Market Wrap
Trading Plan for 4/14
[pay]Pattern notes.
Friday’s last hour probed the prior hour’s low, but didn’t avoided closing under it. On any other day that would be potentially bullish for stealing sellers’ traction. Fridays can be different. Optimism is at work in either case, and it must be strong when managing to appear at the end of a session-long drop to new relative lows. Doing so ahead of a weekend’s illiquidity is something else, indeed. It’s not bullish, although it might allow a corrective bounce prior to resuming the decline.
The very level where S&Ps stopped sliding Friday does also reflect optimism. Having probed the ESm 1338’00 post-open low of April 1’s record rally, the next lower target was put into play at March 31’s 1321’75 close. Friday’s close was between each, leaving the magnetic attraction to fill the outstanding gap. A corrective bounce would likely peak within resistance spanning 3 points up to Friday’s close at 1344’00-1347’00, where any higher close would undermine the bearish scenario.
Indicators and Internals.
If a corrective bounce were going to extend higher and undermine the bearish scenario, it would be driven by the possibly overkill of Friday’s sellers. NYSE down volume was 9.4 times up volume, but produced “only” 3.6 times more declining issues than advancers. That’s still not pretty. And its relevance is a little suspicious because volume’s pace didn’t increase, and deteriorated when backing-out GE’s extraordinary volume. Monday’s session might be obligated to reward Friday’s buyers for their relative performance, but that won’t be impressive unless accompanied by substantial volume.
Monday’s opening setup.
Retail Sales is due before Monday’s open. Business Inventories is due 30 minutes after the open, but it isn’t usually regarded as high-profile enough to influence initial trending. S&Ps have room to firm 3 points before even touching the morning’s bias-up signal, so a lot of energy would be required to trigger it, and meanwhile it is likely to act as resistance.[/pay]
Trading Plan for 4/11
[pay]Pattern notes.
The no-bias rally required a complete retracement back to its ESm 1355’25 origin, despite the rally having reached 1369’25 in the interim. It never ceases to amaze when the market does what it is supposed to do. Actually, only 1357’50 was retraced before bouncing back up to 1363’00 after the cash session close, then nearly 1365’00 after the Globex open.
Having left unfinished the complete retracement back down to 1355’25, Friday’s open should be attracted lower, and back under 1360’00 at any time would signal the retracement had resumed. Thursday morning’s retest of Wednesday’s 1351’25 low was of the same character and weaker technicals, making its eventual break very likely, probably on the way to 1347’50 and lower. Extending the recovery overnight instead to gap above Thursday’s 1369’25 high would be bullish for a couple of days into next week.
Indicators and Internals.
MACD & RSI were deeply negative enough at the afternoon’s low to require its retest. That’s just one more factor compelling S&Ps to resume the no-bias rally’s retracement. Internals were actually accumulative. But the spread between NYSE up and down volume was narrower than the spread between advancing and declining issues that it produced. The session’s flat to lower volume softens any obligation to reward Thursday’s buyers
Friday’s opening setup.
The pre-open Import and Export econ report isn’t usually very high-profile but has gained influence over price action with inflation rearing its head. But Consumer Sentiment is much sexier and it is due 30 minutes after the open at 10:00am, timing that tends to reverse or accelerate any trending already underway. If S&Ps have rallied overnight above Thursday’s highs then that would be the last hope sellers have to retake control before mid-week. Otherwise, if the week’s lows are already under attack, there won’t be much to prevent falling lower with buyers having been rejected so much recently, and with two days of illiquidity just hours away.[/pay]
Trading Plan for 4/10
[pay]Pattern notes.
Did it, or didn’t it? S&Ps closed under last Friday morning’s ESm 1365’00 low to signal that momentum has reversed down. The margin wasn’t narrow – 9 points for the cash session close, and 4-1/2 points for futures. There is a 24-hour window for the break to be invalidated by recovering on a closing basis today, or else by gapping up Friday above the break’s last relative high (Tuesday afternoon’s 1371’00).
Wednesday’s closing action made the signal’s invalidation more than just a possibility. The afternoon’s first low bounced neatly from the morning’s 1352’50 bias-down target, and a lower low was recovered. Only futures closed above the two lows’ interim high, the underlying cash index did not – a buy signal would have triggered had the cash session also exhibited such strength.
