Market Wrap (recording & summary)

The overnight rally ahead of Wednesday’s open had been consolidating around a higher objective at 2673.75 that was made likely by Tuesday’s intraday rally. The open was vulnerable to early strength being reversed early, the same pattern that had been warning us before January of an impending reversal. But the setup never triggered, as the reaction to CPI triggered a 49-point plunge.

A 49-point pre-open plunge is retraced entirely during the session’s first hour. An environment capable of one large leg is capable of multiple large legs, not just one more. So, the afternoon added another 25 points. testing the next higher objective above 2673.75 and 2684.00 and 2698.00-2700.00.

The afternoon bias environment was entered at its renewed bias-up target. A lot of buying pressure had been fulfilled, offering an opportunity for a corrective dip to refuel buyers. The rally didn’t exploit the opportunity. Instead, impatient buying extended the rally.

A similar setup before the close (I describe it at the end of the Market Wrap recording) did the same thing, albeit on a much smaller scale. Size doesn’t matter, only that buyers were still anxious to get long, in a manner that suggests they are weak-handed.

So, an overnight pullback is not only a vulnerability, but a likelihood. Opening Thursday deeply enough could invert Wednesday’s closing WedEX from bullish to bearish. We would then expect trending down into Friday afternoon through Monday morning, perhaps earlier. Otherwise, shallow or no opening weakness Thursday could extend the rally considerably higher into and out of the weekend.

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