Market Wrap (recording & summary)

The Fed chair’s two-day congressional testimony used to be consecutive days. And the second day was reliable for reacting differently than the first, as the first day’s comments were already discounted or walked back. Without immediately walking back Tuesday’s surprisingly hawkish comments, did Wednesday’s pause give Tuesday’s drop an opening to extend?

Monday’s rally had become excessive optimism, silliness ahead of the new Fed chair’s first congressional testimony. Tuesday’s outside day proved that, ending under Monday’s low. Leaving the question for Wednesday, whether it would essentially range sideways while awaiting Thursday’s second day of testimony. Overnight action tested fresh lows but recovered enough to form the basis for an Isolation setup. And the morning’s bias-up signal triggered.

That’s a lot of bullish potential. So much so, that I warned overwhelming it must be done by substantially stronger-handed sellers. It was undone by much stronger-handed sellers.

Peaking 2 points short of the morning’s 2764.00 bias-up target was reversed to probed 1 point under the 2738.50 overnight low. The afternoon’s rally peaked upon probing 6 ticks above its 2757.00 bias-up target, then plunged 47 points through the close. And the close easily probed under 2729.00 “lower prior highs” down to 2712.00.

Is the 1987-style crash template playing out? Inflecting down instead of up wasn’t necessary, but inflecting down, it is. Crashing instead of only probing prior lows isn’t necessary, but the minimum 2509.00-2511.00 objective will seem that way. Perhaps the only chance to avoid falling over the edge is to rally early Thursday, and to rally sharply. A shallower bounce would remain highly vulnerable to trending down 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.