Even if a buy signal had triggered, it would only indicate an intraday reaction. That would only give buyers a chance to gain traction and close above 1365’00 to invalidate the break. The futures close could have been an aberration, but it will need to be rejected very early Thursday to avoid dragging the underlying cash index higher with it.
Indicators and Internals.
MACD & RSI firmed at the afternoon’s lower lows, but not from oversold levels, so the bounce it produced may be only a bounce. Despite the session’s loss, internals ended the day with sellers underperforming buyers: 3.6 times more NYSE down volume than up volume produced only 2.5 times more declining issues than advancers. The obligation for Thursday’s session to reward buyers with a bounce is mitigated somewhat by the post-close surge; it would be altogether moot if the open were to gap under Wednesday’s lows.
Thursday’s opening setup.
At this moment S&Ps have dropped back to yesterday’s cash session closing level, and through it by more than 2 points to ESm 1353’75. That’s after extending the post-close bounce up to 1362’00. If maintained through the open, this degree of rejection would be sufficient to confirm the signal that momentum is reversing down. Buyers have another 4-1/2 hours to save the day, the week, and probably the S&P 1300 century mark.[/pay]
Trading Plan for 4/9
[pay]Pattern notes.
A late recovery barely managed to get S&Ps back up to the ESm 1370’25 target that the afternoon’s first bounce peaked short of fulfilling. That seemed to be Tuesday’s defining characteristic – last-minute buying or selling sprees instead of being evenly spread out. Not that the environment was very opinionated otherwise; S&Ps only twice ventured 1-2 points beyond either end of a 6-point trading range that began at Monday’s close.
That might seem bullish. After all S&Ps firmed through noon after gapping down, and again through the close after the FOMC reaction’s new session low. But that wasn’t a firm rejection of the test of Friday’s ESm 1365’00 low. A gap up Wednesday that leaves Tuesday’s ranging behind it might be able to resume the rally, but it will need to avoid gravity through the afternoon.
Indicators and Internals.
MACD & RSI printed lows along with price on the FOMC reaction, undermining the afternoon recovery’s credibility, even if S&Ps extend higher overnight or Wednesday. And although gapping up Wednesday could form an Island from Tuesday’s price action, volume was too low to suggest that any gain would be durable.
Wednesday’s opening setup.
Another 10:00am ET econ report is due Wednesday. Wholesale Inventories isn’t so high-profile that its surprises lead to major adjustments in outlook. But the reports timing 30 minutes after the cash session open does often accelerate or reverse any initial trending underway. Quarterly earnings surprises have begun influencing price action, too. But this week’s econ calendar is light, so there’s not a lot of catalysts to prevent extending the decline if Friday’s 1365’00 low is broken early enough.[/pay]
Trading Plan for 4/8
[pay]Pattern notes.
Monday’s last-minute low touched three of the past four session’s closing prices before bouncing to close above them all, thus avoiding (narrowly) a “Gotcha!” setup. That was the cash session. S&Ps dipped after the cash session in reaction to one earnings surprise, closing under the highest recent close. S&Ps continued falling on another earnings surprise, extending to ESm 1364’25, nearly 10 points under Monday’s cash session close.
The overnight price action is consistent with a Gotcha setup, so the possibility of it occurring must be allowed. That would also start to qualify as an attempt not only to invalidate last Tuesday’s surge as the start of a new rally leg, but more importantly try to reverse its momentum. There’s not much momentum left to reverse, so a decline won’t drop very far fueled by that motivation alone. The key to starting a new downleg still rests on closing under Friday’s low.
Indicators and internals.
The spread between Monday’s NYSE up and down volume was about 50% greater than the spread between advancing and declining issues. This already obligated Tuesday’s market to reward Monday’s sellers for their relative productivity. MACD & RSI haven’t improved into any of the overnight lows to suggest the low has been touched, let alone that a bottom has yet formed. But the low is being retested now, and technicals should be reviewed when considering the likelihood for a new low to hold.
Tuesday’s opening setup.
The overnight low so far has fulfilled the bias-down target while touching Friday morning’s low, and the two factors produced a 3-1/2 point bounce. A new low under ESm 1363’00 would signal that the bounce had ended and the drop was extending down. Back above 1368’25 would target a retest of Monday’s cash session close. An econ report isn’t due until 30 minutes after the cash session open at 10:00 ET, timing that tends either to accelerate or to reverse any trending already underway. FOMC Minutes is due at 2:00, a report that ordinarily sparks an extraordinary degree of volatility.[/pay]