Market Wrap

“The cart won’t go before the donkey’s hooked up,” as my make-believe Great-great Grandpappy would have said back in the day. Friday he would have said that a rubber band can’t snap until it’s stretched. Which is what happened to the bearish scenario. Or, more appropriately, what didn’t happen to it.

Probing fresh highs Friday above the 2677.00 corrective bounce limit would have been likely to reverse down throughout the afternoon. Fresh highs weren’t probed, perhaps because Thursday’s surge into the futures close did, after all, fulfill the traction gained by its intraday rally. Perhaps the NQ sell-off siphoned the day’s selling pressure, having probed above Thursday’s high before plunging through the afternoon.

Nevertheless, the ongoing test of 2677.00 wasn’t rejected, so fresh highs are still possible. And fresh highs are still vulnerable to reversing down, albeit a little less so. Extending higher would target 2693.00 and 2703.00. Oversold RSIs at Friday morning’s 2657.75 low will require a retest at some point, too.

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Extending Wednesday’s rally through the close had quickly peaked at 2655.00 into the Globex open. An overnight dip seemed deep, it measured 15 points down to 2639.50. But it stopped 3 ticks short — optimistically short — of touching the 2638.75 cash session close. And overnight higher were recovered almost entirely into Thursday’s open. A shallower 9-point dip post-open was quickly recovered to extend the rally sharply higher. Potential up to 2677.00 was exploited almost entirely Thursday’s afternoon. The final hour’s dip targeting 2664.00 held its test to avoid reversing momentum down, and already recovered up to 2674.00.

Not bad, for a corrective bounce. Which continues to be my interpretation of the rally from Wednesday morning. Its retest of Tuesday’s low. Potential up to 2677.00 can be expanded by at least 1 point, at least for the purpose of defining fresh highs, and still maintain a correction’s measurements. Barely.

Thursday afternoon’s rally gained traction by exiting the bias environment above the noon hour’s high and then entering the final hour above the bias environment high. So, probing fresh highs Friday morning is likely, especially having absorbed a late pullback to 2664.00. Extending higher into the afternoon could put into play higher objectives at 2693.00 and 2703.00. The correction would more likely trend back down during the afternoon, and possibly throughout, regardless of whether the morning had probed fresh highs.

Details and other markets coverage are discussed in the post-market Wrap recording here.
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Is Wednesday’s low a durable bottom? The open’s probe under Tuesday’s 2616.00 lows by 5 points was absorbed in an unconventional way — by trending down throughout the entire opening 15 minutes of volatility, and no deeper. The balance of the session essentially trended up, including a midday flat-to-higher range up to 2635.00-2636.00. And that broke higher to 2644.00.

So, bottom?

Post-close high-profile earnings were likely to inhibit trending. Perhaps they did and that’s what caused the midday range. Pessimism and restrained optimism are constructive to bottoming. But Wednesday’s pattern didn’t end there. There was nothing pessimistic or restrained about the break to 2644.00. But that late optimism was neutralized by reacting down 14 points through the proxy window to the surge’s 2630.00 origin.

So, bottom?

Reversal signals don’t trigger on the same day the trend reaches its extreme. Fresh lows during the morning preclude Wednesday’s close from triggering a buy signal. Also, Wednesday’s low touched a 2-1/2 week old prior low before bouncing — not a “lower prior high” or retracement, but a prior low. It’s one of several I’ve identified during Big Picture reviews, noting that their support can be influential, but only temporary.

So, no bottom.

Wednesday’s cash session close was 2639.00 and Facebook’s earnings reaction encouraged extending to 2648.00. That may extend, but only temporarily, before returning to and through Wednesday’s lows.

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

The ongoing series of “ineffectual optimism” since Friday’s low was almost invalidated by Tuesday’s gap up above prior highs. But Tuesday’s gap up was back under prior highs. Overnight highs had probed higher, but it was just another instance of ineffectual optimism.

An unsustained overnight bounce was one form of ineffectual optimism. Some of the other instances had stopped optimistically short of their potential. Tuesday’s post-open action didn’t hesitate to compensate for those delays. The morning dropped sharply to attack prior lows. The afternoon probed sharply lower.

Tuesday’s low essentially filled a gap, which could contribute to forming a bottom. Except that this particular two-week old gap itself had stopped optimistically short of fully bottoming before launching a rally. And Tuesday’s own recovery held “higher prior lows” to avoid rejecting the dip altogether.

Potential for a bigger intraday corrective bounce probably diminishes greatly if not already underway Wednesday morning. Meanwhile, resuming the decline would find more dominoes ready to fall.

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

Day-two of the bearish WedEX can’t be considered a success, other than to have produced only temporary bounces. Both Sunday night’s gap up and Monday’s late-morning rally were reversed back into negative territory.

As expected, the afternoon was also likely to probe lower, a consequence of cumulative “ineffectual optimism” beginning at Friday’s low, repeating overnight, and then Monday morning. Monday’s late low bouncing from actually filling the gap that Friday’s low missed, but it was barely filled and so its impatient buying represents another instance of ineffectual optimism.

Bouncing 16 points through the close to 2673.50 was a corollary to the low’s impatient buying, leveraged by the difficulty in generating sponsorship so late in the day.  Google’s post-close earnings helped to inhibit sponsorship, too. But it’s still likely to resolve down, unless an overnight rally produces a sustainable gap up Tuesday.

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