Trading Plan for 1/29
[pay]At the close (How the prior session ended)
Thursday afternoon’s 1088.50 high came after retesting the afternoon’s 1085.50 prior high. This was no arbitrary prior high, but the “head” of an Head & Shoulders pattern that defined the afternoon’s bounce.
If retested, the “head” was likely to hold. In fact, the 3:10-3:20 window was essentially a drop back down through 1085.50. RSIs diverged negatively on the doomed higher high at 1088.50, triggering a 10-point dive through the cash session close.
Pattern points (And technical influences)
Thursday’s last half-hour reached the same 1087.25-1088.50 area that has been pivotal since Tuesday’s close. This was at the end of a 14-point bounce from 1074.00-1075.00, and the bounce went through hell and high water to get there. It was Wednesday’s constant return to this area at each timing window that had predicted the failed overnight rally.
The reaction down from retesting 1087.25-1088.50 is interesting because it ties Thursday afternoon’s price action to Wednesday’s. This suggests that Wednesday night’s rally and Thursday morning’s reversal to new lows are still part of the same pattern. If the 29-point drop from Wednesday night’s high was part of the pattern, imagine the next trending leg’s measurement.
Thursday’s low appeared suddenly at 1074.00-1075.00 after a 23-point dive. This area had been identified as the next target. Wednesday night’s rally undermined the area’s ability to serve as more than temporary bottom. A significant recovery Friday from fresh lows would be more bullish. But otherwise, lower lows would target 1065.00 and ~1057.00.
RSIs diverged positively three consecutive times into Thursday’s low. This often means that market facilitators are aware of much bigger inventory coming down the pipeline. If that supply doesn’t appear by the next day, then it would more likely mark a significant bottom.
Bottom line (My underlying premise)
Thursday morning’s slide was a very frustrating development for its quick rejection of the overnight rally. The Globex highs were above the prior session’s range, which doesn’t require a retest, but it does argue for remaining vigilant in case sellers lose traction Friday. And as this is a Friday, the morning’s bias signal is likely to persist well through the noon hour.[/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.