Market Wrap

Don’t discount Friday’s complete retracement of Thursday’s rally. It was the resumption of distribution that we began identifying Monday. Then Tuesday. And Wednesday. Friday’s drop proves what we had assumed at Thursday’s close, that the intraday rally was only a function of having dumped all of that ballast Monday, Tuesday, and Wednesday. It was not strong-handed buying.

And distribution by that crowd, for that duration, is positioning for more than one week of problems that they see off on the horizon. Like Friday’s 2-point surge in the 30-year triggering a Cup & Handle pattern, if more than just the strong hands are distributing, then capitulation isn’t far behind.

Had Thursday’s rally stuck, and the overnight dip held Friday as only backing-and-filling, then perhaps this week’s reversal could be explained away as volatility ahead of the next upleg. I would still be wary in this range of potential for one more probe higher. But there’s no “unfinished business” above, and ending the week in decline reflects a continued vulnerability to a much steeper, deeper decline.

Of course, it always seems darkest before the dawn. And, more on point, bull markets have a way of stepping right up to the brink, and then reversing. I’ll be monitoring for any signs that sellers are done, because the reaction up would far exceed the week’s highs.

Meanwhile, the week-ending decline did satisfy unfinished business below at 2806.25 by 1 point. The next lower support is 2801.00, and then 2751.00. Probably as only a correction, possibly as a deeper correction, and potentially as a retest of the Christmas low.

Details and other markets coverage are discussed in the post-market Wrap recording here.
REMINDER: NO SATURDAY REVIEW THIS WEEKEND DUE TO TRAVEL.

Thursday’s open was teetering on the brink of collapse. Its pre-open probe of fresh lows attacked 2813.00 support, whose break would have triggered a drop into and out of the weekend. But a pre-open bounce recovered back above Wednesday’s 2817.25 low to suddenly introduce an Isolation setup into the mix. And it stuck.

Isolating the overnight probe was maintained halfway through the opening 15 minutes to signal the collapse had been abandoned. The entire open’s steep slope, if not also the first half-hour, told us the reversal was getting carried away and not to step in front of it. The noon hour was entered at 2856.50. The afternoon resumed the rally up to 2866.00 — already fulfilling the Isolation setup’s objective to retrace the ~2860.00 prior high.

The afternoon’s rally originated during a no-bias environment, requiring a retracement back to the 2854.50 bias-up signal or the 2852.00 1:20 print. Or, not. The bias environment lapsed above its 2860.25 bias-up target, so the requirement becomes only an attraction. But a very likely attraction.

Meanwhile, the afternoon’s buyers gained no traction for their efforts. The bias environment was exited above the noon hour’s range, but never confirmed. Extending higher Friday would all but require gapping up. Not gapping up would be unlikely to rally, but rallying anyway would be likely to fail. And the week’s earlier 3-day series of failed intraday rallies hasn’t indicated its demise.

Details and other markets coverage are discussed in the post-market Wrap recording here.
Monitor overnight Globex trading in the chaRTroom here.
REMINDER: THERE IS NO SATURDAY REVIEW THIS WEEKEND DUE TO TRAVEL

Bearish. Two days of hammering back at intraday rallies were joined Wednesday by a third. It was the most dramatic of the series, completely retracing a 24-point rally within 4 hours.

The rally was helped by having probed Tuesday’s 2829.00 low uncharacteristically ahead of FOMC — thanks to a barrage of Brexit headlines, topped off by a Trump China trade comment that spiked to fresh lows attacking 2817.00. So much weak-handed discounting ahead of FOMC made it almost impossible not to react favorably. The policy statement was greeted at 2825.25 and surged to 2842.50, then extended up to test 2849.00.

All of which was “no-bias trending” for originating during a no-bias environment, requiring a retracement of the 2828.75 bias-up signal. It was met before the position-squaring window opened, and retested into the close. No-bias trending can also retrace the 1:20 print, which was essentially 2823.25, and it was touched after the futures close. There is no “unfinished business,” above or below.

But there is a three-day pattern of retracing ever-larger intraday rallies. And the series’ third was both the biggest retracement AND the lowest. The market may be playing defense into the weekend if Thursday morning hasn’t recovered Wednesday’s high.

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

Monday night’s rally had formed a “new Globex trend extreme” at 2853.00 and gapped up to 2849.75. The balance of the morning ranged choppily sideways down to 2845.00. The bias environment lapsed by surging 15 points to attack 2859.00 as noon began.

Finally, some intraday trending. Apparently, trending by the same intraday sponsorship that had failed to uphold Monday morning’s probe above Friday’s highs. The rally was already fading to 2853.00 when a China trade headline triggered a collapse to 2841.50. A bounce to 2852.00 returned to session lows as the bias environment began lapsing.

Sellers had not gained traction through the bias environment exit and final hour’s entry. But the 3:10-3:20 proxy window trended down to fresh session lows, a combination that usually produces dramatic follow-through at some point before the close. In fact, the position-squaring window quickly tested 2829.00. The close bounced back up to 2840.00.

Tuesday’s gap up was filled by the China trade headline’s reaction, after barely touching Monday’s range. It is not “unfinished business.” More significant may be the two consecutive sessions of distribution ahead of Wednesday afternoon’s FOMC events, which suggests a very opportunistic trading environment.

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

Monday’s post-open probe above Friday’s 2834.50-2836.50 highs to 2841.00 was retraced entirely back to the 2830.00 open when the bias environment had begun lapsing. Isolating a probe of relevant resistance or support to a relevant timing window suggests that its sponsorship is done.

This would have been confirmed by closing back under that window’s 2829.50 low, but it held. Confirmation could have been held open by closing back under Friday’s 2834.50-2836.50 highs. but they were recovered. The confirmation window can be re-opened by proxy, by exiting Tuesday’s open back under Monday afternoon’s 2833.00 low. Which might even form a “session-long decline” setup.

Otherwise, the trend remains up. But there is no “unfinished business” above. Friday’s new trend high close had required at least an eventual third trend high close. Knowing this context is very helpful during a detour from the new high close. That was possible, even likely, given the bearish WedEX. The open’s surge foreclosed upon that. Two strong-handed sponsorships battled at the highs Monday, so it’s unlikely the pattern just ranges narrowly here — at least not past Tuesday afternoon’s bias environment, if at all.

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