Trading Plan for 3/15

[pay]About that close (How the prior session ended)
Friday’s pre-open rally probed Thursday’s high by 6 points up to 1152.00. Half of that was a spike up on news an hour before the open. An hour later, price was 10 points lower probing overnight lows down to 1142.00.

There was no other trending attempt through any other timing window, and none was required. In fact, none was likely before the last 60-90 minutes. Finally the last hour did dip 3 points, and then retraced it when RSIs diverged positively.

But it was all noise within the range. The last-minute retracement did probe the afternoon highs up to 1147.00 after 4:00. But its timing qualified it as noise, too. The cash session close was essentially unchanged from Thursday’s close.

Pattern points (And technical influences)
The sponsorship of Thursday’s late rally was characterized as being weak hands before it even started. Completely retracing it back to the 1142.00 breakout point at the next open confirmed it. The spike up to 1152.00 was a reaction to news, disqualifying it from being a “new Globex trend extreme.” Its retest isn’t required, but it’s still an attraction.

Reacting down sharply from 1152.00 would confirm that its buyers were weak hands. Any attraction to it, or to the open’s 1150.00 gap, can be neutralized by retesting it overnight, or by gapping down under Friday’s 1142.00 low. Either scenario would conform to the “Rubber band” setup forming:

The “rubber band” setup identifies extreme optimism and impatience just before price either reverses direction sharply, or accelerates in the current direction (more often the former than the latter). S&P futures have closed higher for 11 consecutive sessions. At least twice during that time, S&P cash was essentially unchanged. No lower low to recover from, no dip that touches a prior high before bouncing. “Unchanged” is the only correction, and there have been only two.

Even if the rally stumbles Monday, there’s room down to 1131.00 before signaling the trend has reversed down. A lot of damage would be done in the process, but it could still be repaired during several days of ranging sideways. Meanwhile, accelerating the current rally would next target 1160.00 and 1166.00.

Bottom line (My underlying premise)
Friday’s flat session on the sequence’s day-11 doesn’t invalidate the setup. A second consecutive flat session would. This is a challenge, since narrow range-bound Friday afternoons often repeat on Monday morning. So, in the context of the “rubber band” setup, a volatile open Monday that extends the rally would be more appropriate than opening flat to lower. Even more appropriate for the “rubber band” setup? A steep sell-off, regardless of initial price action.[/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.