Stock market price action to key off Friday reaction

Price action and setup analysis

Price quotes, ticker Price quotes, ticker

If Thursday’s drop confirms Wednesday’s trend change signal… then does that preclude Friday from rallying? No, it just limits the extent of what would be only a corrective bounce that refuels the decline. Recovering too much too quickly could still invalidate the trend change.

Pattern points… (Setups and technicals)

Did Thursday afternoon’s bounce already relieve pent-up buying pressure that might have sponsored a more durable recovery Friday? It originated from 1495.00 when the bias environment started lapsing at 2:30 and recovered back to the morning’s 1504.25 first sell signal. It was retraced down to 1499.00.

1499.00 measured 61.8% of the 1495.00-1504.25 bounce, a healthy retracement that would have been bearish if broken. But retracing that much of the bounce signaled the pent-up buying pressure was already done. Recovering Friday back above Thursday’s highs would require new sponsorship to gap up above 1511.00.

Meanwhile, Wednesday’s trend change signal was confirmed by closing again under 1511.50 Thursday. Invalidating it at this stage requires gapping up Friday above 1517.50 to serve by proxy as if Wednesday’s close had recovered 1511.50. Otherwise, the signal’s minimum objective is one more lower close, if not a retracement back to the last relative low (under 1400.00).

What’s Next… (Outlook and opportunities)

If Friday’s open doesn’t gap up enough to reject Thursday’s sellers, then be on guard for selling pressure from longs that were planning to exit in the afternoon. The scent of another downday, and only hours remaining in the week, could entice sellers that wouldn’t have acted otherwise. The vicious circle of combining the artificial selling pressure with the morning’s accelerated sellers could be very productive. The weekend’s impending illiquidity cuts both ways, and gapping up enough Friday’s to reject Thursday’s sellers could extend sharply higher intraday.

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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