Market Wrap

Buyers gained traction for their efforts Wednesday. Exiting the afternoon bias environment above the noon hour’s high and then entering the final hour even higher is combined to signal that Thursday morning will trend higher. With two caveats. The signal could have been invalidated by trending back down through the 3:10-3:20 proxy window. Thursday’s open could be greeted by a reversal signal like gapping down under the afternoon’s 2466.00 low (which would also form a “session-long decline” setup).

The first exception didn’t happen, but the second setup might. Wednesday morning’s post-open slide was the third consecutive. Pavlovian conditioning would suggest the market is anticipating a fourth post-open slide on Thursday. That makes the prior timing windows vulnerable to sliding. It didn’t happen late Wednesday, leaving it to the overnight.

Avoiding an overnight drop would be likelier to absorb a morning dip, at least retracing it to unchanged if not also reversing it to an afternoon rally. Gapping up isn’t necessary to rallying tomorrow, but it’s the likeliest defense against the overnight downside risk.

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

Monitor overnight Globex trading in the chaRTroom here.

Tuesday’s second consecutive failed gap up held a test of its bias-up signal, putting into play an offsetting test of its bias-down signal. Monday’s similar setup had quickly extended down to neutralize the attraction, and bottomed before the bias environment was within view of lapsing. Tuesday’s instance left the objective outstanding (at 2465.00) and printed a later low as the bias environment began lapsing at 11:30.

It’s not a small difference, leaving unfinished business outstanding. It helps one day’s accumulation or distribution survive overnight. And so long as the intraday action didn’t trend away, price is still in the objective’s orbit and likely to fulfill it.

In Tuesday’s case, the narrow afternoon range makes the next leg likely to compensate for its delay. So, trending down to 2468.00 would likely be steep, and potentially deeper than the objective. If the narrow range was due to inhibition ahead of AAPL’s post-close earnings — which reacted up sharply, despite greeting the news from a position of weakness — then resolving up should begin by gapping up sharply.

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

Monitor overnight Globex trading in the chaRTroom here.

The ongoing Head & Shoulders pattern could have resolved during the final hour. The entire session had attempted breaking either way. First Sunday night’s surge held up into Monday’s open. And then it collapsed when the open had lapsed.

Overnight rally and opening drop, neither one extending. Two no-bias environments. The final hour could have broken in either direction.

The final hour didn’t break the afternoon’s range. But it did expand it, in both directions. So, the pattern didn’t resolve, but not for lack of trying. This range wants to break, and is that much more vulnerable to gapping open either way Tuesday.

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

Monitor overnight Globex trading in the chaRTroom here.

Duplicating Thursday’s plunge on Friday would have confirmed the pattern I warned of in the morning’s Market Tour. That is a lopsided Head & Shoulders, its asymmetry due to the right side developing much faster than the left.

Simply extending Thursday’s drop through Friday’s close would have been bearish, as well. But for a different reason — another attempt at confirming a trend change, after Thursday’s attempt had been absorbed.

One day does not a pattern make, let alone an exception. Thursday’s sessions have learned that lesson, since neither of the two bearish patterns was confirmed on Friday.

Often, failed bearish behavior has a bullish consequence. Had Friday not been an inside day and first probed fresh lows, then much higher objectives would have become targeted. Instead, upside potential to 2484.00 and 2490.00 remains intact. None of which need develop immediately on Monday. Only gapping down sharply Monday could overcome that.

Meanwhile, Friday’s intraday rally reached an important target after the N. Korea missile missed its. that was 2470.50, whose recovery would have left no excuse to further delay extending to fresh highs. Instead, Friday’s close was similar to Thursday’s late test of “higher prior lows” that resulted in an overnight retracement. Gapping up sharply is needed to overcome another intraday pullback.

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

Join us for this weekend’s Saturday Review at 9:30am ET. We’ll review the bigger picture, and do instant chart analysis of your requests. The link will be emailed early in the morning.

TODAY’S WRAP IS COMING ONE HOUR EARLY BECAUSE I’M AWAY FOR THE FINAL HOUR.

Thursday’s drop was impressive. Not only for size, but for its productivity. Friday and Monday’s 2469.00 “lower prior highs” were tested. And broken down to the prior week’s lower prior highs and gap at 2458.50. Breaking any lower would start to risk something much more substantial underway.

Closing under 2462.50-2463.50 would signal a trend change. It would be confirmed by not recovering that area Friday, and then require at least an eventual third lower close. Regardless, fresh intraday lows would be likely down to 2455.50 or 2451.00. Closing back above 2469.00 would suggest the drop had ended. At least, that it was bottoming. Probing negative territory Friday morning would still be possible, but likely to recover.

Details and other markets coverage are discussed in the post-market Wrap recording here (which was held one hour early today).

Monitor overnight Globex trading in the chaRTroom here.