Market Wrap

Wednesday was the third consecutive session that rejected initial optimism. Consecutive initial optimism alone is noteworthy. Rejecting each is more so, especially rejecting each in the same way — by breaking back under the bias signal just several minutes too late to invalidate it.

Initially, this time was a little different. Wednesday’s 12-point reversal was the most substantial. It also left no “unfinished business above.” And the news triggering it wasn’t a surprise, but details of the pre-scheduled afternoon event (Trump’s tax reform reveal).

One more ultimate difference Wednesday was its intraday recovery to fresh highs. The prior two reversals had to wait 1-2 sessions for their recoveries. Leaking the afternoon’s details accelerated its reaction into the morning. But the afternoon’s surge then expended a lot of optimism to greet the actual news at 2509.25 session highs.

Meanwhile, Wednesday left “unfinished business below.” The afternoon’s surge originated during a no-bias environment. Its 2501.00 bias-up signal should be retraced, if not also its 1:20 2499.00 print. The close was under the open’s high, and under prior highs, so gapping down Thursday wouldn’t require filling the gap back to Wednesday’s close.

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

Monitor overnight Globex trading in the chaRTroom here.

Tuesday’s pre-open breakout originated too late to be credible for extending higher intraday. But it did hold up high enough and for long enough to trigger the 2498.00 bias-up signal.

Also too late was the bias-up signal’s rejection. Crossing back under 2498.00 a couple of minutes after 10:30 was a couple of minutes too late to invalidate what had been signaled cleanly at 10:15.

Tuesday morning’s 2503.50 bias-up target became “unfinished business above.” It can be fulfilled simultaneously with the offsetting test of Monday morning’s 2503.00 bias-up signal that was also left outstanding.

That’s two consecutive morning bias signals that were derailed. Patterns often come in threes, so we’ll be extra vigilant to this setup Wednesday. We’ll also see whether Tuesday’s late probe under 2495.50 cleaned out selling pressure, or attracted more.

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

Monitor overnight Globex trading in the chaRTroom here.

We knew there was no bullish reason for Friday’s post-open retest of 2495.50. And we suspected that weekend illiquidity inhibited sellers from breaking under it. Monday’s plunge through it behaved as was expected, discovering an air pocket and bouncing from “lower prior highs” at 2485.00-2486.00.

That setup was then likely to begin an extended pullback down to 2460.00. So, why should we question that? Two reasons. First, the morning’s 2503.00 objective above wasn’t rejected, so it became “unfinished business above” to be met eventually. Second, the plunge’s catalyst was the knee-jerk reaction to a news headline whose weak-handed sponsorship crowds out stronger distributive sellers.

Recovering 2495.50 through the close would have essentially trapped shorts. A very late trending attempt did touch 2495.50 in the very last minute of Monday’s cash session, and futures extended to 2497.00. But that was 3 minutes too late.

Probing higher overnight or tomorrow morning is possible, as is fulfilling the 2503.00 objective above. Neither of which is required, but would still be likely to resolve back down into Friday’s break lower. And having held 2495.50 as resistance through the close, the decline is free to resume immediately.

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

Monitor overnight Globex trading in the chaRTroom here.

Lower participation persisted through Friday, producing a narrowing 4-point range and a late break higher. The overnight plunge to 2492.00 had neutralized two attractions outstanding below. Bouncing out of the plunge overnight to unchanged at 2499.00 could have launched a second plunge after the open by having stretched the rubber band. But another dip had already snapped back a little before the open, robbing post-open sellers of that momentum.

Only one more setup could have triggered another plunge — exiting the open under 2495.50 for which there is no bullish reason to have revisited intraday. Post-open action didn’t trend up immediately, but neither did it give way. That left the balance of the session with only a vulnerability to breaking lower. Testing and retesting 2495.50 only chipped away at its support.

It also left the session with potential for bouncing. Nothing that would be considered durable. In fact, the only intraday bounce originated too late to be sponsored by strong hands. Ultimately, the cash session recovered all of Thursday’s close to 2501.00. A literal last-minute 4-point plunge was mostly recovered. Again.

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

Join us in the chaRTroom at 9:30 for this weekend’s Saturday Review. Its link will be emailed in the morning.

Back at square-one. Perhaps not precisely, or numerically, But essentially. Thursday’s post-open plunge did manage to create a new objective below that remains outstanding. But its 2493.25 bias-down target would have been fulfilled by retesting oversold RSIs at Wednesday’s 2494.00 low. Essentially the same.

Any recent indications of a potential top would all but evaporate if the week ends in a new trend high close. That setup would entrench the rally, and the two setups should not coincide. Hovering just under the rally’s highs into the weekend isn’t very top-ish, either. So, a valid top may enter the weekend already in decline.

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

Monitor overnight Globex trading in the chaRTroom here.