Market Wrap (recording & summary)

Wednesday’s rally probed the 2385.50-2386.25 target and attacked 2388.00. Overbought RSIs at the high will require its retest, regardless of the concurrent vulnerability to another corrective pullback. In fact, a late steep drop into Wednesday’s close fell 9 points to attack 2378.00.

It’s impressive that Tuesday’s drop apparently sufficed for expressing anxiousness ahead of the FOMC. But that lack of any other pre-news or post-news reaction down is what has created a vulnerability to another corrective pullback. Something longer and deeper than Wednesday’s late 9-point dip.

Meanwhile, we should take a snapshot of the bigger picture before the subject changes from rally to top. Especially at this moment as the FOMC session proves out several suspicions and expectations that were guiding us the past two weeks. All of which is centered around the 6-7 day pullback and its testing of the prior week’s “lower prior highs.”

Expectation for an imminent recovery was reinforced by several ongoing observations. Holding the “lower prior highs” was key to being only a temporary dip, but didn’t speak to timing a reversal. That was done by last week’s Thursday-Friday two consecutive positive closes. Even that remained vulnerable to a quick correction, which Tuesday’s drop provided.

Gapping up Wednesday helped to prove Tuesday’s drop was only temporary, and done. Actually, maintaining Wednesday’s gap up through the open was itself a bullish setup, because it did not immediately reject Tuesday night’s one-way relentless overnight rally.

All of which fulfills the bigger picture expectations that the FOMC move was not only anticipated by market participants but welcomed. And that the chorus of bearish market gurus did reach a crescendo last week — the 6-7 consecutive downtrending sessions had absorbed their selling so that the next upleg could begin.

Maybe that next upleg is already ended. Maybe it is on its way back up to and through the two-week old highs to 2401.00 or 2415.00. Regardless, it continues to be vulnerable to being short-lived and quickly rejected when its upside is done.

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

Monitor overnight Globex trading in the chaRTroom here.