Stock market open could confirm direction

Price action and setup analysis

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

If Wednesday’s attempt to break higher was false… then it should be obvious at Thursday’s open. Otherwise, the alternative is for making it obvious that Wednesday’s last-minute plunge was itself ineffectual pessimism, by immediately rejecting the entire slide.

Pattern points… (Setups and technicals)

Try, try again? Wash, rinse, repeat. Wednesday afternoon’s buyers took a perfectly good rally signal and got carried away with it too much, too soon.

Having held the noon hour’s test of 1401.00-1402.00 support, no lower objectives were in-play. Firming back up to 1407.00 through the bias environment didn’t expend too much buying pressure. Anyway, a corrective dip to 1403.25 worked off any excess. That allowed trending up aggressively above 1406.00 through 3:10-3:20 to trigger a rally into the close.

Buyers delivered, and then some, testing 1309.00 resistance at the wrong time — they needed either to break through it by then, or not to have touched it at all. I noted earlier the consequence of not resuming the rally into the position-squaring window would be a dip back down into 1405.00-1406.00. The cash session dipped to 1406.00. Then futures plunged to 1401.00-1402.00.

That was too late to close too low to marginalize buyers. The excessive pessimism created a vacuum that should propel another rally effort if recovered back above 1405.00-1406.00. Regardless, don’t forget the past week’s basing is still only potentially bullish. It remains vulnerable to breaking lower until some relevant window were to recover some relevant resistance.

What’s Next… (Outlook and opportunities)

Happy Halloween tonight! And best wishes to those who are still dealing with Sandy’s effects.

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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