Trading Plan for 2/19
[pay]At the close (How the prior session ended)
Thursday afternoon’s 7-point surge was launched from 1100.00. Had it zigged instead of zagged, then the pre-open 1093.00 low would have been retested. Its test is all but required because its RSIs were oversold. It was also the outstanding objective of the morning’s no-bias environment.
But the market was more interested in stretching buyers thinly. Plenty of indicators suggested the 7-point surge was a false breakout. A productive pullback limit at 1104.00 was revisited, and RSIs diverged negatively.
The last 90 minutes still formed a pattern capable of one more failed surge Friday morning. Instead the Fed hiked the Discount Rate after the close, accelerating the reversal’s schedule. S&Ps plummeted more than 10 points to test 1095.00.
Pattern points (And technical influences)
Thursday’s low volume on higher highs was not surprising. Rather, it was in-line with Wednesday’s tepid follow-through to Tuesday’s rally. Price action has been distributive ever since the 1093.00-1095.00 corrective bounce target was met.
Like the afternoon’s breakout attempt that preceded it, the plunge’s timing came on the cusp between timing windows. There’s probably only one chance Friday for a decline to gain traction, and it is the same chance as Thursday: maintain an immediate break under 1093.00.
Whenever a critical level is tested, not breaking it means its sponsorship has run out of steam. So, a probe of 1093.00 that recovers 1095.00 (or a probe of 1095.00 that recovers 1099.00) would allow momentum to reverse up.
Extending down would next target 1086.00 and 1075.00-1076.00. If touched intraday, not closing lower would rob sellers of their traction. If the rally from last Friday’s 1060.00 low has in fact been a correction, then the prior Friday’s 1040.75 low would be in-play.
Bottom line (My underlying premise)
It’s always interesting when expiration gets a wrench thrown into it like this. Like any Friday, the morning’s bias signal tends to persist through the noon hour. Expiration biases tend to extend through Monday morning. If the decline can’t resume Friday on these factors, then it probably won’t resume before attacking January’s “higher prior lows.”[/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.