What goes up early… can avoid coming back down. Reactions down from Thursday’s pre-open rally behaved as as expected, holding support before extending to higher and higher highs. But was it the product of bullish accumulation, or lack of liquidity?
Pattern points… (Setups and technicals)
This morning’s post-open reaction down from the 1246.25 bias-up target formed a sloppy pattern. I almost can’t call it a pattern. This is normal for pre-holiday weekend trading.
Sponsorship for trending is difficult to generate, almost as difficult as reversing any initial trending. The reaction down from Thursday’s initial trending never turned negative before reversing up to higher highs. But that doesn’t mean the rally had strong sponsorship — only that counter-trend sponsorship could not form.
Even when trending stops, this environment may be unable to reverse it. Thursday afternoon’s 1246.00-1249.00 range lasted almost 3 hours, and was barely ever threatened.
Friday won’t be much different, not in principle. Early trending, or lack thereof, will be difficult to change. Thursday’s last-minute action did suddenly leave a narrow range, probing fresh highs, and fulfilling buying pressure. This setup could have been rejected harshly if it had appeared earlier. It must be rejected almost immediately Friday to trigger any reliable downleg.
What’s Next… (Outlook and opportunities)
This being pre-holiday, volume should evaporate quickly and greatly by late-morning. Trending is still possible, and the market will be vulnerable to steep moves and wild swings.
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.