Trading Plan for 3/18

[pay]Pattern notes.
Monday’s rally had potential to 774’00 before being cut down by the afternoon’s drop. Tuesday’s rally finished the cash session at 774’00. Despite extending to 777’00 after the close, a dip fell to 771’25. But essentially the overnight price action has ranged around 774’00.

This is equilibrium – meeting a target as a timing window closes. The trending didn’t stop short and leave something on the table to resume the trending. The trending didn’t extend in time to put into play further targets. And the trending wasn’t retraced in time to reverse direction. Typically, the first trending attempted from equilibrium is false, similar to trending from a triangle or from an extended range.

The pattern has yet to establish whether it is beginning a multi-week bear market rally, or ending a corrective bounce off the lows. But the 774’00 area was the latter’s upper-limit, and it has been met. Maintaining higher highs would suggest a bigger rally underway, targeting 800’00 and potentially 821’00-825’00. Not extending higher Wednesday wouldn’t signal momentum reversing down, but it might as well, if Tuesday’s rally out of Friday and Monday’s ranging can’t attract more buying.

Indicators and Internals.
A positive divergence at the 771’25 overnight pullback low quickly bounced 3-1/2 points but hasn’t extended higher while technicals have deteriorated. There is no unfinished business either way.

Wednesday’s opportunities.
The afternoon’s FOMC announcement might inhibit trending attempts by late-morning. CPI could help to get things going for awhile. So long as the bias-down isn’t signaled, a retest is likely of Tuesday’s 777’00 post-close high… Be sure to add your stock request on the blog for today’s review. [/pay]