Trading Plan for 2/8

If sellers have flubbed multiple attempts this week to retake control… then could the consequences be limited to only a slightly higher high? Probably not. But that’s assuming sellers actually flubbed Thursday’s attempt. 

Pattern points… (Setups and technicals)[pay]
Thursday’s pre-open retest of Tuesday’s 1511.00 high would have been “obligatory resistance” had it been intraday. The reaction down would have been sure to recover. But after Wednesday’s two failed sell-off attempts, the reaction down from 1511.00 extended lower for a third. Did it fail?

The reaction’s follow-through down to 1494.50 was the biggest sell-off attempt yet, and it was mostly recovered. “Mostly,” as in 61.8%, back to 1504.75. That’s often where a correction peaks. So, either Thursday morning’s dive has been corrected and it is about to resume, or else the recovery will extend back to the 1511.00 high.

It’s odd that wasn’t resolved Thursday. This stage of that pattern was likely to trend 9 points either way from 1503.00. Even the 3:37-3:52 position-squaring window only ranged sideways, which is unusual for so volatile of a session. Gapping open Friday would explain that away.

[/pay]What’s Next… (Outlook and opportunities)[pay]
This being a Friday, a new high close would entrench the rally’s momentum into next week. Whether that meant extending higher without delay (probably) or absorbing an immediate reaction down, this week’s sellers would be undermined. Similarly, probing fresh highs Friday morning would be vulnerable to reversing down sharply into negative territory — think Thursday, on steroids (or, suffering steroid withdrawal).[/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.