Technicals put stock market recovery in question

When is a recovery not a recovery?

Stock ticker Stock ticker

When is a recovery not… a recovery? When it fails to recover resistance that it managed to probe intraday. Such is the case with Monday’s rally from overnight lows. The open held a test of its resistance, and the afternoon held its resistance. Each was a higher high, and more higher highs may follow. But that doesn’t mean buyers are gaining traction for their efforts.

Pattern points… (Setups and technicals)

Buyers expended a lot of energy to rally from 1342.50’s overnight low, testing 1366.00 during the open. That much strength could have been bullish, if applied more appropriately, either by delaying 1366.00’s test, or by blowing through it.

After a pullback to 1360.00, rallying to new session highs expended a lot of energy, too. That also could have been bullish, if the probe above 1366.00 were maintained. At the very least, avoid meeting the afternoon’s 1370.50 bias-up target. Otherwise, not even probing new session highs could have been more bullish.

But the noon hour high was still being tested at the bias environment’s exit, and the last hour’s entry was under the bias environment’s high. Not only had buyers gained no traction for their effort, but they allowed a distribution pattern to form.

What’s Next… (Outlook and opportunities)

Monday’s late 3-point break under 1367.00 to 1364.00 barely avoided qualifying as a compelling hold-short through the close. Extending the rally through Tuesday would require gapping up above Monday’s 1370.00 high (which would also trigger a “session-long rally”). Rallying from any weaker opening strength or modest opening weakness would be doomed to failure. Meanwhile, the decline is free to resume anytime.

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.

About the Author
Rod David

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.

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