Trading Plan for 3/14

Worried about bank stress tests?… JPM had just the solution — it increased its dividend prior to the Fed releasing test results. The market had been sitting on the precipice, quite relieved at the news. Does this action discount too much optimism ahead of the actual test results?

Pattern points… (Setups and technicals)[pay]
It’s interesting that prior to the news, S&Ps had formed all four legs of a bearish reversal pattern. It was only lacking a trigger. And that trigger had been delayed during the afternoon’s bias-up environment.

Then the 1378.00 bias-up signal was still being tested at the bias environment’s exit. That limp action was not enough to reject it at 1:20, and it wasn’t enough to reject it at 2:30. The last rejection opportunity was to enter the session’s last hour under 1378.00‘s last relative low — 1376.50. Guess what was being recovered at 3:00. (Rhetorical question.)

None of which is a buy signal, but the 1386.25 bias-up target became “unfinished business above.” A buy signal was actually triggered by recovering 1378.00, but it required a standing buy-stop to execute.

Tuesday’s 24-point session-long rally was a breakout above prior highs. Regardless of the rally’s size and duration, it has yet to be confirmed by a second consecutive higher close. Also, Tuesday’s 1391.25 high touched big resistance, the 61.8% extension from last week’s 1369.00-1333.00 pullback.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The stress test results’ immediate reaction was a spike down to 1386.25. A bounce is now attacking 1390.00. That’s relatively shallow, so it is only noise.Any higher close would target 1405.00, with potential to 1427.50. A drop has room down to 1384.25 or 1381.25 before invalidating Tuesday’s breakout attempt.  [/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.