Clearly I underestimated the significance… of Wednesday’s low testing the 1217.00 target. Recovering so suddenly and testing new highs shouldn’t be underestimated, either. But like the pullback’s low, a reversal won’t be credible if delayed.
Pattern points… (Setups and technicals)
The next higher objective(s) above 1245.00 were 1265.00 up to 1280.00. I refined the latter to 1279.50. Anyway, Thursday’s highs blew through both up to 1289.25.
The 10-point excess is not irrelevant, but it isn’t much more relevant than having fine-tuned 1280.00 by 2 ticks. What is relevant is whether 1279.50 held through the close.
It did, and it didn’t. But it did. The last half-hour’s 15-point dive was retraced somewhat. However, the position-squaring window ended at 3:52, under 1279.50. Recovering 1279.50 fast enough would have undermined its earlier break, effectively creating a “tie” to be decided by the prevailing trend (up). That wasn’t necessary, since 1279.50 still was not recovered within 3 minutes of the cash session close.
1279.50 was exceeded post-close. But its late recovery already established the bounce’s sponsorship is weak hands. Extending above it only stretches the rubber band tightly.
The rubber band might be stretched tighter. Overbought RSIs at the 1289.25 high require its retest. The attraction can be neutralized overnight and already be reversing down into Friday’s open. Gapping up above 1289.25 could neutralize the close under 1279.50 and simply squeeze higher into the weekend.
What’s Next… (Outlook and opportunities)
A forcible, violent drop Friday morning is not very likely. Of two possible paths down, only one would be vulnerable to melting down without first distributing more above the week’s prior highs. Not already reversing down into the noon hour could marginalize sellers through Tuesday morning.
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.