Monday’s recovery was impressive… until it wasn’t. Buyers got a benefit of the doubt, but now sellers may benefit from the doubt about buyers…
Pattern points… (Setups and technicals)
The morning’s rally was impressive. A test of the morning’s 1371.00 bias-up target was never official. The 1358.50 bias-down signal after fulfilling its 1353.50 bias-down target, but only through 10:30, and not through 10:15. That was enough for the setup to get a benefit of the doubt. Sellers never gained traction, and 1370.75 was touched.
The afternoon’s rally attempts were unimpressive. Both probes above the morning’s 1367.75 high — to 1369.75 and 1370.75 — were retraced back down to 1366.00. Final bars still overlapped the morning’s high, but did not clearly recover it. Buyers gained no traction for their efforts.
Of course, sellers gained no traction for their efforts, either. Sound familiar? That’s where Friday’s close left us. If the rally were going to extend higher Tuesday, then it must gap up. Not gapping up would be likely to decline.
A decline could retrace all of Monday’s recovery, on the way to reversing the trend to down. Monday’s 1353.00 low touched last Wednesday’s “pivotal low” (the low prior to actual low), all but requiring a retest of Thursday’s 1350.25 actual low.
What’s Next… (Outlook and opportunities)
That unfinished business below tells us that Monday’s bounce was a correction. The bounce’s aggressive nature suggests that, too, especially with its buyers ultimately failing to gain traction. The open’s “session-long decline” setup was swallowed whole and spit out by the bias-down rejection. But a lot of buying pressure was expended just to do so. There is no bullish reason to delay extending higher.
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.