Market Wrap

HAVE A SAFE AND HAPPY NEW YEAR’S! Thank you sincerely for subscribing. I’m glad you’ll be joining me in looking forward to an interesting and profitable 2018.

Friday’s sellers didn’t appear until the pre-open pop. But they were in control through the last drop. And it was a biggie.

Recognizing the week’s pattern of rejecting overnight rallies kept us alert at the open for a potential collapse. If we were disappointed, it was by not getting a post-open probe above prior highs. But the 2698.25 overnight high didn’t form a “new Globex trend extreme,” so its retest wasn’t required.

Tests of both bias-up parameters were rejected as the 2692.25 sell signal became very productive. The resulting no-bias put into play offsetting tests of both bias-down parameters. So did last Wednesday, but its no-bias was triggered late and its 2675.50 bias-down target was left outstanding. Friday’s clean no-bias still had to chip away at 2684.25 support until the 3:37 position-squaring window.

Admittedly, a head-fake after the 3:10-3:20 proxy window didn’t even hint at what was coming. But its bounce to 2686.50 was reversed nearly 18 points as price collapsed 2668.75 through the close.

“Unfinished business below” that had been outstanding all week is now neutralized. Not in time to recover relevant resistance by 3:57 which would have trapped sellers. But also not in time for closing under its lowest objective to put into play 2660.00 and 2640-2642.

Except for being a weekend, regardless of it being a 3-day weekend or year-end, Friday’s close would be likely to gap down and extend down at the next intraday open. It’s still possible, but the special circumstances do allow a path higher that essentially treats Friday’s late collapse like an anomaly by gapping up above 2684.25. The overnight new high’s retest would become very likely.

• Details and other markets coverage are discussed in the post-market Wrap recording here.
• Globex re-opens Monday night at 6:00 PM ET. I’ll display a Bitcoin chart over New Year’s and comment where merited on any reaction.

Words could only describe so much. But this picture of S&P futures since Wednesday afternoon’s low shows what the weekend’s impending illiquidity can do, and what it can prevent.

Reacting down from the overnight rally was entirely legitimate. That is an irrelevant timing window, so it can’t gain traction. And it greeted the open at the 2688.25 bias-up signal’s resistance. More so, the overnight rally was an extension of Wednesday’s late surge. It was only noise, having peaked at resistance of the afternoon bias environment’s high.

An entirely legitimate and fully expected reversal down. Pretty productive, too, putting into play an offsetting test of the 2681.50 bias-down signal. (Add it to 2679.00 and 2675.50 outstanding.)

But the drop stopped suddenly, and permanently for the day. Weekend illiquidity inhibits sponsorship, and promotes noise. Gapping up Friday above prior highs would be credible for extending higher into year-end — the same setup as every other day this week. Meanwhile, there briefly visiting the lower objectives is likelier, while being vulnerable to extending down even deeper.

As long as we’re sharing pictures, here’s another. We professionals consider the historical metrics that the rally has gone too far, which ironically adds bricks to the proverbial “Wall of Worry” keeping the rally alive. But, what do we know. Here’s an example of how popular the stock market rally has become among those whose ignorance is blissful:

The last time I recall seeing a non-analyst’s widely publicized opinion is 10 years ago:

I’ve noted on the following long-term EUR / USD chart where Gisele proclaimed that paying her millions of dollars would offend her:

That’s timing which many market analysts only wish they could match. And I’m not saying Kanye has Gisele’s expertise. But it’s too cold to measure miniskirts, so we’ll have to wonder whether the stock market’s chart will have taken a similar turn in several months.

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

Wednesday afternoon’s late bias-down signal wasn’t the least bit productive. Actually, it WAS the least bit productive. More important was that the bias signal wasn’t rejected. So, its 2679.00 bias-down target becomes “unfinished business below.”

How choppy is this market environment? The morning’s late bias-up signal left outstanding its 2693.75 bias-up target. Now it becomes “unfinished business above.” Each requires being met eventually. As does last Wednesday’s outstanding 2675.50 bias-down target.

Until proved otherwise, I’m still giving the downside a benefit of the doubt for exercising its influence. Wednesday’s downdraft began in time to be credible ahead of another 3-day holiday weekend’s seasonal bullishness. But it doesn’t have unlimited time to fully develop. Unless Thursday’s open were to gap up above Wednesday’s highs, fresh lows remain in-play.

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

The week began with relatively choppy overnight ranging that kept Tuesday’s first hour choppy, too. But the range quickly contracted to a matter of ticks. Flat-to-lower ranging probed a fresh low AFTER the 3:10-3:20 proxy window had closed, which was already too late to be durable. Greeting Wednesday’s open above Tuesday’s range would be credible for extending higher, and for probing new highs. Otherwise, “unfinished business below” continues to inhibit a recovery, while the opening between two seasonally bullish windows gives room for a downdraft.

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

Merry Christmas!

Thursday night’s bounce had failed already before Friday’s open. Which Friday’s open and morning exploited by breaking down from 2688.00 to attack 2682.00. That was the morning. Sponsorship for trending down was difficult to gather, so it didn’t. Sponsorship to recover was unnecessary, so it did. Bouncing recovered 2688.00 coming out of the bias environment. The balance of the session fluctuated there. No action.

Trending back down Tuesday would still target 2679.00 and 2675.50. but the drop would no longer be done a constrained context. Still unlikely to trend down, but more capable. Gapping up above 2692.50 is probably the only path higher, but it could be satisfied quickly at new highs up to 2703.00.

As I pointed out in my previous blog post, Bitcoin could be in for more selling this weekend. I’ll update the blog with any relevant observations. Meanwhile, have a safe and Merry Christmas…

Rod

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