Trading Plan for 1/31

If Tuesday’s test of the rally’s target has held… then is there indefinite time before a downleg must appear? No. It should be obvious by Thursday’s close — preferably, before Thursday afternoon — that sellers are retaking control. The battle is over which side’s tactics will define Friday’s close, and a trend change can’t wait until then.

Pattern points… (Setups and technicals)[pay]
The rally’s 1503.00 target continued acting as resistance Wednesday, a behavior that began upon first testing it Tuesday afternoon. Multiple intraday checkpoints returned back to 1503.00, heading in one direction or the other.

Ultimately, that direction was down. Of all the relevant checkpoints, entering the final hour back above 1503.00 would have been optimal for getting back to the 1506.00 overnight highs. Not only did buyers peak under 1501.00, but then 3:10-3:20 trended down to fresh lows targeting at least 1494.00.

Is the downleg now underway, or must the highs be retested, first? The new downleg may be underway, and the highs might be retested anyway. The pattern is likely topping, and no later than Thursday’s close should the pattern signal that momentum is reversing down. But since the pattern avoided closing under 1494.00 or 1490.50 Wednesday to already point down, there yet remains potential to retest the highs.

[/pay]What’s Next… (Outlook and opportunities)[pay]
1494.00 was tested before the Globex open. No setup currently targets fresh highs, but back above 1498.00 would suggest as much. Otherwise, a close under 1490.50 is the minimum requirement to begin signaling the trend has reversed down.[/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.