Stocks close to establishing new technical downtrend

Price action and setup analysis

Price data, ticker Price data, ticker

If Thursday’s bounce was a correction… then Friday’s drop is just one lower close away from confirming a bigger drop underway. Friday’s close was a new low for the decline, and Friday’s low was a new intraday low. But Wednesday night’s Globex low still offers a challenge sellers.

Pattern points… (Setups and technicals)

Friday afternoon’s timing windows offered a great example on how not to launch a rally.

The bias environment exit was still testing the noon hour’s high, despite having probed above it. Then the final hour’s entry was testing the bias environment’s high, despite also having probed above it. Not probing above either would have been more bullish — or, at least, allowed for a bullish setup — for keeping the buying pressure in reserve.

Instead, buyers expended energy without gaining traction, indicating that they were weak hands. Then the 3:10-3:20 window did the same. Potential to rally up to 1427.50 was replaced by the likelihood of resuming the decline.

Except that the close was nearing. So, although the 1420.50 session low was revisited, that wasn’t until after the cash session close. And it was not a fresh low. If the decline were going to extend down to the 1400.00 area, then it should do so without delay Monday. Gapping open above the afternoon’s 1426.00 high would instead trigger a session-long rally.

What’s Next… (Outlook and opportunities)

A special note about this weekend’s Saturday Strategy Session: There might not be one next weekend, and there definitely is not one the following week. So, if you have stocks, or in-depth questions about methodology, or just want to get you charting fix, then be sure to join us at 9:30am ET.

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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