Trading Plan for 2/12

If Monday’s ranging around Friday’s close isn’t bullish… then does that make it bearish by default? No, and it doesn’t make reversing down any easier. But it does require the next credible trending attempt to have some very specific behaviors.

Pattern points… (Setups and technicals)[pay]
Friday’s “breakout” is dead. Its late dip back to prior highs already made it suspicious. Closing higher Monday would have been even more than suspicious, after dipping intraday back under prior highs. Monday’s session didn’t close higher, which is worse.

Closing above 1513.50 was the minimum requirement to even consider whether a rally was emerging. Touching 1515.00 Monday afternoon without closing above it or 1513.50 was even less bullish. Futures dipped to 1512.75 at the close.

Contracting volume on Mondays makes it difficult to confirm Friday breakouts. Monday’s contracting volume would have made it difficult to confirm a reversal signal. Any attempt to extend down must now be accompanied by sharply expanding volume to be credible, instead of waiting until a prior lows is broken.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Regardless of so many potentially bullish elements being undermined — those few described above, and many more discussed since Friday’s close — momentum has not signaled it is reversing down. Still not rejecting  new highs makes the pattern more vulnerable to extending higher. Meanwhile, although the 1517.00 overnight high doesn’t require a retest since it wasn’t rejected deeply enough or for long enough, not immediately extending down Wednesday would make its retest likely anyway.[/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.