Market Wrap
Trading Plan for 6/3
[pay]Pattern notes.
Last week’s rally was always considered to be only a corrective bounce. Monday’s ESm 1377’50 low was 30 points under Thursday’s high, only 5 points above last Monday’s low. So, is it possible that the decline hasn’t actually resumed? Actually, a 61.8% retracement of last week’s rally was allowed without signaling the decline had resumed. That level is around 1385’50 which was tested throughout Monday’s final minutes.
Nevertheless, the morning’s drop had fallen far enough that sellers gained traction on its break. It is counterintuitive, but their traction allows room for a bounce. S&Ps surged up to 1387’50 but still closed under 1385’50. There was still nothing accumulative about the pattern off of Monday’s low – and the late-afternoon surge adds the unhealthy combination of being overly-optimistic. None of which requires the decline to resume immediately, but these are the characteristics of a bounce and not of a sustained rally.
Indicators and Internals.
MACD & RSI deteriorated into Monday’s last-minute surge. Some sort of expanded volatility had been likely, if not necessary, since technicals had become mired in a non-volatile range. And that setup tends to resolve by a false breakout in one direction that reverses more substantially in the opposite direction. Meanwhile Monday’s volume was relatively light. The larger intraday move was down, but more time was spent retracing up, so the lower volume reflects more poorly on buyers.
Tuesday’s opening setup.
A couple of retail reports are due pre-open Tuesday. The extra room for a bounce still has room up to 1390’00, but there is no requirement for any further bounce. Back under 1382’50 should reinstate the decline. If the decline isn’t obviously back in-play before Tuesday’s open, then the bounce would be more likely first.[/pay]
Trading Plan for 6/2
[pay]Pattern notes.
Sunday night’s Globex open immediately attacked Friday’s last-minute low. That was only 30 minutes ago, and the initial drop has yet to break lower. But by not immediately recovering Friday’s last-minute dive, the Globex open is clearing the way for sellers to retake control. Monday’s cash session open is still 15 hours away and the clock doesn’t start ticking down until Friday’s ESm 1398’00 low is actually probed.
But of all the opportunities to reject sellers that buyers might have, they just missed one. And the Globex open was a pretty big opportunity, because immediately rejecting the last-minute dive would have tucked it away neatly in anomaly-land. I was starting to wonder myself, since the template had so clearly predicted it and yet it could not have happened any later. Until there is any evidence to the contrary, I am ascribing Friday’s delayed dive as being the product of optimism.
Indicators and Internals.
It’s not surprising after Friday’s relatively narrow ranging that internal spreads were evenly weighted. However, the relatively heavy total volume was a bit unusual. But Friday was an inside day, with all of the session’s price action contained entirely within Thursday’s range. Light volume would have made the day otherwise irrelevant. But Friday’s heavy volume, balanced internals and inside day suggest last week’s recovery attempt ended before the weekend.
Monday’s opening setup.
If the optimism of last week’s corrective bounce has peaked, then Monday’s open should gap down under Friday’s ESm 1398’00 low and extend down noticeably through 10:15. Otherwise, a gap up to the 1404’00 area will peak a little higher – perhaps as high as 1408’00 – then fail miserably. Two econ reports are due 30 minutes after the open, and Monday’s are unusual for any reports, so the oddity could easily throw a wrench in the works of any initial trending attempt.[/pay]
Trading Plan for 5/30
[pay]Pattern notes.
Thursday afternoon’s pullback bounced off of the ESm 1397’50 bias-up signal where a bounce up to 1400’25 formed an Ascending Triangle that reversed down into the close. But it did not probe the afternoon’s lows. The biggest problem for considering the corrective bounce as having peaked is that Thursday was its third consecutive higher close.
That’s acceptable considering one of the decline’s hallmarks was its last-minute resolutions. Of course, that requires a last-minute resolution, which in this case would be the decline’s immediate resumption at Friday’s open, and preferably moving lower overnight. I do like that the cash session’s last half-hour ranged narrowly, chipping away at support and rejecting a bounce, creating a lot of pent-up selling pressure and leaving it all on the table for Friday’s open.
