Trading Plan for 2/3
[pay]At the close (How the prior session ended)
Recovering 1097.50 would confirm what Tuesday’s open already signaled, that sellers were marginalized until Thursday afternoon. It was Tuesday afternoon’s bias-up signal, but didn’t trigger. It was probed twice during Tuesday afternoon, and retraced each time.
The second retracement was after the cash session close, so its recovery wasn’t clearly rejected. But neither was its recovery decisive. Instead of triggering the signal, or letting the next timing window challenge it, Tuesday’s close was still testing the signal.
While this is not a sell signal, it undermines the rally’s momentum. Buyers ultimately gained no traction for their efforts.
Pattern points (And technical influences)
There was a window of opportunity for Monday’s bounce to fail, and that window slammed shut soon after Tuesday’s open. Wednesday’s session could still sell-off immediately, or fail an opening surge. But it wouldn’t likely launch a new downleg or resume the decline.
A pullback would likely recover from testing 1089.00. Any dip to 1087.00 should be quickly rejected, or else delayed until Thursday. Breaking 1087.00 any earlier would suggest that Tuesday morning’s surge was, in fact, too aggressive. Under 1083.00-1082.00 would confirm.
Had 1097.50 been recovered decisively, this week’s bounce would have next targeted the mid-1130.00‘s. While flat to lower ranging is now likely, I would still be prepared for probing higher highs Wednesday morning.
Bottom line (My underlying premise)
The two-day rally hasn’t recovered any level that would signal more than a bounce was underway. Not even close. However, Tuesday’s rally did come close to triggering a much bigger recovery attempt – still doomed to failure, but from much higher levels. While the burden of proof is still on sellers when it comes to reversing momentum down, buyers are far from proving this week has been anything more than a corrective bounce.[/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.