Trading Plan for 3/11

That’s something you don’t see everyday… An extended consolidation that is still testing two-week old lows.. You don’t see that often in a rally. You do see it often before declines. Closing any lower would confirm.[pay]

Pattern points… (Setups and technicals)
Thursday’s overnight trend down and opening gap down was similar to the week’s prior two sessions. But Thursday differed in two important ways. First is that the open gapped under prior lows. Second is that sellers gained traction for their efforts.

Gapping down under prior lows, and closing under them, entrenches sellers. They can still be invalidated, but it’s much more difficult. And sellers gaining traction means Thursday’s pessimism was not ineffectual.

A third difference was narrowly avoided, and it’s the one potentially bullish element. The open’s low touched Feb 23’s low (circled red in the above chart). That was a “pivotal low,” the low prior to Feb 24’s actual low. Just touching a pivotal low all but ensures eventually touching its actual low. Having that objective outstanding would help the decline to extend into the next session. But Thursday’s late low already fulfilled it.

Lower lows remain possible thanks to Thursday’s ugly intraday pattern (nearby chart). Its multiple bottoms represent “ineffectual optimism” for the multiple failures. Its spikes reflect impatient buying, and not the pessimism of durable bottoms. Some meaningfully lower low remains likely eventually.

Impending weekend illiquidity can cut either way. Friday is not being preceded by a bounce to help absorb weak-handed sellers trying to avoid the weekend’s exposure. Without that buffer, any rally depends upon rejecting Thursday’s drop, and also any follow-through there may be.

What’s Next… (Outlook and opportunities)
The decline’s next lower target is 1278.00, whether by first firming, or simply extending down at Friday’s open. Any bullish path must reject either Thursday’s drop by gapping up above its 1300.00 intraday high, or else by abruptly rejecting fresh lows Friday.

A special note for this template is that Friday could range narrowly, and not trending early could mean not trending at all. Regardless, this being a Friday, the morning’s bias is likely to persist through the noon hour.[/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.