Literally, a “Kodak moment”?… The scapegoat for Friday’s closing drop was the assumption that EK plans to file bankruptcy. Their denials after the close prompted SPY to firm a little (it still trades after-hours on Fridays). Just a little. Not enough for it alone to spark the potential speculative bounce described below.
Pattern points… (Setups and technicals)
The minimum objective for retracing last week’s failed rally was not simply back to its 1135.50 breakout. A retracement back into the broken consolidation is also required. A 61.8% retracement is the typical candidate, 1118.00.
A downleg Friday afternoon was not required, but any downleg was likely to be well on its way to 1118.00. Friday’s 1121.50 close came close. Too close. It essentially tested the pattern’s 1124.00 38.2% retracement, and held it.
Ending with a test of the 38.2% retracement creates the opportunity for an immediate speculative bounce — i.e. sponsored by short-term money, weak hands. It would target at least 1146.00, perhaps also 1153.00, and maybe even 1163.50. And it would be only corrective, like all prior bounces.
That last characteristic is what makes a bounce unlikely — all the prior bounces. Last week’s buyers tried and failed, repeatedly, with each lower high resolving in a lower low. The complete retracement ultimately disproved the entire endeavor. Monday’s open is more vulnerable to gapping down under 1118.00 to 1116.50 or 1113.25, and extending down to new lows.
What’s Next… (Outlook and opportunities)
I chose the name “Saturday Strategy Session” because it seemed like an easy way to remember which day it is held. I thought about adding “You can log in up to one hour before the 9:30am ET start time,” but that seemed a bit much.
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.