Trading Plan for 2/27
If last week’s trend change signal is valid… then can the decline afford the hesitation of Tuesday’s bounce? Probably not if it extends into Wednesday.
Pattern points… (Setups and technicals)[pay]
Last Wednesday’s drop triggered a trend change, which Thursday’s drop confirmed. That confirmation gave sellers the leeway to rest on their laurels Friday, to refuel by trapping longs. Friday did bounce, all the way into Monday’s open. Monday’s drop resumed the trend change.
Closing under Thursday’s low confirmed that Friday’s bounce was only a correction, therefore re-confirming the trend change. There was no requirement for Monday’s drop to also close under Thursday’s low. But extending the decline does require at least two days of the trend change’s resumption following Friday’s corrective bounce.
That’s the issue.
Tuesday did produce new lows for a second consecutive session. New intraday lows at 1482.75, under Monday’s 1485.50 low, Monday’s intraday low. Fresh lows after Monday’s close touched 1481.75, which was not touched Tuesday, while Tuesday’s low did probe under Monday’s intraday low.
So, the trend change buys itself a little time to comply with the setup’s typical resolution. In order to serve by proxy to compensate for Tuesday’s delay, Wednesday’s open should break quickly under any relevant support and already extend down considerably. If the new downtrend isn’t clearly underway at the open, then Tuesday’s recovery is probably already extending higher overnight — and another trend change signal would have to wait for a retest of the highs.
[/pay]What’s Next… (Outlook and opportunities)[pay]
Tuesday’s last hour wasn’t likely to range narrowly into the close. Sellers didn’t retake control, so that left only the option to probe fresh highs. If that served the purpose of playing out the clock — like the entire afternoon rally, which regained no ground that the open had not already tested — then the drop should resume almost immediately overnight. In fact, a drop into the futures close touched 1492.00. Is it a start, or an end?[/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.