Stock open could set tone for several sessions

Price patterns could point the way

Deja vu, all over again… Plus ca change… Last Wednesday’s close was testing 1389.25 as resistance, trying to recover it to avoid a bearish signal. Thursday’s close was also trying to recover 1389.25, whose recovery could have been bullish. The next day’s open can still predict the next several sessions, but not the eventual resolution…

Pattern points… (Setups and technicals)

The first overnight test of 1387.50 produced a bounce to 1391.00. Its pre-open test down to 1386.00 reacted up similarly. Both the morning and afternoon drops through 1387.50 to test 1383.00 were recovered to 1389.00. That’s a lot of volatility, not to mention being so far below Wednesday’s close.

But the cash session open and closing prints were both essentially 1387.50.

1387.50 was the drop’s next lower objective if 1395.25 failed to hold. Wednesday did not close under 1395.25, so 1387.50 was never actually put into play. That made its sponsorship a little suspicious. Regardless, the sponsorship was unable to produce a close under 1387.50.

Still more signs that this drop from Monday’s 1408.00 high may be sponsored by weak hands, which would make it a temporary pullback.

But the drop is nonetheless productive. A late bounce into Thursday’s close extended 2-4 points above a 1385.25 normal retracement, late enough for the buying to be considered noise. And there was already no bullish reason to revisit the morning’s 1383.00 low without also visiting 1380.00. So, almost any weakness Friday should include new lows.

Rallying overnight could test 1395.25-1397.25 resistance — then either react down to fill the gap back to Thursday’s open, or else extend higher to form a temporary Island out of Thursday’s range.

What’s Next… (Outlook and opportunities)

Since Thursday’s second low launched only an obligatory bounce, the most bearish scenario would leave unfinished business below while refueling sellers — like rallying throughout the morning, and extending higher Monday to fulfill the high’s retest. Being a Friday, the morning’s bias signal is likely to persist through the noon hour.

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.

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