Market needs tests to resume the rally

Price action and setup analysis

If this week’s lows are THE lows… then what’s taking so long for their tests to resume the rally? Maybe it’s not the low, after all. We should know soon enough, as the weekend’s impending illiquidity tends to make players show their cards.

Pattern points… (Setups and technicals)

Thursday’s rally tried something new. Rather than wait for the morning to probe fresh lows, a rally was already underway into and out of the open. Was that premature? That would explain why it didn’t extend higher, while a reversal held its lows. Like Hansel & Gretel, “unfinished business above” left outstanding at the morning’s 1697.50 high’s overbought RSIs could help to attract price higher.

Surely, only strong-hands could sponsor another rally into and out of Friday’s open. Right? Well, it would get a benefit of the doubt, so long as it triggered bias-up instead of rejecting the bias-up’s test.

But that benefit of the doubt would be just to avoid declining into the weekend, and not necessarily for the rally attempt gaining traction. A lot of buying pressure was expended already during Thursday’s last-hour bounce back up to the afternoon’s 1693.00 high — and no higher, so its buyers gained no traction for their efforts. The burden of proof is on buyers.

What’s Next… (Outlook and opportunities)

Thursday afternoon’s 1685.75 low was on the cusp between the bias environment lapsing and the final hour’s entry. Still, gapping down under it would get a benefit of the doubt for triggering a session-long setup. Just putting into play a probe under 1685.75 would be likely to trend down into the weekend. Almost any other setup would avoid new lows.

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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