Anxious market freezes Friday's sharp drop

March 16, 2014 05:22 PM
Price Action & Setup Analysis

If not for nervousness ahead of Sunday’s referendum… then Friday’s market could have declined sharply. Anxiousness paralyzed trending.

Optimism fought against probing fresh lows. And that also kept the closing action ranging around prior lows instead of triggering a clean trend change. But the second consecutive lower close confirms Thursday’s break, requiring a third yet to come.

Pattern points… (Setups and technicals)

Lows held through last hour’s entry and then again 3:10-3:20

Thursday afternoon was choppy, but held the 1838.50 low that printed coming out of the noon hour. Overnight action was choppy, and so was all of Friday’s session. Those both chipped away at 1838.50.

Ranging narrowly Friday at 1838.50 would have been vulnerable to probing fresh lows, whether before or after the weekend. But its break wouldn’t have been likely to trend down. The congestion of ranging narrowly would attract price back to it.

Choppy ranging like Friday’s is as likely to probe fresh lows. And then keep going. The choppiness is like a pitcher’s windup, letting go at almost 100 MPH. Extending down sharply is likely so long as it’s not a wild pitch triggered by favorable weekend developments — more so than just a relief rally in the absence of anything new that’s negative.

Friday’s last-minute dip did probe fresh post-open lows. Being last-minute, the probe originated too late to be that pitch. And it reacted back above prior intraday lows — like Thursday’s low, which didn’t prevent extending down the next day.

What’s Next… (Outlook and opportunities)

This should be one of our more interesting Saturday Strategy Sessions, if not one of the most compelling to attend — or, to watch its recording. It won’t last any longer than the normal hour, but WE’LL BEGIN 30 MINUTES EARLY AT 9:00AM ET. Instant analysis of stock requests will be taken.

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 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