Stocks fail at strong confirmation of Wednesday's price action

Price action and setup analysis

If Thursday’s close were any higher… then Wednesday’s trend change signal would not have been confirmed. The confirmation that it did get wasn’t optimal. None of which requires extending down any more aggressively. But not extending down into the weekend would be suspicious.

Pattern points… (Setups and technicals)

Did it, or didn’t it? Wednesday’s trend change signal still needed confirmation Thursday. Unlike a breakout that is confirmed by extending the following day, the trend change needed only to avoid a recovery. And then only too much of one.

Thursday’s pre-open rally to 1556.50 was retraced back under Wednesday’s 1548.50 close. Then another rally to 1557.50 was also retraced, eventually to under 1547.00 going into the afternoon’s bias environment. The balance of the afternoon trended back up toward the morning’s highs.

Essentially.

Monday’s lows held for the most part — the 1555.50 close being more relevant than the session’s 1552.50 low. In any case, Thursday’s behavior did not seem to be rejecting Wednesday, so much as correcting it. Spending the vast majority of the session in positive territory also reflects some degree of optimism. And that could be bearish from a contrarian perspective ahead of Friday’s Employment Situation report.

What’s Next… (Outlook and opportunities)

The trend change signal is not a timing tool. It only offers context, which now expects that bounces will resolve down in new lows. It should preclude there being any new high. Regardless, considering the gravity of Friday’s NFP, not ending at new lows for the week would undermine the bearish scenario.

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 http://IfThenSignals.com.

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