Trading Plan for 2/19
[pay]Pattern notes.
Sellers might have lost traction Wednesday if the close was not under Tuesday’s 787’00 prior low. Price ranged very narrowly just above Tuesday’s prior lows, which the cash session close barely managed to hold. This seemed somewhat dubious since buyers had failed to hold any relevant level during any relevant time intraday. So a 9-point plunge moments later down to 776’50 made much more sense.
The entire drop has been retraced overnight back up to Wednesday’s last relative high at 790’00. Gapping up above it Thursday would reject the last-minute dive. Gapping open in the direction opposite from trending’s direction also fulfills the setup that triggers a session-long rally. This instance of the setup might be less reliable here because the last-minute trending happened after the cash session and not intraday.
In any case, no close Wednesday rejected Tuesday’s breakout close. So any bounce would be corrective, perhaps only to absorb Friday’s expiration, and no more lasting. Expiration day could tilt down sharply if Thursday offers on tepid gains, tepid losses, or a rejected rally. Only one template offers a solid chance to reverse the decline’s near-term momentum: a rally intraday that maintains its relative gains on a closing basis.
Indicators and Internals.
Neither the 1-minute nor 3-minute MACD & RSI made a bullish setup at Wednesday’s 776’50 last-minute low. Not after the cash session close first plunged, nor on its retest one hour later. But each is starting to diverge negatively as the overnight rally tests yesterday’s last relative high up to 790’00. A gap up would be a gap up, but technicals don’t speak well of the current effort, and there is unfinished business back at yesterday’s low.
Thursday’s opportunities.
Wednesday’s low stopped 4 points short of the 774’00 next lower target. The last-minute plunge came within 3 points. A retest of the post-close low would easily fulfill the target, assuming a retest is even offered. If so, we should be sensitive to the possibility of temporarily bottoming there, considering the often unpredictable influences of expiration. Extending the overnight bounce might reach 808’00-809’00 before capitulating. In either case, the decline’s next major target would be 756’00, and under 743’00 would point significantly lower.
Thursday’s heavy economic calendar has two pre-open items at 8:30, and two post-open items at 10:00. That is ample opportunity to offer volatility that unsettles any initial trending attempt. Once these events become history, the market can return to digesting the sweeping fiscal changes, and to digesting how poorly that digestion has been going. [/pay]