Buying, selling pressure collide in stock indexes

Price action and setup analysis

Stock ticker Stock ticker

If Thursday morning’s drop expended so much selling pressure… then didn’t the afternoon expend a lot of buying pressure, too? Left pent-up at lower levels, the buying pressure could have launched a significant rally into and out of the weekend. Now hesitating to resume the rally Friday would suggest that buying pressure was fully expended.

Pattern points… (Setups and technicals)

Thursday’s test of 1401.00 included a test of the two-week old 1406.00 prior low. Its break would have next targeted 1391.00-1392.00, and also signaled the trend reversing down. A second consecutive lower close Friday might have confirmed. Now, that’s not an issue.

Closing above 1401.00 after probing under it set-up the potential for a significant low, likely to test 1431.00. Already rallying back to relevant resistance (1416.50) the same day expends a lot of buying pressure. Closing back under Wednesday’s 1410.75 prior low indicates that buyers gained no traction for their efforts.

Sellers gained no traction for their efforts, either. And they left no unfinished business below to require resuming the decline. Resuming the week-old decline must break under 1402.50 or 1401.00. Resuming Thursday afternoon’s rally must essentially gap up above 1419.00, and extend above 1422.50 — any shallower strength would be vulnerable to failing and resuming the decline.

What’s Next… (Outlook and opportunities)

Thursday afternoon’s rally chipped away at “higher prior lows.” There is no requirement to probe any higher, but probing higher would be required to extend. Not exploiting a higher probe by extending higher would not necessarily default to being very bearish, not if the open isn’t already breaking back under 1401.00-1402.50.

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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