Market Wrap

Quarter-end portfolio window dressing may have made a difference Friday, as the two-week ranging still sits atop a massive quarter. But open-to-close was little changed, if at all, as I describe below.

Meanwhile, Thursday’s 2820.25 cash session close was still overlapping 2019.50 to avoid qualifying as a recovery attempt. Friday’s session developed exclusively above 2019.50 to clearly qualify as a recovery attempt. Being recovered is the week-old close under 2013.00-2019.50 that signaled the trend is reversing down. A significant signal to have followed a week-long distributive pattern.

A recovery attempt, because trend change signals aren’t discarded easily. Neither are they triggered easily. Last Friday’s triggering close had required Monday’s second consecutive close to confirm. Similarly, this Friday’s recovery attempt requires its own confirmation, closing again back above 2019.50. Otherwise, the recovery attempt fails, and the trend change remains intact.

At least two setups are undermining the recovery attempt. Closing Friday at or overlapping its opening bar’s 2837.50 opening high reflects equilibrium. This setup often accompanies weak-handed sponsorship, which would suggest that Friday’s buyers won’t be attracting reinforcements on Monday. Friday’s “ineffectual optimism” also reflects weak-handed buyers — gapping up, ranging exclusively in positive territory, probing a fresh high, but not closing above the last prior high probed. Gapping up Monday can invalidate both bearish setups.

Overbought RSIs at 2840.00 were neutralized before the close. Which is not a sell signal, but removes an upside attraction that would have been a helpful reminder to the market coming out of the weekend. A lot of buying pressure was expended intraday, without gaining traction for the effort or leaving “unfinished business” above, so extending higher anyway would be bullish for at least attacking the recent distribution highs. Not extending higher Monday could already be gapping down sharply.

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Wednesday night’s initial 15-point drop and 20-point recovery had offered a glimpse of the intraday session. Thursday’s 5 and 10-point opening surges collapsed more than 20 points, and largely recovered. As inside days go, it was volatile.

Wide swings represent a broad-based willingness to express widely divergent opinion. Being range bound reflects an anxious reluctance to reinforce those opinions. But it tends to be only a temporary condition, with its eventual resolution being an order of magnitude compared to the range.

Throw a hard deadline into all of that volatility — such as two days of impending illiquidity — and strong-handed sponsorship becomes obvious. Whether that is a rush to the exits, or to cover and buy, trending at all on Friday should trend a lot. And trending early should extend.

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Monitor overnight Globex trading in the chaRTroom here.

Aside from Tuesday’s correction day, last week’s distribution seems to be dominating again. Tuesday night’s 9-point rally to 2832.00 was retraced to 2814.50. And Wednesday’s opening surge to 2831.00 was retraced to 2817.50. Those round-trips are sort of a gentle reminder of last week’s distribution, albeit shallower, but distributive nonetheless.

In contrast, a stark reminder of Friday’s collapse followed Wednesday’s late-morning bounce to 2828.50. The consequences of distribution were another collapse to attack 2791.50.

The low stopped optimistically short of touching Monday’s ~2790.00 lows. RSIs diverging positively warned early of a bounce that tested and retested 2813.00 resistance. Resistance held through the close, keeping alive the late-morning collapse’s bearish momentum. The decline is still easily invalidated by closing back above 2827.00, but should meanwhile become obvious into the weekend.

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Monitor overnight Globex trading in the chaRTroom here.

Apparently, rallying overnight and then surging at Tuesday’s open had a purpose — to create room for expending selling pressure without yet resuming the decline. The session had potential for being corrective, since Monday had confirmed Friday’s break under prior lows.

The 2823.00 open had extended sharply to the morning’s 2835.00 peak. Trending back down through the afternoon bias environment fell to 2808.50. Which is a lot of selling pressure to have expended until so late in the day, without yet probing back into negative territory. That became our focus in the chaRTroom, and the last 60-90 minutes bounced back up to the 2823.00 open.

Closing unchanged from the open reflects an equilibrium session. Not to be confused with inert, as the session ranged considerably either way. But the 45-point rally from Monday afternoon’s 2789.50 low was also a 61.8% retracement back to Thursday’s 2863.00 high, which is natural resistance.

Extending any higher would have potential to 2846.00 and possibly 2852.00. Meanwhile, already ending the correction and resuming the decline would simply target fresh lows, and probably in an aggressive manner.

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Monitor overnight Globex trading in the chaRTroom here.

At least two recovery efforts failed Monday. The post-open collapse back down to the 2791.25 overnight low had recovered to the open’s 2813.50 high, before reversing back down to test 2791.25. Any lower could have extended the decline. The afternoon’s no-bias trending expended all available selling pressure to only touch its 2791.25 bias-down target, and it retraced the noon hour’s 2802.50 high,which held as resistance.

The choppy, sloppy afternoon was separated by two dips to 2791.25. Returning to their origins makes the dips accumulative. Closing above the dips’ origins would have made them strong-handed accumulation. But the recoveries stopped short.

Gapping up Tuesday above relevant resistance like 2819.50 could serve by proxy for the recovery that Monday didn’t produce. Even then, recovering 2830.75 would be a challenge. Whether testing higher resistance first, or just resuming the decline, the pattern remains likely to resolve down, and to extend.

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