Trading Plan for 2/24

Thursday should answer a lot of questions… Extending down for a third consecutive day would be bearish confirmation of this week’s selling. But a higher close could also confirm the pattern, assuming it’s not too high, and holds any test of relevant resistance.[pay]

Pattern points… (Setups and technicals)
The most important observation of Wednesday’s session is that it sellers gained traction. The close was under the morning’s low. A rally attempt Thursday morning – from 1318.50, or even to 1326.75 – would be doomed to failure.

Although a rally is possible, more likely is the decline’s resumption. Wednesday closed under the morning’s low despite the afternoon’s 14-point rally. Buyers expended a lot of energy, and gained no traction for their effort.

Buyers did gain one thing for their efforts: Exiting the bias environment back above its 1303.00 bias-down signal negated the afternoon’s 1295.00 bias-down target. It may be irrelevant, though, since simultaneously oversold RSIs at the 1297.50 low require its retest. Also, the “V” bottom that formed there is likely to be retested.

Retesting Wednesday’s low would likely include a visit to 1295.00. Its near-miss, and the V’s spike reversal, each reflect excessive optimism that make 1295.00‘s eventual test likely to slide through it.

What’s Next… (Outlook and opportunities)
Tuesday’s trend change signal extended lower the next as required. Maintaining a gap up above 1318.50 would put into play a test of 1325.00. Closing above 1326.75 would target a retest of the 1340.00 area. Otherwise, back under 1303.00 and 1301.00 would target 1295.00, whose break would target 1273.00, 1259.00 and lower.  [/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.