Trading Plan for 3/10

[pay]Pattern notes.
Friday’s pattern was interesting in many ways. From its gap down to new lows and the reversal back into positive territory, to the slide down to new lows where the target identified the last hour’s short-squeeze. But the most interesting facet to Friday’s price action its close, which was equal to the opening price. This feature’s interestingness relies somewhat on the session’s other interesting factors, because while it is one thing to open and close at the same level – not unusual for turning points – it is quite another to do so after attempting so much trending either way in the interim.

The session resolved several bits of unfinished business at lower levels. At least two items had pre-dated the session: targets in-play at ESh 1299’00 and 1285’00. The magnetic attraction to a “new Globex trend extreme” that printed overnight was also neutralized intraday, and it also held as support at the close. It is very compelling to announce that a bottom was made. Indeed, a bounce to 1306’00-1307’00 might be unavoidable regardless of whether a larger bounce or recovery was underway. That bounce, and a potential recovery, would be likely if Monday’s session can absorb a loss. The problem is that I’m not sure whether the market can absorb a loss.

Indicators and internals.
MACD & RSI diverged positively or improved when S&Ps were retesting the ESh 1285’00 target by the expected 2-3 point margin. That was bullish, but not anymore since it already produced a half-hour 20-point short-squeeze. Technicals were weak among shorter intervals on a pullback into the close, but they did not even begin to get oversold, which would have been more bullish for Monday’s chances.

Monday’s opening setup.
Friday reversal setups aren’t very rare, they’re just not very reliable. Two-day reversal setups are rarer, but they’re very reliable when those two days are Friday and Monday. Friday’s last-hour short-squeeze neutralized a lot of buying pressure, almost grudgingly considering that MACD & RSI hardly noticed. Early weakness Monday will be assumed credible until proven otherwise, and the burden of proof will be on buyers in case of early strength. At the very least, a durable rally would close above Thursday’s ESh 1306’00-1308’00 close. But a close under Friday’s low would more likely run lower to retest January’s lows, and then probably lower.[/pay]