Trading Plan for 3/12

[pay]About that close (How the prior session ended)
The afternoon’s no-bias environment began lapsing after 2:30, freeing its narrow trading range to begin trending. It was greeted by an uptick, and not a down tick. The morning’s no-bias environment had created the objective to test 1142.75, and it was tested by a surge at 3:00 that extended to 1144.00.

Overbought RSIs at the high prevented a dip down to 1142.00 from gaining traction. Any lower was unlikely, because any lower would have signaled momentum reversing down. Meanwhile, the dip formed a bullish Falling Wedge continuation pattern. The required retest of its high extended up to 1146.25.

Pattern points (And technical influences)
The timing of Thursday’s late surge is revealing of its weak-handed sponsorship. Waiting until there was too little time for the opposition to mount a defense allowed the classic short-squeeze. Clever. Not well masked – the timing, its inflection point and its behavior all developed on cue – but clever nonetheless.

The cleverness was self-defeating, because it borrowed from Friday’s buying pressure. “Ineffectual pessimism” had formed from gapping down and ranging exclusively in negative territory. Pent-up buying pressure would have fueled the rally’s resumption Friday. Instead, Wednesday’s 1143.25 high wasn’t exceeded until Thursday’s last ten minutes, which is hardly timing for a reliable breakout.

Thursday’s clever last-minute optimists are benefiting from patient sellers, and might continue benefiting. S&P cash (SPX) has returned to January’s high, which is likely to at least be probed. Meanwhile, my “Rubber band” crash setup has completed with at least nine of ten consecutive sessions closing higher. Avoiding a deep sell-off Friday could extend the rally three more days.

Only 3-minute RSI remained overbought at Thursday’s 1146.25 closing high. A shallow pullback has room down to 1142.00-1143.00 without sellers gaining traction. Gapping down under 1139.25 would reject the last hour’s rally altogether as if it had never happened. Otherwise, the rally’s momentum remains intact.

Bottom line (My underlying premise)
This being a Friday, the morning’s bias signal is likely to persist into the afternoon. A bias-up then at this stage of the pattern could marginalize sellers through next week’s open. A bias-down could punish the sponsorship of Thursday’s last-hour rally, and also the sponsorship of the morning’s recovery. If this rally isn’t rejected forcefully with little delay before the weekend, then it could extend up sharply through Monday’s open.[/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.