Stock rally's dynamics shift over weekend

Price action and setup analysis

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

If Friday’s rally had developed Wednesday, then would it have been countered already by a new downleg? There’s certainly something to be said for having time to gather sponsorship, which Friday’s shortened session did not. That won’t matter if Monday’s close hasn’t reversed the direction down.

Pattern points… (Setups and technicals)

Friday’s last intraday post discussed the week’s complete, retracement back to 1397.00-1397.75, whose break had put into play 1348.00. Neither closing above the signal, nor probing 10 points above it intraday, makes it any likelier to extend higher Monday. Extending higher may even be less likely, already having expended so much buying pressure.

A second consecutive higher close Monday would make this rally’s objective new highs, above 1468.00, at least to 1471.25. Closing back under 1397.00-1397.75 would trap Friday’s buyers, and all but signal that momentum had reversed down. Closing in between — above 1397.00-1397.75 but not a fresh high — would still rob buyers of their traction, but allow another buy signal to trigger.

By the way, in case there’s any question, this week’s buyers have been fully rewarded. Monday had closed above the morning and noon hour highs, and each subsequent session had recovered from an intraday or overnight plunge. Friday’s surge did not close high enough to put into play any higher target, and buyers did nothing new to require a further reward.

What’s Next… (Outlook and opportunities)

Eurozone leaders’ pessimistic statements Friday were reminiscent of the rhetoric between Palestinians, Egypt and Israel that had reached its most heated levels only hours before announcing the cease-fire. Following the same “head-fake” template would suggest a resolution to Greece (if not also Spain) this weekend. Sell the news? Perhaps, especially if any initial upside follow-through proved short-lived. No resolution over the weekend would not necessarily be bearish.

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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