Stock market gap down, lower low, not enough

Wednesday’s close was retraced entirely. So, ultimately no rally since then gained traction. And the delay was compensated for by aggression. But Monday’s gap down and briefly lower low didn’t quite satisfy the “downward bias” that was signaled.

Pattern points… (Setups and technicals)

Monday’s 3:10-3:20 window (highlighted green) contained a probe to fresh session highs, and not also a retracement back under prior highs. At that point, no drop before the close could gain traction. A drop could be noise only, limiting it to retracing the last upleg (circled green).

That’s a lot of room. The probe of fresh highs at 1203.75 had originated at 1188.25. A lot of selling pressure could have been expended, sponsored by weak hands since it wasn’t going to gain traction. But a dip into the close tested 1197.50, only a 38.2% retracement, supported by impatient buying. A 61.8% retracement down to 1194.00 would have been healthier. And since the late upleg originated too late to be a durable recovery, holding a test of 1194.00 as support would have been bullish by starting another breakout attempt.

Recovering from a fresh low Monday afternoon (circled red), instead of from a higher low, would have reflected “ineffectual pessimism.” And that could have launched a durable upleg. But the pattern is vulnerable to reversing down Tuesday and resuming Sunday night’s decline.

Monday’s late upleg might yet become more productive into Tuesday. Filling the gap(s) back to Friday’s 1209.50/1211.75 close (highlighted yellow) is not required, but it is not prohibited. It would be bullish if exceeded through a relevant timing window, and bearish if not.

What’s Next… (Outlook and opportunities)

NEW: Freshman Ten. Beginning this Thursday (not Wednesday) I will launch an introductory workshop designed for newer subscribers. But all subscribers will want to check it out. Our agenda includes ten items that we discuss at different times throughout the week. This week’s will begin at 6pm ET…

Market Wrap: The daily post-close recording is now linked permanently from the sidebar, next to Market Tour.

Look for at least one update overnight or ahead of the Morning Market Tour… My thoughts on the day’s econ calendar are linked here.

Rod David develops analytical techniques that are designed to efficiently identify targets and turning points for any liquid stock or market in any time frame. He primarily analyzes S&Ps, generating several round-turn candidates daily. Rod publishes "Trading Plan" and more each session at the blog http://IfThenSignals.com.

About the Author
Rod David

Rod David develops analytical techniques that are designed to efficiently identify targets and turning points for any liquid stock or market in any time frame. He primarily analyzes S&Ps, generating several round-turn candidates daily. Rod publishes "Trading Plan" and more each session at the blog http://IfThenSignals.com.

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