Trading Plan for 2/7

If the rally’s target has been met… then should the next leg — either reversing direction down, or accelerating the rally’s pace — be delayed much longer? Probably not, for two reasons. Tuesday and Wednesday’s flirtations with both ends of the range suggest a break is coming. And Friday is one day away, another deadline to rejecting the rally.

Pattern points… (Setups and technicals)[pay]
Wednesday’s open gapped down to Tuesday’s 1499.00 lows. That was a reasonable opportunity to prove that Tuesday’s retest of Friday’s 1508.25-1510.50 highs had neutralized the attraction above. Instead, the market rallied through the noon hour.

The noon hour peaked within an acceptable 3 ticks of its 1509.50 objective. Its sudden, steep and substantial reaction down attacked the morning’s lows down to 1501.50. That was a reasonable opportunity to prove that the bounce had failed. Instead, it was retraced up to 1506.00.

Having exited the bias environment under the noon hour’s 1506.00 low, trending down into the final hour or through the 3:10-3:20 window would have launched another steep and substantial slide. Instead, a narrow consolidation resolved up to 1507.75 into the close.

A new high close above 1508.25 would be preferable to leaving on unfinished business above. So would actually testing Wednesday morning’s 1509.50 bias-up signal. Coming so close to one or both is almost pessimism, which is almost bullish from a contrarian perspective.

[/pay]What’s Next… (Outlook and opportunities)[pay]
Like Wednesday, there is potential for the best (or worst) of all worlds. A probe of fresh highs that fulfills potential to 1512.75, yet closes under prior highs to prevent buyers from gaining traction. Rejecting a new high intraday but still closing above 1508.25 to fulfill the prior high’s retest. Rejecting a fresh high to close under the morning’s low — after the open had gapped down — would form a bearish Pivot Reversal. Regardless, fresh highs could simply extend higher. And the open could simply extend down (gapping under Wednesday afternoon’s 1501.50 low would even trigger a “session-long decline”). [/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.