Trading Plan for 2/23

[pay]At the close (How the prior session ended)
Monday’s last hour was like Friday’s last hour, ranging flat to lower, and then definitely lower. The 3-minute RSI had diverged negatively upon tests of 1110.00, and meanwhile, 1-minute RSI refused to become overbought. Price extended 2 points higher despite MACD deteriorating. The setup played out with a dive down to 1104.75.

1104.000-1104.50 was pivotal. Whether stopping optimistically short of touching it, or just plain closing under it, either setup would have extended the late dive. Instead, the dive touched 1104.000-1104.50 within 1 tick, close enough to rob sellers of their traction, producing a bounce into the close.

Pattern points (And technical influences)
Monday afternoon’s “rally” – relatively speaking – developed during a no-bias environment. It stretched up to the 1110.50 bias-up signal, but not higher. It was a classic example of expending buying pressure (or selling pressure) during a time frame incapable of gaining traction. Not plunging would have been inappropriate.

The afternoon rally may also be an example of a false break. It emerged from the morning’s post-open consolidation. This consolidation had formed a Symmetrical Triangle, which tends initially to break falsely in one direction. The pattern’s false break can be premature, and not necessarily in the wrong direction. In any case, the afternoon rally’s false break was retraced entirely. So now, either Monday afternoon’s rally will resume Tuesday and produce new highs, or Monday afternoon’s reversal will extend down into a new downleg.

Monday morning’s no-bias environment had held a test of the bias-up signal. Its objective to test the 1101.00 bias-down signal remains outstanding. It will be neutralized if tested. Delaying its test for an entire timing window tends to exceed the target when eventually met.

Bottom line (My underlying premise)
Monday morning’s pre-open high at 1112.75 doesn’t require a retest, but its retest is likelier than not until there’s a close under prior lows. Its test intraday is no longer assured of pushing back down, but that’s still likely, too – at least, if tested prior to testing 1101.00. Meanwhile, there is no assurance that 1101.00 will hold or not, regardless of what order it is tested.[/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.