Market Wrap (recording & summary)

Don’t discount Friday’s complete retracement of Thursday’s rally. It was the resumption of distribution that we began identifying Monday. Then Tuesday. And Wednesday. Friday’s drop proves what we had assumed at Thursday’s close, that the intraday rally was only a function of having dumped all of that ballast Monday, Tuesday, and Wednesday. It was not strong-handed buying.

And distribution by that crowd, for that duration, is positioning for more than one week of problems that they see off on the horizon. Like Friday’s 2-point surge in the 30-year triggering a Cup & Handle pattern, if more than just the strong hands are distributing, then capitulation isn’t far behind.

Had Thursday’s rally stuck, and the overnight dip held Friday as only backing-and-filling, then perhaps this week’s reversal could be explained away as volatility ahead of the next upleg. I would still be wary in this range of potential for one more probe higher. But there’s no “unfinished business” above, and ending the week in decline reflects a continued vulnerability to a much steeper, deeper decline.

Of course, it always seems darkest before the dawn. And, more on point, bull markets have a way of stepping right up to the brink, and then reversing. I’ll be monitoring for any signs that sellers are done, because the reaction up would far exceed the week’s highs.

Meanwhile, the week-ending decline did satisfy unfinished business below at 2806.25 by 1 point. The next lower support is 2801.00, and then 2751.00. Probably as only a correction, possibly as a deeper correction, and potentially as a retest of the Christmas low.

Details and other markets coverage are discussed in the post-market Wrap recording here.
REMINDER: NO SATURDAY REVIEW THIS WEEKEND DUE TO TRAVEL.