Stock index price action and setup for Monday

Price action and setup analysis

If the FOMC really wanted to claim status quo… then it should have authorized a good old-fashioned 3:30 ramp-up. But that was the afternoon’s high, and it reacted down sharply. So, while the spin did have an effect earlier, it seems to have disproved itself.

Pattern points… (Setups and technicals)

Wednesday’s expiration indicator is intended to identify any intended bias into and out of the weekend. It identified distribution, which means the expectation for lower prices. Since Friday afternoon only ranged sideways, the question is whether Thursday’s immediate massive repricing already fulfilled the bearish WedEx signal.

Possibly. But probably not. A big opportunity to invalidate the bearish WedEx was ignored — i.e. holding the afternoon’s bias-up target test, instead of exceeding it to renew the bias-up signal. And the afternoon only ranged sideways, its last consolidation overlapping the noon hour’s 1585.00-1586.25 exit.

We’re still discussing expiration because its influence extends through Monday morning. And if the WedEx is valid, then its influence Monday morning should be aggressively bearish. So bearish that a hold-short was contemplated at the close.

Friday’s gap up and afternoon recovery from intraday lows did form a Pivot Reversal pattern. It wasn’t credible because the morning’s high wasn’t recovered, and because expirations don’t produce reliable setups. Opening strength Monday still could gain traction, but no opening strength would confirm that no Pivot Reversal had formed.

What’s Next… (Outlook and opportunities)

Oversold RSIs at Friday’s 1570.50 low should be retested down to 1567.50. Trading any lower through a relevant timing window would target 1551.00 and 1546.00. Rallying, instead, still relies upon recovering 1598.00-1600.00.

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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