If a falling tree doesn’t hit the ground…then does it make a sound? Wednesday’s session-long decline requires that almost every timing window probe a fresh low. Wednesday’s last timing window didn’t comply. To the contrary, it rallied 6-1/2 points from the 1938.50 fresh session low back to the session highs. Will that leave a mark?
Pattern points (Setups and technicals)
Reversing from session low to high might not seem like “ineffectual optimism.” But Wednesday afternoon’s 6-1/2 point rally stopped short of gaining traction. The bias environment was exited under the noon hour’s low, and the final hour’s entry was within the bias environment’s range. Wrong buyers, wrong time.
So, were sellers weak, or were they conserving energy to compensate for the delay on Thursday? Not only is the answer one or the other, but it should be one or the other on steroids. Gapping up sharply or gapping down sharply is likely. Gapping up is necessary to rallying after buyers gained no traction. Gapping down could extend down if the opening print were not too deep to attract new sellers.
Not already recovering into the noon hour from a morning drop would be likely to extend down into Monday morning. Maintaining a gap up through the noon hour could marginalize sellers through the weekend, but probably not with a new high close on Friday.
What’s Next (Outlook and opportunities)
The front-month for S&P futures including the E-mini S&P 500 (CME:ESM14) rolls forward at Thursday’s open from Jun (M) to Sep (U), and trades at about a 7.25 point discount.
Ed Note: Each trading day going forward, traders can listen to live, streaming squawk box commentary on FUTURESmag.com coming directly from the S&P trading pits in Chicago.