Market Wrap

Thursday morning’s rally started optimistically short of actually testing Wednesday’s lows, despite attacking them pre-open from fresh overnight highs that had fulfilled “unfinished business above.” But the rally extended almost relentlessly, triggering its 2634.25 bias-up signal and fulfilling its 2641.75 bias-up target as the morning bias environment began lapsing.

Was that impatience? Because that would suggest weak-handed sponsorship, which is potentially bearish from a contrarian perspective.

In fact, the rally essentially peaked at its target, fluctuating 2 points centered around 2641.75 through the noon hour. And a blip-up barely touched the afternoon’s 2643.50 bias-up signal before triggering no-bias for the afternoon. Sideways ranging broke lower as the bias environment began lapsing.

Anxiousness often paralyzes Thursday afternoons ahead of Friday Employment Situation reports. Excessive optimism ahead of the reports often portends a bearish reaction to the news, or reversing an initially favorable knee-jerk reaction up. So, the question is whether the morning’s optimism was neutralized by Thursday afternoon’s partial retracement of it back down to 2635.25 — most of which was recovered through the futures 2642.50 settlement.

Details and other markets coverage are discussed in the post-market Wrap recording here.

Monitor overnight Globex trading in the chaRTroom here.

Wednesday’s optimism lasted longest, and lasted latest. Its last high printed just AFTER the afternoon bias environment had begun lapsing at 2:30. Entering the final hour had retraced it from 2634.50 back under the 2633.75 prior high all the way down to 2631.75.

In other words (or, IN words, actually), not a lot of range. That wasn’t strong selling pressure, and it had become too late for strong-handed sellers to suddenly arrive. Higher highs earned by the morning’s multiple dips into negative territory remained likely, such as the “unfinished business above” at 2635.50.

It was too late for strong-handed sellers, but hovering at the highs had inhibited buyers from exploiting. So, a weak-handed dip to 2628.00 became likely, which was accomplished into the close. Closing under 2631.75 allows fresh highs overnight to fulfill the outstanding objective, and already trend down into Thursday’s open. Recovering 2631.75 and higher through the open may be the only way to avoid trending down.

Details and other markets coverage are discussed in the post-market Wrap recording here.

Monitor overnight Globex trading in the chaRTroom here.

Tuesday morning offered the rare reminder that bias environments are context. Bias signals are not necessarily directional. At least, not necessarily the initial direction.

Holding a test of the 2643.00 bias-up signal put into play an offsetting test of its 2635.50 bias-down signal. The window’s price action would normally develop between the signals. Not Tuesday. The no-bias environment probed above its bias-up signal to test its 2648.25 bias-up target that wasn’t even in-play.

Recovering the bias-up signal through 10:30 could have invalidated the 10:15 signal. Absent that, the bias-up target could have served as proxy for the signal, and recovering the target through 11:30 could have invalidated the 10:15 signal. Absent both, the offsetting test of the 2636.50 bias-down signal became “unfinished business below.”

Already trading back down into the noon hour was helpful confirmation that the morning’s rally was “no-bias trending.” Even extending higher, first, would have been in the context of being doomed to failure. Sellers were refueled by letting buyers fulfill their target. Weak-handed buyers, as indicated by how late they finally took control.

All of which delayed the expected eventual test of 2631.75. Still testing it (to within 3 ticks, within 3 minutes) at the cash session close neither holds it nor rejects it. An earlier test would have had more time to resolve the test more clearly. That’s probably not a bug, it’s a feature — the market didn’t do anything it didn’t collectively want to do.

If the market wanted to trend Wednesday, then it would have resolved the 2631.75 test decisively on Tuesday. Or else, Wednesday’s open will immediately exceed a proxy level. Absent nothing so substantial so immediately, Wednesday’s session is vulnerable to trending aggressively in one direction, and then reversing, both intraday.

Details and other markets coverage are discussed in the post-market Wrap recording here.

Monitor overnight Globex trading in the chaRTroom here.

Sunday night was greeted by a relief rally on tax reform advancing over the weekend. Monday’s open offered the intraday crowd an opportunity to express a similar sentiment. But Wednesday and Thursday’s rally last week already had anticipated the news, so rallying Monday morning was likely to reverse down. Which it did.

We patiently awaited a break either way of the overnight sideways range. The first spot to fade it followed the first detached tick from testing 2663.75 by 6 ticks. Its reversal down touched last Wednesday’s high to become relevant, so that its bounce could neutralize the 2660.25 open. Suddenly, there was no “unfinished business above.”

The morning’s 2651.00 low launched another sideways range attacking 2658.00 through the afternoon bias environment. Multiple opportunities to rally were ignored, and it wasn’t long before learning why — the bias environment exit resumed the decline. Another collapse slid to test 2639.00, where the balance of the session hovered until a last-minute blip to 2638.00.

Monday is the second session to have tested the rally’s 2657.25 objective. And both of its tests have closed back under 2651.00. This suggests distribution. Meanwhile, continued underperformance by NDX and outperformance by the Dow suggests big money rotating out of speculative and into safety.

Details and other markets coverage are discussed in the post-market Wrap recording here.

Monitor overnight Globex trading in the chaRTroom here.

Friday morning’s 43-point collapse was cut to 35 points into the afternoon’s bias environment. It was cut to 5 points ahead of the close.

The pattern’s lowest potential objective was touched at the morning’s 2605.00 low. Correcting off of the 2657.25 target didn’t delay extending by interjecting bounces that would have refueled sellers. Pretty much all available selling pressure was expended.

All near-term selling pressure.

Retracing all of Friday morning’s collapse before the weekend would have neutralized the attraction above to its 2648.00 origin. That would have been difficult to defend against renewed selling ahead of the weekend’s impending illiquidity. The Flynn shoe has fallen, all but immunizing the market against more news from that story. And the tax reform vote didn’t happen during market hours, preventing a “sell the news” effort.

Ending Friday flat doesn’t sufficiently reward buyers for absorbing all that near-term selling pressure. Still not rewarding them Monday morning could find that selling pressure has been refueled by the bounce, or re-inspired by weekend developments.

Details and other markets coverage are discussed in the post-market Wrap recording here.

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