How Friday's stock market drop sets up Monday trading

Price action and setup analysis

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

If a 200-point drop is Friday’s anniversary gift for being 25 years since Black Monday’s 500-point plunge in a market that was 20% lower… then that’s quite a let-down. Its equivalent would have been 2500 points. This would equate to a greeting card. Of course, some gifts are belated…

Pattern points… (Setups and technicals)

This Friday’s close is similar to the prior Friday. The session’s low left the market positioned precariously above support that is vulnerable to sliding sharply immediately Monday. The alternative to sliding sharply is all but required to recover just as substantially.

In fact, last week’s open did drop immediately Sunday night. Not having extended down, the alternative was to gap up and trend higher, which it did. The same choice was left the market for this week’s open.

There is still a likelihood to recover and retest recent highs up to 1471.25 AFTER a deeper drop or plunge, presumably from testing 1400.00. And there is still potential simply to retest recent highs first. None of which can prevent an immediate drop from extending much lower than 1400.00 — which is likely to be tested if Monday’s open isn’t already rallying.

What’s Next… (Outlook and opportunities)

There is no Saturday Strategy Session this weekend (or next). Friday’s Market Wrap included a bigger picture discussion, including the S&P/Dow/NDX comparison often considered on Saturdays.

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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