Trading Plan for 2/17
[pay]At the close (How the prior session ended)
Tuesday morning’s gap up had essentially put into play 1093.00-1095.00, so long as no pullback limit’s test triggered a sell signal along the way. The afternoon’s narrow range held the morning’s “lower prior highs” as support. And having edged higher into the last hour and having held off sellers through 3:10-3:20, the pattern became extra vulnerable to squeezing higher into the close. In fact, Tuesday’s last half-hour surged up to 1094.00.
Pattern points (And technical influences)
Every session last week overlapped the prior Friday’s range, the session that contained the trend low. Despite probing higher through the week, prices weren’t becoming overbought. The decline had lost its momentum. Without a gap down to resume the decline, the rubber band needed to be stretched thinly.
That was the purpose of gapping up through the weekend, to do what last week’s ranging did not: stretch the rubber band in one direction to react the other way.
The upper-end of this effort is essentially the gap back up to Feb 3’s close. It wasn’t filled entirely Tuesday, but the lower-end of its structure was probed. Whether done as part of the open, or after recovering an initial dip, the pattern’s timing suggests the rubber band will be stretched to its limit Wednesday.
Probing higher highs, then closing both negative and under the morning’s low (in case of initially dipping) would launch the next downleg. An immediate gap down maintained under the 1086.00 area would achieve the same objective, so long as the character of selling was relentless. Probing the 1095.00 area and closing higher would suggest a much bigger bounce underway, instead.
Bottom line (My underlying premise)
Except for the trend’s low, there hasn’t been much pessimism expressed. And even that pessimistic extreme attracted such optimistic buying that it has yet to be retested intraday. This didn’t form a base capable of launching a durable rally, but it still makes sense to let the bounce prove it has ended before positioning for a decline.[/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.