The 1221-1222 target seems credible… especially after Monday’s big reversal down rejected it. Sunday night’s highs were rejected, too, but not yet back under a prior low. So, its retest cannot yet be discounted.
Pattern points… (Setups and technicals)
Post-close action has already extended Monday’s drop under its 1194.00 low to test the next target area at 1187.00. The repeated testing of 1195.00 produced obligatory bounces. But there was no bullish reason to have returned to 1195.00 — which was tested late Thursday — after probing new highs in the interim.
It is a little late now (since there is a break lower after covering this in depth during Market Wrap) to dwell much on how revisiting 1195.00 meant the market intended to probe lower. The only question was whether a bounce could develop first. But there was no question that not bouncing would mean gapping down.
It is a little early now to assume Tuesday’s open will indeed gap down. An overnight recovery is plausible. Opening in positive territory would essentially target 1215.00, if not also new highs at 1230.00 and 1245.00. But opening under 1187.00 could find an air pocket below down to 1179.00 before even slowing.
What’s Next… (Outlook and opportunities)
Breaking under 1187.00 through any relevant window would find little support below. And breaking 1187.00 support through the close could seal a top. But beware the rally’s resolve to defend this critical support, since the two-week old rally’s health depends entirely on holding 1187.00.
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.