Market Wrap

Monday’s opening sell signal hadn’t finished its business that morning, making it likely to extend into Tuesday morning. Which it did, trending down early overnight and extending lower before the open. Tuesday morning’s low did react up substantially, but mostly only temporarily. The balance of the session ranged choppily sideways through the close, just above the morning’s lows.

A couple of things happened Tuesday, and a couple didn’t.

What did happen is a new sentiment or pattern of gapping up into Friday’s new high session and gapping down into Tuesday’s retracement through that last upleg’s origin. The paradigm shift is sudden and relevant, closing under support — similar to January’s two prior big down days. But what didn’t happen Tuesday is the broken support being within proximity of Wednesday gapping up immediately above it to reject Tuesday’s break. but too far below to be recovered immediately by a gap up tomorrow.

Tuesday’s other development was the multiple downtrending sessions, also a new characteristic. This didn’t happen during January’s rally, which has stretched the rubber band. That rubber band didn’t snap back up in the afternoon, perhaps inhibited by a stream of high-profile post-close earnings due, and/or the evening’s State of the Union address, if not also the next morning’s ADP employment number.

Isolating fresh lows to the overnight is the only reliable recovery pattern that would be signaled immediately. Meanwhile, overnight lower lows not recovered through the open would be vulnerable to melting down into the afternoon.

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

Monday morning’s slide was signaled before the open, which was greeted under the Globex session’s 2873.50 earlier high at 2865.75. It was also signaled after the open, by triggering bias-down under 2866.25. Its target was soon met at 2860.25, and probed by 6 points down to 2854.50. Exiting the bias environment at or above its 2860.25 target suggested that sellers weren’t gaining traction for their effort. Something that buyers might exploit.

They did. And they didn’t.

Bouncing a cumulative 14 points through the noon hour to 2868.25 wasn’t enough to trigger the afternoon’s bias-up signal. The bias environment slipped 10 points. The balance of the session collapsed 12 points to 2852.00. But was it too late to be strong-handed selling sponsorship?

It was, and it wasn’t.

A very late bounce was probing back above the morning’s low within 3 minutes of the cash session close at 3:57. Sellers didn’t gain traction for their efforts. But probing doesn’t equate to recovering, so buyers didn’t gain traction on the bounce.

Having trended down into the close, gapping up above the afternoon bias environment’s 2867.00 high could form a “session-long rally” setup. The reward for either would be to retest Friday’s 2973.25 high and fill its closing gap, probably retest Sunday night’s 2878.50 “new Globex trend extreme” intraday, and possibly fulfill Friday’s requirement for another new trend high close. An overnight test of 2848.00 would have to be isolated to avoid a deeper meltdown.

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

MARKET WRAP WAS HELD EARLY AT 2:22 ET FRIDAY.
THIS SUMMARY IS BASED ON PRICE ACTION THROUGH 3:30.

Friday Factors exploited the morning’s inability to exploit the delayed improvement upon the open’s gap up. Friday morning biases tend to persist through the noon hour, further inhibiting sellers. And greeting the afternoon bias environment all but fulfilling its target also fulfilled its buying pressure. Yet another opportunity sellers failed to exploit.

The rest of the session was governed by the greatest Friday Factor of them all. Trending sessions that exit the afternoon bias environment above all prior timing window highs rarely reverse down. And the greatest corollary of them all, that the setup is very vulnerable to extending the session’s trend.

We’re left with a new trend extreme close requiring at least an eventual follow-up higher close. It’s a blow-off rally, and Friday Factors probably also prevented rejecting early strength early, so another downdraft first is possible Monday morning. But any downdraft at this stage, however deep or protracted, is likely to be recovered.

• Details and other markets coverage are discussed in the post-market Wrap recording here.
• REMINDER: NO SATURDAY REVIEW THIS WEEKEND… ENJOY!
  

PROGRAMMING NOTE: Friday’s Market Wrap will be held at least one hour early.
REMINDER: There is NO Saturday Review this weekend AND next.

Wednesday night’s rally greeted Thursday’s open at Wednesday’s open, instantly neutralizing its required retest. Paradigms suddenly shifted to the current atmosphere of rejecting early highs early. The entire first half-hour trended down to probe under overnight lows.

Bouncing into the noon hour nearly retested the open — which doesn’t require retest, since it wasn’t above all prior highs. Another drop ultimately fulfilled its minimum objective by probing the morning’s low. Bottoming and then recovering back above prior lows through the 3:10-3:20 proxy window drifted slightly higher into the close.

The bias environment lapsed under the noon hour’s low, and the final hour was entered even lower, so sellers gained traction for their efforts. The late bounce refueled them. All of which must be rejected by gapping up Friday to avoid extending down through the morning — if not also into and out of the weekend.

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

Wednesday’s 30-point drop from high-to-low only rivaled last Tuesday’s 39-point high-to-low intraday drop. Their afternoon bounces differed in all but one relevant element. Last Tuesday afternoon’s bounce was resisted by “higher prior lows” of the previous afternoon. But Wednesday’s bounce was probing back above the similar structure from Tuesday.

That difference allowed a gap up last Wednesday to target a retest of the prior day’s open and its high. But this time a gap up Thursday would have to be above Wednesday’s open before putting into play a retest of Wednesday’s high. Regardless, both open’s gapped up above all prior highs, so both require being filled intraday.

None of which requires filling the gap back up to Wednesday’s 2848.00 open immediately. It’s likely to be tested sooner rather than later, if only because Wednesday afternoon’s 2839-2845 range was within its orbit. Its test can be influential overnight, but its attraction can be neutralized only intraday.

Meanwhile, Wednesday afternoon’s rally originated from under its 2835.50 bias-down signal, during its bias-down environment. Similar to “no-bias trending,” the bias-down signal must be retraced. And the delay in retracing it makes its 1:20 bias timing print likely to be retraced, too… at 2827.00. Either of these retracements can be neutralized overnight.

One thing becoming more likelier, if not more obvious, is that the market has entered a distributive phase. Rising prices intraday do not dictate resolution, and the intraday behaviors are revealing cracks.

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