Trading Plan for 1/31

Monday’s gap down proved… support no long existed at 1305.00. Monday’s bounce proved the relevance of 1308.00. Finally having closed back under 1311.00, we’ll soon see whether Monday proved at least a corrective drop is underway…

Pattern points… (Setups and technicals)[pay]
Monday’s session was spent entirely in negative territory, after gapping down and probing prior lows. Closing back above the prior lows would have made it “ineffectual” pessimism, except for one or two things. First, the afternoon did not probe fresh session lows, whose recovery would have trapped even more shorts.

Second, Monday’s close above Friday’s 1307.00-1308.00 prior lows was not high enough. There is noise around Friday’s lows up to 1309.25. And it’s not as if 1309.25 wasn’t even touched until very late — it was first tested more two hours before the close, and several times afterward. It would have been recovered if the market had intended to recover it.

Friday’s session was somewhat similar to Monday. Probing its prior lows into and out of the noon hour offered context for the afternoon’s bounce, that its sponsorship was weak hands. Monday’s bounce began after the morning established a bias-down. The bounce’s sponsorship was weak hands.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Also like Friday, there is no unfinished business above, but potential for bouncing further to 1312.75 and 1316.50 before reversing down anyway. Monday’s final minutes could have dipped less than 2 points to neutralize the attraction back to 1304.50, but instead bounced back to resistance  That unfinished business below remains outstanding, along with the gap back down to Monday’s 1300.75 open.[/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.