Trading Plan for 2/27

[pay]Pattern notes.
Yesterday’s session could have spared a lot of heartache had the open simply gapped under Wednesday’s 751’25 low. But apparently sellers needed the refueling of a gap up, and one more failure at 774’00. The session wasn’t spent entirely in positive territory, so it didn’t qualify as “ineffectual optimism.” Besides, the last hour dove into negative territory, ending while in the process of testing 751’25.

Now this morning’s open is threatening to gap under 751’25, after probing it repeatedly overnight and then sliding back to the week’s lows at 740’50. The week’s pattern had already shown us there was no support between the two. I did expect the low to offer an obligatory bounce had it been met intraday, but gapping open down here could simply continue sliding.

“Sliding” might not be the right word for it. Sellers could come out of the proverbial woodwork with new lows printing on a Friday. There are two days of illiquidity ahead and a week’s worth of broken promises behind. A corrective bounce back up to yesterday’s lows at this point would only refuel sellers further – not that they need it after ranging sideways for four days. Unless 753’50-755’00 were recovered, this day looks down.

Indicators and Internals.
Both 1-minute and 3-minute RSI diverged positively simultaneously at the pre-open lows, and again on their retest. Buyers need to exploit that soon by bouncing back above 745’00 to test 749’00. Lower lows would instead ignore the positive divergence. One or two more instance of that would mean much bigger selling pressure than already seen overnight was coming down the pipeline.

Friday’s opportunities.
GDP at 8:30 doesn’t tend to influence price action much. It might start doing so for two reasons. One is to fill the void left by FOMC events (interest rate announcements, Minutes, Biege Book) that don’t have much meaning anymore. The other reason is that proposed debt loads are reaching levels that make their ratios to other measures more relevant. NAPM is due 15 minutes after the open, and then Consumer Sentiment before the first half hour has ended. Should be fun![/pay]