Post-open Review

Testing the lowest-lower end of the range.

The Employment Situation report was greeted by a Rising Wedge attacking 2807.00. The knee-jerk reaction down to 2800.00 avoided retracing the Wedge before recovering to a higher high at 2810.00. Which was essentially the bullish scenario I had described… for post-open action.

But this was still pre-open. The new day’s buyers weren’t getting enthusiastic at sellers waning. The overnight sellers weren’t still pressuring price down. So, the bounce was retraced back into the wedge. And the hesitation at extending down only aggravated potential buyers instead of encouraging them.

The minimum consequence to not recovering was to retrace the Wedge’s 2797.00 low, probably down to the next lower objective at 2793.50. It actually extended to 2789.25.

A bounce up to 2801.00 is trying to re-open the door to making buyers enthusiastic again. And we’ll know they are if the bias environment exit is recovering 2805.00. Otherwise, back under 2795.50 again could marginalize buyers for the day.

Overnight strength fades, yesterday’s lows hold.

The problem with yesterday’s late rally was that it expended a lot of buying pressure without closing above a relevant level. It closed within proximity to a relevant level whose recovery through this morning’s open would have reversed the trend up. But that level was probed overnight and rejected well before the open.

Which might prove to be very bullish.

Yesterday’s double bottom had held a test of the 2814.50 objective that fulfilled the morning reversal’s selling pressure. It also held a test at this morning’s open. And that was after absorbing a probe under yesterday’s lows down to 2809.50. It was enough to launch another recovery attempt up to 2826.00. But not enough to avoid triggering bias-down.

Which might also prove to be very bullish.

Bias-down was delayed. Its 2818.50 was already tested, and now retested. Sellers are expending energy without gaining traction for their effort — more so, their selling pressure is being fulfilled. And unlike yesterday’s late 20-point surge, optimism is (relatively) restrained.

Firming into the afternoon would be bullish, albeit difficult to extend too much ahead of tomorrow’s payrolls and today’s post-close earnings onslaught. Potentially more bullish would be another downdraft that probes yet lower down to 2805.00 before recovering back above relevant levels today. Then the risk would be in not recovering.

Which might prove to be very bearish.

Gap up and range choppily sideways.

Yesterday’s open had gapped open sharply lower. The first half-hour ranged widely. And each of the session’s leg’s choppily overlapped the open. This morning’s action is similar. Gapping open (less) sharply higher and ranging (less) widely has only ranged choppily sideways around the opening print.

This is in-line with my warning this morning that trending would be difficult — both because of yesterday’s wide range, and because of this afternoon’s impending news. So, the open’s surge barely pierced the overnight high up to 2839.75 before reversing down to 2830.50.

Now retracing the bounce is probing fresh post-open lows down to 2827.75. The range persists.

Meanwhile, these are large legs because there is a lot of room within yesterday’s opening range of support and resistance. Neither end of any range requires being retested, but moves away from its midpoint are likely to return.

Spoiler Alert: Often when greeting FOMC events in a persistent range, the volatile reaction to its news tends to be contained within the range. But breaking lower would be attracted down to the gap back to yesterday’s 2824.00 area close. And fresh session highs would likely test 2845-2847.

Has the follow-through finished?

Selling resumed before the open and retested the 2831.00 overnight low down to 2828.75. Bouncing through the open overlapped 2837.50 resistance by a couple of points before reversing back under its 2836.50 sell signal. The drop soon accelerated into the setup’s 2827.75 target.

And soon broken. By a lot. Sawing through 2827.75 formed a Falling Wedge that resolved down aggressively again, plunging to 2818.50.

That was potentially stage-3 of a 6-stage pattern that often follows (see the nearby chart). Troughing and bouncing back into the Wedge have taken the pattern to its final stage. The bounce extended back above the Wedge before pausing, increasing the potential for its reversal to gain traction throughout the day.

A scapegoat has been identified in the pre-open news of a Buffet/Bezos/Dimon health care initiative that is pressuring the rest of the sector downward. This helps market participants to discount the negative and to start re-focusing on the positive. Not immediately, but gradually and ultimately.

Back under 2827.00 (just tested by a blip-down) would start to signal the recovery is failing. And potentially that a much more substantial intraday drop is forming. Otherwise, could today’s session turn positive? That’s the stuff of blow-off tops, even after their first warning shot is fired. Back above 2831.75 (now being probed) would help to extend the bounce, or more.

Opening bounce fails to maintain.

Regardless of the 3 upside attractions now outstanding, sellers are in control.

That was first indicated by exiting the opening 15 minutes of volatility at 9:45 under the earlier 2873.50 overnight low — when the interim 2878.50 overnight high had probed the prior session’s high. This slingshot’s influence tends to last through the morning, if not also through the following morning.

Then the post-open bounce attacked 2872.25 to its room for noise at 2871.00, where it started becoming attractive to sell. And finally, so far, the bounce’s failure has triggered the 2866.25 bias-down signal.

Already, the 2860.25 bias-down target has been met. And now probed, considerably, down to 2855.75. That’s Friday morning’s highs, “higher prior lows” that could be difficult to break and may instead hold. Oversold RSIs suggest a bounce would fail. But recovering 2860.25 as the bias environment begins lapsing at 11:30 would suggest the low’s retest will wait for a bigger bounce.