Trading Plan for 2/9
[pay]At the close (How the prior session ended)
Perhaps I shouldn’t be surprised that the decline into Monday’s close wasn’t much more pronounced. A 15-point drop from morning highs at 1068.50 had touched 1053.00, probing the morning’s 1056.00 retest of overnight lows.
My theme for the day was “disappointment,” its intended victim being the optimism generated by Friday afternoon’s recovery. We already knew that buyers gained no traction for their efforts. And resistance at 1067.50-1069.50 had held a couple of tests.
Apparently the surge from Friday’s lows generated a lot of optimism. Despite most of Monday trending down, no doubt there were hopeful buyers all the way. Unless the afternoon drop is rejected at Tuesday’s open, the theme of disappointment should become more prominent intraday.
Pattern points (And technical influences)
Where Friday afternoon’s buyers failed to gain traction, Monday afternoon’s sellers succeeded. Friday’s rally tested prior highs but closed under them. Monday’s decline probed prior lows (the morning’s retest of the 1056.00 overnight low) and closed under them.
There is no unfinished business above the market. So, opening forcefully higher – above the afternoon’s 1063.75 high – would require sponsorship. Almost any shallower opening strength would be a temporary reaction bounce. A bounce isn’t necessary before extending down. But considering the slow onset of disappointment, perhaps it shouldn’t be surprising.
Bottom line (My underlying premise)
Assuming that a better rally effort doesn’t get underway, I’m very eager to learn how a retest of Friday’s lows is handled. It’s too late for a positive divergence with Friday’s reading. And even a shallow bounce would still be near Friday’s low – launching a downleg early enough would have plenty of opportunity to extend down sharply. So great is the opportunity for extending the decline, that a failed attempt would be considered bullish. [/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.