Did Thursday's turnaround refuel sellers or mark bottom?

Pent-up buying pressure fends off lows

Stock index, chart, technical analysis Stock index, chart, technical analysis

Thursday’s lows fulfilled the… last element likely from Wednesday’s “session-long decline,” by trending to new lows intraday. Wednesday night’s rally didn’t prevent it, after all, only refueling sellers. Now the question is whether Thursday’s rally back above Wednesday night’s highs has only refueled sellers, too…

Pattern points… (Setups and technicals)

Apart from being follow-through from Wednesday’s “session-long decline” setup, Thursday’s 1297.25 low fulfilled a lot of selling pressure. RSIs diverged positively, and being too early for the balance of the session to trade out at the lows, a 22-point rally probed 1318.00.

Had that buying pressure remained pent-up, recovering only 1308.50, then a bigger rally Friday would have been all but assured. Perhaps not a direct path higher, given that the Employment Situation report is released pre-open. But 1308.50 recovery would have been enough to trap shorts without expending all available buying pressure.

At least 1318.00’s last-minute test did react down. In fact, the cash session’s close only touched 1308.75, and only futures dipped further to 1306.00. The new weakness is not enough to have refueled buyers again, but it discounted some pessimism ahead of Friday’s report. If another bounce can gain any traction, it could extend the corrective rally to 1346.00.

What’s Next… (Outlook and opportunities)

So, Friday’s report is being greeted essentially at equilibrium, no likelier to react initially in one direction than the other. Overbought RSIs at Thursday’s high require a retest — “required” because of how rarely it is not retested. Those rare exceptions tend to be for a much greater cause, which in this case would be to trend down sharply.

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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