Trading Plan for 2/12

[pay]Pattern notes.
The drop back to yesterday’s 819’50 low had room up 822’00 for the drop’s momentum to remain intact. Its recovery all the way back to the session’s 836’00 upper-end accomplished nothing that two earlier rally efforts had not. Indeed, the buying pressure was absorbed by those rally legs and a new session high was avoided.

The entire session was a consolidation of the decline off of Monday’s high. The vast majority of the consolidation developed well above its mid-point (optimism) without breaking higher (ineffectual). Extending under 826’25 would signal the decline had resumed, next targeting 817’25 (probably down to 815’25).

The path down might be indirect, and include a momentary probe above Wednesday’s 836’00 area highs. The risk is that this indirect path might also let buyers gain traction for a bigger bounce. Regardless, despite being at the lower-end of a massive trading range, a bounce from here won’t be considered a new rally leg underway. Until proved otherwise, the decline’s resumption is still by far the pattern’s most likely resolution.

Indicators and Internals.
An overbought 3-minute RSI had accompanied the peak of Wednesday afternoon’s surge. Sellers couldn’t gain traction until the price high was retested. The timing required that retest to begin and end within a handful of minutes, while including a negative divergence. It was tight, but it was done, and it produced nearly a 10-point drop. The drop’s low at 826’00 wasn’t technically significant, so it should be retested and possibly broken.

Thursday’s opportunities.
The econ calendar has been relatively quiet. Retail Sales and Jobless Claims before the open will have a higher profile than usual considering the relative lack of recent data. They may still be overshadowed by current developments from Washington. A gap up above Wednesday’s highs would be a more compelling short than a surge to higher highs. But any short-entry would require only dropping back under a relevant price level, and not necessarily through a relevant timing window that a long-entry would require.[/pay]