How Friday's price action sets up Monday's market

Price action and setup analysis

If Thursday’s rally was a breakout… then Friday was its confirmation. Sessions shouldn’t serve dual purposes, and Thursday was already the first countertrend day. So, could Friday serve as the breakout? Yes, subject to confirmation by closing higher Monday. Sidenote: Friday breakouts are rarely confirmed on Mondays.

Pattern points… (Setups and technicals)

Thursday’s “session-long rally” produced Friday morning’s higher highs. The higher prior gap at 1689.25 was filled. No sell signal gained any traction Friday afternoon. And a last-minute surge extended to fresh highs at 1699.00.

There is no unfinished business above.

Extending higher still has potential to test 1702.25, but no requirement to do so. Friday’s higher close does qualify as confirmation to Thursday’s breakout — to the degree that Thursday was a breakout, since its close was still overlapping prior highs.

Friday’s last-minute surge from 1693.00 eventually extended to 1700.00. Clearly, pessimism was squeezed before the weekend. So long as 1696.50 holds as support, the rally might extend. But anything above 1696.50 is living on borrowed time. And failing to hold it through any relevant timing window would start to signal a reversal down is forming.

What’s Next… (Outlook and opportunities)

I’ll go over the market’s bigger picture in greater detail at this weekend’s Saturday Strategy Session. Join us at 9:30am ET, where you can also request instant analysis of any chart you choose. Its link can be found in the blog’s sidebar.

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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