Low volume opens path for stock market bulls

It is difficult to push a stone uphill or downhill… when it is on a level surface. Monday’s surface was leveled by low volume, and 1184.00 was tested at 10:30, noon, 1:20 and 2:30. Even a late drop to 1176.75 retraced back to 1184.00, and through it to 1192.25… Then, back down to 1184.00?

Pattern points… (Setups and technicals)

I had noted earlier Monday in the blog that the intraday pattern — a failed Ascending Triangle — tends to be recovered entirely after breaking lower. It is depicted in the Market Wrap but it is moot now since the recovery already happened.

In other words, the pattern’s attraction back up to its 1187.00 has been neutralized.

Another pattern in-play was the retest of Sep 27’s “pivotal high” — the ~1187.25 intraday high prior to its 1190.00 actual high. Testing one all but assures testing the other. Its retest is completed, and its attraction is moot.

But Sep 27’s retest is still interesting. The interim dip between retesting a pivotal high and its actual high can predict the potential for extending higher. And Monday’s interim dip between testing Sep 27’s highs was shallow, only piercing Sep 27’s interim low. Buyers barely refueled.

And now those poorly refueled buyers are already neutralized.

And a lot of buying pressure was expended in the process. Monday’s late buy signal at 1180.75 is similar to last Tuesday’s 1074.00 signal. Each triggered in the last half-hour, reversing an afternoon dip with a steep surge to fresh session highs. This is not the first time since last Tuesday. The rally seems not to have attracted new sponsorship.

What’s Next… (Outlook and opportunities)

The rally should extend higher without delay if it intends to extend higher at all, or without first consolidating. Closing under 1182.25 Tuesday would signal that the rally had ended. And while awaiting a new accumulation pattern to form and trigger, it would be vulnerable to launching a downleg. Closing under 1182.25 could already be well on the way back down to last week’s lows (and lower).

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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