Market Wrap

This morning’s 2620.00 bias-down signal was tested down to 2612.25, and recovered in time to avoid triggering. That put into play an offsetting test of its 2638.25 bias-up signal. And it was tested before the first hour ended, when exceeding it would have renewed the bias-up. But it was still being overlapped.

The rally extended anyway.

If tested during the no-bias environment, the untriggered 2638.25 bias-up signal would be required to define the window’s upper-end, or else trending above it is required to be retraced. Both constraints could be invalidated if the rally’s sponsorship were to prove itself worthy — by exiting the bias environment above its 2646.00 bias-up target.

It was.

And having rejected the no-bias and its required retracement, the rally has only extended. The open’s shallow muted reaction to the Employment Situation report leveraged Thursday afternoon’s pent-up pressure to extend sharply higher. The afternoon’s 2655.00 bias-up signal triggered and its 2662.00 bias-up target was ultimately probed up to 2669.50.

The session ended by retracing the bias environment down to 2657.00, but no prior low was attacked. The session closed by overlapping Wednesday’s 2658.50 high, and not by closing above it, so extending to 2674.00 and 2684.25 is not necessarily in-play..

Details and other markets coverage are discussed in the post-market Wrap recording here.
WE’LL APPLY THIS AND MORE TO THE BIGGER PICTURE AT THIS WEEKEND’S SATURDAY REVIEW. ITS LINK WILL BE EMAILED IN THE MORNING.

La plus ca change… Thursday’s 2623.50 opening print was under Wednesday’s last-minute 2629.00 low. And it quickly resolved down, eventually a lot, attacking 2591.00 at the bias environment low. Already bouncing into the noon hour was extended through the noon hour, and then a little higher to 2632.50 at the bias environment high. That was actually probed momentarily by 2 points while ranging sideways through the close, supported by 2623.50… the opening print.

That’s a big tail, as the candlestick chartists would say. A somewhat agreeable open and close, with a substantial interim trending attempt that fails. But it’s also interesting to note that the failed trending was only retraced, and not reversed. Futures settled higher, but Thursday’s cash session close was negative from Wednesday.

Headlines seemed to be forming a theme of formally ending the trade war soon, which may not be a valid read, but helps to explain why sellers became inhibited. Retracing or reversing Thursday afternoon’s recovery remains likelier than to extend it. And when an afternoon that is least likely to range sideways ranges sideways, then a powerful move is likely — perhaps already overnight.

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

Tuesday afternoon’s rally had gained traction for its effort. Reversing down Wednesday morning required gapping under a relevant support. Wednesday’s open did gap down — after testing fresh highs up to 2658.50 several times overnight.

But the 2648.00 open was too shallow to reflect strong-handed sponsorship. And the morning’s 2642.00 bias-down signal didn’t trigger. So, no reversal down.

Also, no intraday probe above Tuesday’s 2654.00 intraday high, not until the afternoon’s FOMC policy statement reaction. Surging to 2658.50 took RSIs overbought, which requires an eventual retest.

Oversold RSIs at the morning’s 2640.25 low were more attractive. Its retest targeted at least 2635.00, but that extended to 2629.00. Retracing to between 2630.50-2633.00 within 3 minutes of the cash session close avoided triggering both a hold-short and hold-long setup. Actually, 2633.00 was being overlapped, which is not a decisive break.

Despite not triggering hold-short, post-close action is extending down so far to 2627.00. Isolating it to open Thursday back above 2635.00-2638.00 could target a retest of Wednesday’s 2658.50 high, which would all but ensure retesting Monday’s 2783.25 high. Extending down anyway could resume the bigger picture’s decline.

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

Lower volume from global May Day celebrations didn’t interrupt Monday’s decline from achieving its objective Tuesday. The minimum objective of 2641.50 would have sufficed, had its overnight test been isolated by opening back within Monday’s range. But that recovery attempt’s failure put into play 2635.00-2638.00, whose failure targeted 2623.00. All had been tested when the afternoon bias environment was entered. All were recovered when the bias environment began lapsing. And the balance of the session extended higher to recover positive territory up to 2653.00-2654.00, ignoring any anxiousness ahead of AAPL’s post-close earnings. But the positive close was too shallow to confirm the afternoon’s traction must extend higher, although that’s likely so long as Wednesday’s open doesn’t gap down.

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

The topping pattern that would have been credible Thursday finally played out Monday. So, why is it suspicious? One word: CATALYST.

Attacking or testing 2677.00 last week would have sufficed to expend all currently available buying pressure. Reversing down from its test would have sufficed to signal counter-trend sponsorship taking control. Delaying its reversal made fresh highs likelier, up to at least 2681.00, which was tested and attacked Sunday night and Monday morning. The bias environment lapsed back under 2677.00.

Oh, and the decline extended down another 32 points to 2646.00. So, bearish?

Bearish behavior, for sure. But the reversal’s durability is a function of its origin and its sponsorship. Its catalyst was not simply a failed attempt to resume the rally. The open’s consolidation above 2677.00 had created a position of strength likely to probe even higher. A news headline prevented that, and more of the same news extended the reversal.

An artificial catalyst often crowds out organic sponsorship, which is then left unfulfilled. Monday’s decline didn’t gain traction, so gapping up above 2658.50 Tuesday could reverse the trend back up to probe fresh highs up to 2684.25. That said, and artificial catalyst can still be productive, so not yet reversing up through Tuesday’s open would next target 2635.00-2638.00.

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