Trading Plan for 2/6

If the rally’s momentum remains intact… then Tuesday’s recovery should have closed above prior highs, or else not tried so hard to do something that it could not. Probing the prior high without closing above it is just one of many problems the rally’s momentum is encountering.

Pattern points… (Setups and technicals)[pay]
Friday’s new trend high close didn’t predict Monday’s reaction. It did predict that reacting down would recover. Trends simply don’t end with a new extreme close on Fridays. Tuesday’s probe above Friday’s 1410.50 high now fulfills that template.

One more higher close is also likely in the template. Tuesday’s late drop prevented it by dropping back under Friday’s 1508.25 high close, retracing to the noon hour’s 1505.50 buy signal. The gap back to Friday’s close was filled, without closing above it.

Monday’s interim drop to 1490.25 did manage to close under 1494.00, which required strong-handed sponsorship. Reacting up immediately only undermined the near-term potential for extending down. Having originated from under 1494.00, Tuesday’s probe of fresh highs should prove to have been sponsored by weak hands.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Rallying from a strong-handed close under prior lows, filling an outstanding gap without closing above it, probing the prior high without closing above it, retracing the noon hour’s productive buy signal back to its origin… All of which reflects weak-handed buyers. (We covered more elements in the Market Wrap, whose recording is in the blog’s sidebar.) None of which is signaling momentum has reversed down — but it should, soon, if at all.[/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.