Thursday stock index closing action leaves Friday vulnerable

Price action and setup analysis

If Thursday’s breakout were valid… then it should have expended more buying pressure, or less. Instead, closing AT the rally’s highest calculable objective makes Friday vulnerable either to reversing down, or to ranging widely.

Pattern points… (Setups and technicals)

Thursday’s session behaved like a session-long rally. Wednesday afternoon’s high had printed after the bias environment, so Thursday’s gap up above it did not qualify. But the almost every one of Thursday’s timing windows probed a fresh high. And the session high printed during the final hour.

Every one of Thursday’s timing windows also overlapped the others. Probing higher highs intraday without extending higher is not trending. It is weak-handed, if not actually distribution. But it is not strong-handed trending.

So, it’s not surprising that 1701.50 held as resistance through the close. It is the current rally leg’s highest calculable objective. Its recovery would have put into play 1731.00-1733.00. That doesn’t change Thursday’s new high close from being a breakout above prior highs — it just makes it unlikely to be confirmed by a second consecutive higher close Friday.

If the rally were to extend higher anyway, then its sponsorship is weak-handed, and intolerant of any hesitation. A very steep slope would be likely until the objective was met.

What’s Next… (Outlook and opportunities)

A favorable reaction to Friday’s reaction to the Employment Situation report that doesn’t reverse down before the open is likely to trend up relentlessly intraday. Gapping down under prior highs would not be required to extend down, but a reaction up to Friday’s 1697.00 lower-end would likely hold.

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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