Trading Plan for 2/10
[pay]At the close (How the prior session ended)
Once again I find myself surprised at the temerity of a sell-off into the close. Despite coming from above Monday’s highs at 1072.25, Tuesday’s late decline barely probed under the morning and overnight highs to touch 1065.25. That was the morning’s highs second test as support – bordering on overkill if the market is trying to say the support is capable of launching another rally leg.
Pattern points (And technical influences)
The noon hour’s spike down was also surprisingly brief. It’s not that the dip was brief, but that that the dip’s brevity wasn’t due to a rally trying to get underway. Instead, the dip’s low was later probed by fresh afternoon lows.
The afternoon’s interim bounce retraced 61.8% of the decline from session highs, qualifying as a correction that is ready to start a new downleg. But that wasn’t attempted until Tuesday’s final minutes, which is a little late to be predictive. And that late attempt measured 61.8% of the way back to session lows. Meanwhile, the close was back under the morning’s highs, indicating that buyers failed to gain traction.
It all smacks of equilibrium, which suggests trending attempts will be tried in either direction, and that the first attempts will fail. Tuesday afternoon was spent treading water above the morning’s highs, forming “ineffectual optimism.” This also undermines the recovery’s credibility, but also doesn’t prevent a rally attempt. A failed attempt, unless it starts by gapping up above Tuesday afternoon’s highs.
Bottom line (My underlying premise)
Extending higher after Tuesday’s noon hour would have been likely to extend higher through Wednesday morning, too. The impending three-day holiday weekend would have made counter-trend sponsorship difficult to generate. This was just the latest Tuesday’s three failed rally attempts. Buyers repeatedly failed to exploit the opportunity whenever it appeared. The message seems clear that a rally might be attempted, but it won’t last long.[/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.