For all of Thursday’s ranging… it’s almost shocking to notice it was an inside day. Wednesday’s lows were probed, but only overnight. Intraday trending never gained any traction, not in either direction. And the range narrowed. You know what that means…
Pattern points… (Setups and technicals)
Extended narrowing ranges tend initially to break falsely in one direction, and then to reverse more substantially in the opposite direction.
Breaking lower Friday morning would be vulnerable to probing fresh lows, even if only to retest Wednesday night’s 1218.50 low. If not to do more than just retest Wednesday night’s 1218.50 low, then the balance of the session could reverse direction up and probe above Thursday’s 1244.00 high.
Breaking higher falsely first is possible, too.
The false break can be negated by gapping open beyond its range. And that is interesting in the context of this being a Friday. While trending is difficult to get underway on Fridays, trending that gets underway is difficult to stop. Gapping open beyond Thursday’s 1224.50-1244.00 range would be vulnerable to trending in that direction.
Any trending from this stage of this pattern must fulfill not only the normal time and price parameters, but also in this case the trending must behave appropriately. And aggressive trending is the appropriate behavior at this stage of this pattern.
What’s Next… (Outlook and opportunities)
Thursday afternoon’s ranging felt heavy. Probes above resistance and buy signals were rejected as false breaks. Not all probes under support were productive, but those that weren’t did not reverse up immediately. And those reversals never fully recovered before failing again. Back under 1235.25 and 1232.25 would signal the drop resuming. Above 1240.00 would be likely to rally. In either case, trending should be aggressive to be credible.
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.