Trading Plan for 2/5

If Tuesday had probed fresh lows before rallying… then Monday’s drop probably would have become unlikely to resume. But the gap back to Monday’s close is left outstanding, and Tuesday’s buyers gained no traction for their efforts.

Pattern points… (Setups and technicals)[pay]
Monday’s cash session and futures closes were 1736.50 and 1732.75, respectively. Tuesday’s post open low was 1738.75. Leaving the gap outstanding is a reflection of impatient buyers. That optimism might not be bearish from a contrarian perspective — not if buyers gained traction.

They didn’t.

After the bias environment dropped 9 points to 1744.50, Monday’s final hour was entered at the bias environment’s 1751.50 high. Not lower reflecting patience. Not higher reflecting strength. At the bias environment’s high, reflecting that buyers expended as much energy as possible without gaining traction for the effort.

Then the last hour plunged to 1743.50. It was retraced all the way back up to 1751.50. Not lower, not higher, but expending all blah, blah, blah. These buyers are nothing if not redundant.

But are they predictable.

Currently, they’re predicted not to prevent a probe under Monday’s lows. Tuesday’s post-close plunge to 1743.50 probed under 1748.25 and 1746.00 too late to signal hold-short, but Wednesday’s open could gap down to fresh lows. If so, then maintaining the probe or not would be very predictive going forward. There is otherwise no bearish reason even to revisit Tuesday’s 1752.50 highs, let alone to probe higher.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Earnings and econ reports are batting the market around, but so are developments like Puerto Rico’s downgrade. The specific news is irrelevant, only that the market is paying attention.[/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.