Trading Plan for 2/25

Third day’s a charm… as far as confirming Tuesday’s trend change signal. That’s two more consecutive days of probing lower lows and/or not closing above a prior high. Is it time to refuel? Is there time to refuel? [pay]

Pattern points… (Setups and technicals)
Thursday’s pre-open low required a retest for being a “new Globex trend extreme.” It was also accompanied by oversold RSIs, and the 1295.00 target was only tested overnight. Finally, the muted reaction to Jobless Claims somehow always produces an intraday dive into negative territory.

Neutralizing the attraction below during a no-bias environment helped to form a perfect storm that launched the afternoon’s 16-point rally. Those were essentially the same factors that launched the pre-open rally. The third factor was oversold RSIs. RSIs were oversold again at Thursday afternoon’s low. This time, the condition was intraday, so its retest is required.

Also similar to the morning’s bounce – the afternoon’s bounce expended a lot of energy just to recover unchanged. At least buyers didn’t lose traction by only probing resistance recovered through the close. That preserves energy for extending the rally into Friday’s open. But also similar to Thursday morning’s bounce, fresh highs may serve only to stretch the rubber band before snapping back down into the weekend.

Repeat: Look out below if early strength quickly fizzles, or if session-long strength greets the last 90 minutes from only slightly positive territory.

The same could be said for extending a bounce into the weekend. It would not totally credible. But somehow, this time seems different…

What’s Next… (Outlook and opportunities)
A dip into Thursday’s close formed a Falling Wedge. Its breakout is 1307.25, targeting 1311.00 and potentially 1318.50. Post-close action extended the wedge’s drop by another 2 points. This creates a vacuum that tends to be filled by futures rising. The action tends to slingshot the recovery. Otherwise, just failing to hold 1301.00 through the open would make signal the decline had already resumed. [/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.