Thursday's stock rally; correction or new direction?

Setups and technicals

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

If Thursday’s rally was only a correction… then what would signal it had ended? And how much higher could it extend, first?

Pattern points… (Setups and technicals)

Thursday afternoon’s bias environment was exited above the noon hour’s 1441.50 high, but the final hour wasn’t entered any higher. A fresh high up to 1444.50 did print between the two windows, so not extending higher was bearish. But it was only so bearish as to dip back into the noon hour’s range to 1440.00. Momentum did not reverse down.

The 1441.25 cash session close was within the noon hour’s range. That wasn’t enough of a retracement for sellers to gain traction for their efforts. But the traction that buyers gained is under suspicion. It’s nothing that a big, fat, gap up Friday can’t overcome. That would be preferable, anyway, since Thursday’s highs held their test of “higher prior lows” from last Thursday and Monday.

In any case, “lower prior highs” tested Wednesday have proved they would not break on their first test. Retesting them would be all but assured to extend down in a new downleg. Thursday’s bounce can extend higher only so long as continues gaining traction.

What’s Next… (Outlook and opportunities)

Immediately recovering 1445.50-1446.50 would target 1452.00. Any higher would likely marginalize sellers for the day. Not already rallying into Friday’s open could still back-and-fill down to Tuesday’s ~1436.00 lows without extending down. But any lower could greet the weekend attacking or probing fresh lows for the week.

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

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