Trading Plan for 1/28

If Tuesday’s open doesn’t reject Monday’s last-hour drop… then the three-day old decline may be entering a very dangerous phase.

Pattern points… (Setups and technicals)[pay]
Monday was a third consecutive session of probing sharply lower lows. More important is that last week’s bearishness persisted through the weekend. Weekends, like time, can heal all wounds. But last week’s pessimism survived through the weekend.

Monday’s drop wasn’t just residual momentum, but productive selling. The morning and afternoon each probed fresh lows. Neither low was arbitrary noise, but targets created by selling pressure. And despite bouncing sharply off of the afternoon’s low — avoiding a bias-down trigger despite testing both bias-down parameters — the bias environment’s rally was retraced entirely back down to its origin.

Extending just a little higher into Monday’s close would have formed a bullish Pivot Reversal. Failing to trigger it suggests that buyers are weak-handed.

All of which can be undone at Tuesday’s open, for another chance at recovery. Monday afternoon’s 1788.50 high printed before the final hour, which is a little late to optimal, but gapping up above it would still trap a lot of sellers.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Oversold RSIs at Monday’s low want to be retested. The attraction can be neutralized overnight, or delayed for awhile if the open were to launch a rally. Launching a rally would be likely to recover Friday’s downleg and probe back into Thursday’s range. Extending the decline through Tuesday morning could be substantial, too.[/pay]

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.