Trading Plan for 3/11

[pay]Pattern notes.
S&Ps had barely ticked under the cash session low to officially fulfill the “V” bottom’s required retest, then reversed up soon after the Globex open, eventually probing the ESh 1283’25 bias-up signal by 2 ticks. A dip just pierced the 1279’75 bias-down signal, and holding it as support would allow the 1288’50 bias-up target to come into play – where the decline would become likely to resume again. Even that strong of a gap up wouldn’t recover any significant resistance, or break the downtrend. Monday’s “V” bottom requires more retesting than the momentary piercing it got Monday, and the next lower targets are essentially 1266’00 and 1255’00.

Indicators and internals.
Monday’s internals certainly left a vacuum for buyers to fill. Nine times more NYSE down volume than up volume produced “only” five times more declining issues than advancers. The spread between issues is wide enough to demand an eventual retest of the low, if not a resumption of the decline. But the lopsided application of volume required Tuesday’s session to reward Monday’s buyers for their relative productivity, even if only momentarily.

Tuesday’s opening setup.
There is room back up to ESh 1281’50-1282’00 before buyers gain traction again. Overnight illiquidity hampers predictability, but the rally attempt is credible so long as 1277’75 holds as support. The caveat is that the overnight high – like Monday’s pre-open high – is not a “new Globex trend extreme” that would otherwise require retesting during regular trading hours. So failing to maintain this overnight rally could easily resume the decline and produce a gap down to new lows tomorrow.[/pay]