Trading Plan for 2/5

If not for the late ECB news… then a reaction down into the close was still likely. Just not as deep. But the target had been met essentially, and its sponsorship satisfied..

Pattern points… (Setups and technicals)
Two consecutive opening surges met selling pressure that was nevertheless absorbed, and then reversed to fresh session highs. Tuesday”s open gapped up and ultimately absorbed the morning”s drop. Wednesday”s gap down bounced, but still had to absorb a fresh session low before extending higher.

It”s difficult taking sellers seriously with those resolutions. That doesn”t prevent dipping — this was a major theme Tuesday morning, that its selling took price down, but it didn”t reverse the trend down. 

Of course, it”s difficult NOT taking Wednesday”s late sellers seriously. The reaction down from 2049.00 to 2038.00 and then to 2030.00. Twenty points in 10 minutes. That has extended another 7 points to 2023.00 post-close.

Is this reaction just exacerbated by the “fortune” of its timing? The afternoon rally”s sponsorship was fulfilled by testing the 2049.75 target  to within 2-3 ticks. Those buyers had no traction, anyway, since the bias environment exit and final hour”s entry were within the noon hour”s range. There was no other required upside. And after the news, it had become too late to attract countertrend sponsorship. 

What”s Next… (Outlook and opportunities)
Wednesday”s late reaction can extend down near-term — and not just to test the 2023.00 post-close low. The rally from under 2000.00 Monday afternoon requires being retraced at some point. Its test would be vulnerable to extending down anyway. The more bullish scenario would be to already start retracing the drop before Thursday”s open, if not already opening above its origin.