Trading Plan for 2/12
[pay]At the close (How the prior session ended)
As if not already clear from the mid-morning surge, sellers were absorbed. The noon hour’s narrow range was exceeded after the 1:20 timing window, and the afternoon’s 1075.75 bias-up signal was still being tested at 1:30. Sellers just weren’t going to get anything done.
Indeed, the balance of the afternoon continued ranging sideways at the higher levels, even through the bias environment lapsing. So much energy had been expended to tread water at the highs, without sellers scoring any hits, that higher highs became almost a requirement.
Fresh highs at 1078.75-1079.00 into the last hour could have been rejected in time to launch a steep and deep drop through the bottom of the hour. But the last hour only maintained the range.
Pattern points (And technical influences)
The afternoon reflected no significant selling pressure – no dip, no failed probe of higher highs. This setup all but assures at least a probe of higher highs yet to come. In fact, 1078.75-1079.00 was probed an hour after the close.
It is significant that the cash session did not do this. Closing above the week’s prior highs would have entered Friday at the lower-end of a new trading. Opening Friday back under Thursday morning’s 1075.00 high would signal momentum reversing down, and not just a corrective dip.
The open’s significant selling was a warning shot across the bow. Whether it is revisited Friday or next week is irrelevant. Thursday’s low should be revisited soon, along with last Friday’s low, so long as a significant rally isn’t squeezed in before the weekend. And no matter the probability for resuming the decline, the impending holiday’s three-day illiquidity does insert a wild card into the equation.
Bottom line (My underlying premise)
Several econ reports have been delayed due to weather. The calendar already had its potholes. But this shifting lineup makes any initial trending even more vulnerable. The vulnerability would be to accelerating to the downside if the cash session opens back under Thursday morning’s high. Otherwise, new highs after the open could still be rejected. But this being a Friday, the morning’s bias environment is likely to persist into the afternoon. [/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.