Trading Plan for 2/2

There was little left to show… for Wednesday morning’s rally by the time it was retraced into the close. Tuesday night’s rally remained untouched. At least, for now. Either the afternoon got carried away with its pullback, or it is threatening to retrace Tuesday night’s rally, too…

Pattern points… (Setups and technicals)[pay]
When Wednesday afternoon’s bias environment began lapsing, the 1324.00 prior low was being tested as support. That was enough weakness (testing a prior low), just in time (by 2:30), to reverse down from probing fresh session highs.

But it wasn’t exploited very timely, and 1324.00 was still being tested well into the session’s last hour. The delay did not prevent breaking to fresh afternoon lows at 1321.00. And holding its support through 3:55 did not prevent its break to 1318.75.

Breaking 3 points under 1324.00 was still credible fore extending down further. Dropping under 1321.00 was less credible because it did not break until the session’s last 5 minutes. Why care? Because 1321.00 is the lower-end to the consolidation off of Wednesday morning’s highs. Closing under it robs buyers of their traction.

Perhaps the late break under 1321.00 was an anomaly. It happens. And when it happens, it is corrected by recovering at the following open. That, or the late break was valid, in which case the timing will be corrected by accelerating the decline’s pace.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Gapping open Thursday back up above the 1323.00 area would correct an invalid break under 1321.00. Gapping down Thursday under 1316.00-1317.00 would correct the drop’s delayed timing by accelerating its pace. The reward to invalidating the drop would be a relatively quick retest of Wednesday’s 1327.00 high. Extending Wednesday afternoon’s drop would target the 1311.00 area.[/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.