Trading Plan for 2/26

If the rally isn”t topping right now… then it”s preparing to get extend at an exponential pace. That wouldn”t change its ultimate resolution, but it would be a painful short.

Pattern points… (Setups and technicals)
You know that string of consecutive gaps down, all of which were absorbed intraday? They eventually got shallower and briefer, as their recoveries became more and more anticipated. Pavlov”s dogs used to do the same thing.

So, as the opening dips are bought up more eagerly, and that”s translated more regularly into a new high, eventually, their higher highs become unsustainable.

That happened Tuesday, to a small degree. Its afternoon new high failed to retrace above the morning”s new high. It happened again Wednesday, as its new high almost closed back under the morning”s low. In fact, Tuesday”s sequence required Wednesday to reject its 2117.75 new high. We were anticipating it. The only question was how, and by how much?

Okay, that”s two questions.

How: The bias environment was exited under the noon hour”s 2114.75 high, and the final hour was entered under the noon hour”s 2112.75 low.

How much: The morning”s 2108.75 low in negative territory was probed down to 2107.25.

New highs, and sellers gained traction. They also avoided closing under the morning”s high, which would have formed a very bearish “Pivot Reversal” setup. We also anticipated that wouldn”t happen, since this wasn”t the appropriate stage for “very” bearish. Sort of like the gaps down, also inappropriate to extend down.

But not for long. Trending down sharply Thursday morning after Tuesday and Wednesday”s sequence would be substantial, but not durable. That template is available, but more likely is another optimistic session that doesn”t gain traction for its effort..

What”s Next… (Outlook and opportunities)
Overbought RSIs at Wednesday”s 2117.75 high require its retest. Gapping up around 2115.00 and probing a fresh high would be optimal timing — both intraday and day of week — to begin trending back down into the weekend. Closing above Wednesday”s high would instead suggest the rally is instead extending to 2130-2140.