Trading Plan for 2/16

Wednesday morning’s failed probe… above prior highs set-up a bearish indicator. Two, actually. Both the 3-Day Weekend indicator and the Wednesday Expiration Indicator. Then, the reversal down probed several relevant support levels. The resolution to any one of those tests stood to negate the morning’s bearishness…

Pattern points… (Setups and technicals)[pay]
In fact, Wednesday’s reversal retraced both of Tuesday’s 10-point surges. The overnight surge above 1348.00 was retraced through the open. Tuesday’s pre-close 10-point surge from 1337.75 was retraced to within 1 tick 24 hours later.

It would be odd for such blatantly impatient optimism at the low to produce a durable bottom. Or, at least for it not to resolve in at least one more fresh low. In either case, immediately rallying should be doomed to failure — whether from 1348.00-1349.00, 1352.00 or 1358.00.

Immediately extending down Thursday could react up sharply if fresh lows were absorbed through an initial timing window. Otherwise, gapping open above 1351.25 and extending higher immediately would shift momentum back upward, suggesting that Wednesday’s drop had run its course.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The premise is that big money is distributing ahead of expiration. So, the bias — if not also the trend — should be down into and out of the weekend.[/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.