Stock market price action early Friday key to Thursday setup

Price action and setup analysis

If Thursday’s rally isn’t rejected Friday morning… then its late drop could be the reason. It originated too late for its sponsorship to be strong hands, and it expended a lot of selling pressure. Its complete recovery could be bullish.

Pattern points… (Setups and technicals)

Only one element of Thursday’s session improved the likelihood for resuming the decline. Not its opening surge that extended through Wednesday’s 1651.00-1653.00 highs and up into Tuesday’s range. Not leaving no unfinished business below from the morning — not an oversold RSI, or even a gap back to Wednesday’s close. Even the late 8-point drop originated too late to be sponsored by strong hands.

But at least the probes above the morning’s 1658.25 high were all rejected. At least the 1653.00 close was under the noon hour’s 1654.50 low. Buyers gained no traction for their efforts. None of which is a sell signal, and only makes an early rally Friday likely to fail. And an early rally’s failure is likely to resume the decline.

An early rally Friday had better fail. Otherwise, Thursday morning’s probes above 1658.25 may be rewarded for having chipped away at its resistance. Tuesday’s last relative high was already revisited, while retracing 61.8% of the drop from Tuesday morning’s high. Both are natural corrections, leaving little reason to delay resuming the decline — unless the recovery intends to extend.

What’s Next… (Outlook and opportunities)

This being a Friday, the morning’s bias tends to extend through the noon hour. The most bearish scenario is not necessarily the most aggressive. Rather than already trigger bias-down, more bearish would be to reject a test of the bias-up signal to trigger no-bias, putting into play a test of the bias-down signal.Otherwise, regardless of the eventual resolution down, extending the rally Friday could make new highs likely.

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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