Sunday night’s slide extended… down sharply into Monday morning’s open. But most of the session was spent bouncing. That doesn’t seem as cleansing as the correction it could have been. And the bounce has retraced 61.8% of the drop…
Pattern points… (Setups and technicals)
Monday morning’s 1354.00 low was telegraphed in a number of ways… Fulfilling the 1355.00 extended target, RSIs diverging positively, recovering 1356.25.
But the low’s permanence for the session was not obvious. The decline could have resumed from 1359.00, without also testing “higher prior lows” at 1363.00-1364.00.
The low’s permanence is not a question — 1354.00 held for the session, but it should be probed eventually. The low stopped just short of filling the gap back to 1353.50, which equated to the low close two weeks ago. And its 1352.50 low should be probed as well, probably under 1350.00.
“Higher prior lows” at 1363.00-1364.00 didn’t require a retest, and their test hasn’t been rejected despite neutralizing their attraction. And the session’s last hour was entered back under the noon hour’s 1361.00 high. Unless the reaction down was simply delayed until Tuesday’s open, the bounce could extend back up to Friday’s close in the 1374.00 area.
What’s Next… (Outlook and opportunities)
Tuesday’s econ calendar is especially interesting. Five — count ‘em, five — post-open reports due simultaneously. Could set the tone for Wednesday’s FOMC announcement and Bernanke’s press conference. Especially if any gains are only a corrective bounce.
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.