Trading Plan for 2/20

If not for the Fed speak triggering a sell-off… then Wednesday’s session could have been very bearish. Not bullish, but bearish. That’s because the noon hour’s comments triggered a steep sell-off that greeted the FOMC Minutes defensively, instead of allowing an optimistic blow-off. There’s other reasons, too.

Pattern points… (Setups and technicals)[pay]
In place of an optimistic blow-off, Wednesday afternoon was pessimistic. The 1830.00 overnight low had been attacked to within 2 ticks, retracing an interim 14-point rally. The 9-point reaction up was retraced to within a couple of ticks of its prior low. The next bounce was shallow before finally fizzling.

Now the attraction below at Friday’s 1829.00 noon hour low (the bottom of a Complex Ascending Triangle) is neutralized. As is potential for more thoroughly testing lower prior highs closer to 1826.25 — down to 1823.25. Decreasing the impediments to a rally is bullish, even if that requires trending down first.

None of which is a buy signal. Any lower would threaten extending down to 1818.00-1819.00, which would be bearish if not tested during an irrelevant timing window. But meanwhile, overbought RSIs at Wednesday’s 1844.50 high require an eventual retest, and 1856.50 remains outstanding.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Wednesday’s pattern was bearish. Gapping down in an uptrend, later probing the morning’s low despite printing fresh trend highs intraday. This is more relevant to triggering a bearish WedEX. It doesn’t prevent bouncing Thursday, but extending down too far into Friday morning could invert the signal for rallying 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.