Pattern points… (Setups and technicals)
While delaying a corrective bounce makes it less likely, it also makes the delayed bounce potentially more powerful. This would be a product of the delay’s extra buying pressure. So, an immediate corrective bounce has one target, and a delayed corrective bounce can have a higher target.
That’s why testing the 1238.00 area Tuesday could have ended the correction, and already resumed the decline. And that’s why delaying 1238.00’s test until Wednesday has potential for extending up to 1248.00.
The correction is not required to extend above the 1238.00 area, there is only more potential for extending higher since it was delayed.
Anyway, 1238.00’s test reacted back down to 1222.50, fresh session lows. Its reaction down (into FOMC news) did recover back above Tuesday’s 1229.50 highs (on Bernanke Q&A). Wednesday’s last hour ranged sideways, supported optimistically just above 1229.50 without extending higher. Wednesday’s buyers did gain traction, but not enough not to be vulnerable.
What’s Next… (Outlook and opportunities)
Having trended up into Wednesday’s close, gapping down Thursday under Wednesday afternoon’s 1222.25 low would signal a session-long decline. Just breaking under 1227.25-1227.75 would make another bigger dip likely. A bigger bounce is underway.
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.