If the corrective bounce has ended then Friday’s open should already be in decline at the open. That, or any initial gain should be very short-lived and quickly reverse down under Thursday afternoon’s lows. There is room down to 1393’00 before being anything more than just a retracement to refuel buyers. There is room under 1390’50 for a steep drop into the weekend.
Indicators and Internals.
MACD & RSI firmed a little at Thursday’s late lows, but they had never gotten oversold to the point where improvement would have been bullish. Meanwhile internal spreads were evenly weighted with each other, so Friday’s session isn’t obligated to reward either buyers or sellers for any relative productivity.
Friday’s opening setup.
This being a Friday, the morning’s bias is likely to persist well past the noon hour. Three econ reports will influence price action prior to the bias signal’s trigger. Two are due after the open – NAPM-Chicago at 9:45 and Consumer Sentiment at 10:00 – timing that tends to reverse or accelerate any initial trending underway.[/pay]
Trading Plan for 5/29
[pay]Pattern notes.
Back above ESm 1384’50 and 1386’00 was increasingly likely to trend up into the close. A surge lifted off just as the 3:20-3:30 window was opening, eventually reaching the 1393’25 pre-open high. Wednesday’s session was not accumulative, and neither was Tuesday’s, but that hasn’t stopped price from eking higher. The market is finding a way to refuel sellers and take care of unfinished business (like the gap back to last Thursday’s 1393’50 close) while also absorbing buyers without letting them get any traction.
Indicators and Internals.
Despite the session’s net gain, Wednesday’s internal spreads were negative as 50% more NYSE up volume than down volume produced only 30% more advancing issues than decliners. Total volume improved, so Thursday’s session is obligated at some point to reward Wednesday’s sellers for their relative productivity. Wednesday’s last 2 points were added after the cash session close while RSI & MACD made no higher highs.
Thursday’s opening setup.
A pullback has room down to ESm 1388’00 before either extending lower or else extending the corrective bounce up to either 1396’25 or to 1401’50. A third consecutive closing gain is unlikely unless the following day reacts down strongly. Several econ reports are due throughout the morning, and if none is able to trigger the decline’s resumption, then it might not occur until at or just after Friday’s open.[/pay]
Trading Plan for 5/28
[pay]Pattern notes.
The afternoon’s test of this morning’s high could have closed higher to form a “Pivot Reversal” setup that would have pointed higher for 1-3 days. Or the higher high could have been rejected by a close back under the morning’s high to rob buyers of their traction and doom to failure the next rally attempt. In either case the required retest at Tuesday’s ESm 1370’50 pre-open lows would be the minimum target.
In fact, S&Ps did probe a new session high momentarily during the session’s last hour. The new session proved to be part of the last hour’s consolidation, and the last hour’s consolidation proved to be no more than a retest of the morning’s high. The retest didn’t break higher and neither was it rejected. A higher high can’t be ruled out, but its rejection would be credible.
Indicators and Internals.
The ratio between NYSE up volume to down volume was weaker than the ratio of advancing and declining shares it produced. This would be a positive divergence if S&Ps had declined, even with Tuesday’s depressed volume; instead it’s a non-event. MACD & RSI diverged negatively among 1-minute and 3-minute intervals into the last half-hour’s highs, as they had done on the highs one hour earlier and 6 points lower – the technicals aren’t a sell signal, but they won’t inhibit the decline from trying to resume.
Wednesday’s opening setup.
Everything about Tuesday’s session characterizes it as a correction. Exiting Wednesday’s 10:15 bias under 1381’50 would be credible for resuming the decline. Meanwhile there is room to fill the gap back up to Thursday’s 1393’00 close first. Four econ reports due pre-open could incite volatility capable of testing both parameters. A more substantial rally won’t be signaled without closing above 1396’25.[/pay]