Stocks establish new intraday technical pattern

Price action and setup analysis

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

If the pattern of retracing early rallies has ended… then will the new pattern be to trend intraday? And in which direction? Perhaps the impending Employment Situation report inhibited much follow-through either way Thursday. It won’t inhibit anything Friday.

Pattern points… (Setups and technicals)

The pattern of retracing overnight/opening rallies has ended. Or, has it? Thursday’s surge up to 1457.75 was retraced entirely, back down to the 1450.50 opening tick. The retracement had played itself out just when the bias environment began lapsing.

But that developed entirely in positive territory, above prior highs. And the retracement had every opportunity to reverse under the open’s 1448.75 lows, let alone into negative territory. The balance of the afternoon ranged sideways, also ignoring a sizable opportunity to trend down.

Thursday’s gap up and ranging in positive territory is not considered “ineffectual optimism” since the morning’s high wasn’t probed. That makes the afternoon’s ranging more likely pessimism — that’s right, pessimism after gapping up — which is potentially bullish from a contrarian perspective.

Pessimism ahead of the Employment Situation report should allow a knee-jerk reaction down to be absorbed, retraced, and reversed into extending the recovery. But a gap down maintained under Thursday’s 1450.50 post-open high would threaten to turn Thursday into an Island, as a new substantial downleg begins.

What’s Next… (Outlook and opportunities)

Whatever the ultimate resolution, the initial volatility should play itself out pre-open. The cash session should without delay either trend up, or gap down, and then extend in that direction.

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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