Pattern points… (Setups and technicals)
Thursday’s buyers were very productive. Rallying 16 points to 1357.00 from the flat open at 1341.00 is impressive in any case. Its 23-point rally from the 1334.50 overnight low was even more impressive. Is there anything left?
Only one pullback of any consequence interrupted the rally, but none since recovering 1346.50, so buyers haven’t really refueled. The afternoon’s 1355.50 bias-up target was not only met, but met at the beginning of the bias environment to interrupt the rally’s momentum. And despite exiting the bias environment in position to extend higher, the rally did not resume.
Hovering around a target, at prior highs, is not pessimism. The move left no higher objective outstanding, nor did it close above its most recent objective. Wednesday’s pre-open “new Globex trend extreme” at 1358.00 might attract price higher, probably up to 1360.25 if at all. But Thursday’s buyers gained no traction for their effort, so probing higher would be unlikely to extend, and vulnerable to reversing down.
A reversal down could be very ugly since Wednesday’s closing indicator suggests that big money has been distributing at the range’s upper-end. That said, that is not a signal that momentum has actually reversed down, but an indicator of being likely to reverse down. If a decline is underway into Friday afternoon, then Thursday’s bounce should make the decline it that much uglier.
What’s Next… (Outlook and opportunities)
Thursday’s sharp rally would have been signaled early had the open rejected a brief gap down. It did not, but an overnight probe of fresh lows had been recovered. So, if the market is in the mood for considering overnight action, then an overnight probe of fresh highs that retraces through the open would be bearish.
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.