not surprisingly, not yet trending beyond the range by noon was unable to trend afterward.

Trending is not a job for the session prior to the Employment Situation report.

Greeting an entire afternoon from the range’s lower-end, and unlikely to trend any lower, the balance of the session was likely to bounce. Which it did, back to the range’s upper-end at 2884.50. Bouncing that high wasn’t required, so we’ll interpret it as last-minute optimism — which can be bearish from a contrarian perspective.

Resolving up anyway tomorrow morning would likely put into play the next higher objective at 2902.00. A favorable knee-jerk reaction to the news would still be vulnerable to reversing back down through the session.

Details and other markets coverage are discussed in the post-market Wrap recording here.
Monitor overnight Globex trading in the chaRTroom here.

The rally’s next higher objective at 2885.00 was already being tested by Tuesday night’s China trade rally, and greeted Wednesday’s open there. Immediately collapsing to test the morning’s 2875.50 bias-down signal held, triggering a complete recovery to the 2886.25 overnight high’s “new Globex trend extreme.”

Up to 2889.25, which defined the bias environment’s high. Despite exiting the bias environment above 2885.00, 2889.25 was never exceeded to confirm upside momentum remained intact. The next higher objective at 2902.00 was never confirmed, either. And not for lack of proximity, as the noon hour ranged exclusively above 2885.00.

The afternoon’s no-bias trending under its 2881.00 bias-down signal was productive, dipping under its 2874.00 bias-down signal to 2869.00, the pullback potential I had described before the open. But not in time to invalidate a requirement to retrace the 2881.00 bias-down signal, which is now unfinished business.* As is the 2884.75 opening gap up, which has yet to be retested since dipping back into a prior session’s range. (*Wednesday’s late bounce extended through the close to within 3 ticks of 2881.00 which satisfies its required retracement.)

Nothing requires extending up through or reacting down from testing the higher attractions. But there continues to be strong selling into rallies, so regardless of the near-term potential upside, a reversal down remains likely.

Details and other markets coverage are discussed in the post-market Wrap recording here.
Monitor overnight Globex trading in the chaRTroom here.

Monday’s rally to prior highs didn’t extend Tuesday. Neither was it rejected. The morning qualified as backing-and-filling, the pause that often consolidates outsized moves before resuming them. But trying to resume the rally failed. Trending up to touch the 2873.75 high, which had pierced Monday’s late high, then a last-minute collapse back under 2869.00 to 2867.00 through the futures close.

Fresh highs are possible regardless of the resolution, even if only temporary to stretch the rubber band so it can snap back down aggressively. Whether to 2879.00 or to 2885.50, a probe of fresh highs is either the likely reward for not having reversed the trend back down Tuesday, or the room for noise where strong-handed selling resumes. A bullish and a bearish path, both beginning with fresh highs.

An alternative bearish path would not first probe fresh highs, but instead exploit Tuesday’s chipping away at support to start breaking lower without delay. So would an alternative bearish path, with room down to 2866.00 before required to accelerate. A bullish and a bearish path, both beginning with a pullback.

Potential bearish setups could form before Wednesday’s open. Tuesday’s last-minute dip was too late to negate having trended up into the close, so gapping down under the 2868.50 afternoon bias environment low (regardless of Tuesday’s post-close break under it) could form a session-long decline. Probing fresh highs overnight wouldn’t require retest if already reversing down under earlier Globex lows for a Globex-flip. But the potential bullish setup should not only resume the rally, but at an accelerated pace.

Details and other markets coverage are discussed in the post-market Wrap recording here.
Monitor overnight Globex trading in the chaRTroom here.

Friday’s “ineffectual optimism” setup, for appearing ahead of the weekend, had made Monday’s open likely either to gap up or to gap down. And it didn’t gap down. In fact, Sunday night’s open had already gapped up and extended through the morning’s bias-up parameters. Hovering at its highs into the open without bothering to correct reflected more optimism lying ahead. And even the “Dry Cleaners morning” setup didn’t prevent resolving up into the afternoon.

The reward for Friday’s pattern resolving up was to retest two-week old highs. By proxy, gap-fill, or actually probing room for noise would suffice, and the rally neutralized it all. Room for noise up to 2869.00 was met and held through the afternoon bias environment. Surging after the position-squaring window up to 2873.50 still found time to retrace entirely back down to 2866.50, so 2869.00 held. Otherwise, its recovery would essentially put into play 2902.00.

So, still overlapping the upper-end of the two-week old distributive pattern raises the question, where’s the distribution? Was it the cause of Monday’s restrained rally? Or, has strong-handed distribution suddenly become so universally patient that another upleg is underway? If the latter, then its upleg should be steep. If the former, then another second-day reversal like this area’s last test should be obvious by noon Tuesday.

Details and other markets coverage are discussed in the post-market Wrap recording here.
Monitor overnight Globex trading in the chaRTroom here.