Trading Plan for 2/8

[pay]At the close (How the prior session ended)
1-min RSI had improved into session lows at 1040.75, formed a reversal pattern, and violated its bounce limit. The pattern’s 1048.00-1049.00 target was met, and definitely influenced price action for a half-hour into 3:00.

Resuming the decline would have produced a 15-point dive to 1034.00. Not resuming the decline produced a 15-point rally up to 1064.00. Such is the weirdness of Friday afternoon. Even after testing 1058.00 through 3:20, a dive to new session lows would not have been surprising.

Pattern points (And technical influences)
A return to Friday’s lows remains possible thanks to its last-minute action. The recovery’s ultimate 1064.00 high was part of a structure that included two prior highs. And Friday’s close reversed back under both. It’s not a sell signal, but it opens the door to one. Buyers responsible for the last push higher gained no traction for their effort, wasting any traction gained by earlier buyers. Closing before making that last push higher would have been more bullish.

All of the last two hours’ rally makes matters more difficult on buyers going forward. The low’s oversold condition creates pent-up buying pressure, and that might be sorely missed at Monday’s open. That said, it’s probably not a factor if ignored. through Sunday evening.

Meanwhile, RSIs were oversold at Friday’s bottom, enough to require a retest. The 3-minute RSI had been persistently oversold into the low, which undermines the quality of the recovery’s sponsorship.Friday’s base is too unstable to launch a durable rally. Without an immediate 8-10 point gain above 1067.50-1069.50, the three-week long decline remains especially vulnerable to probing new lows Monday or Tuesday.

Bottom line (My underlying premise)
A two-hour, 24-point rally is nothing to sneeze at. But recovering ground lost in the same session is bullish if extended on a closing basis. Yet, only S&P Cash closed positive, let alone above the morning’s high, and then only in Friday’s last several minutes. That can be accomplished after the fact by proxy, by spiking or gapping up at Monday’s open, above Thursday’s next resistance. Otherwise, much lower lows lie ahead. [/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.