Trading Plan for 3/19
[pay]Pattern notes.
Has the market’s rise been a corrective bounce, or a bear market rally? Was there a single upleg having potential to 774’00 that would reverse back down to the lows (i.e. bounce)? Or was a multi-session, multi-leg advance underway targeting 800’00 or 821’00-825’00, and then back to the lows (i.e. rally)? Retracing a corrective bounce would have potential to hold a test of the lows. Reversing a bear market rally would target a move to new lows.
We still don’t know, but the two are starting to look very similar. The bear market rally’s minimum target has been achived in a single upleg from March 6’s low. The bear market rally would have to be substantial if this has been only its first leg.
Wednesday’s FOMC reaction spiked up from 774’00 and continued surging until testing 800’00 by 2 ticks. A close under 774’00 would have been self-evident as having sealed a top and already reversed momentum down. A gap open Thursday under 773’00 would serve by proxy, but Wednesday’s close above 791’00 makes that difficult.
Meanwhile, the last hour’s bounce from 780’50 is still likely to be retraced. Its origin was simply an obligatory bounce (780’50 had been a prior reaction’s low), and the bounce began from just above prior highs instead of first testing them. If the bounce’s 780’50 holds its test, then the rally could resume – if only to retest Wednesday’s 800’00 high. But I would give sellers a benefit of the doubt until proved otherwise.
Similarly, a close above 793’00-794’00 would have helped to absorb any initial selling. The alternative – a proxy – would be to gap open above 796’50 and reinstate the momentum of Wednesday’s rally, and possibly put into play 821’00-825’00.
Indicators and Internals.
Sellers did not do enough Wednesday afternoon to influence technicals. There was no unfinished business above, but sellers don’t appear to have opposed buyers. It’s not a sell signal, but the market’s reaction will be interesting when selling pressure actually appears.
Thursday’s opportunities.
Jobless Claims before the open are just the beginning of a moderately heavy calendar. LEI and the Philly Fed Survey come 30 minutes after the open, timing that tends to accelerate or to reverse any initial trending. A pullback Thursday need not end the corrective bounce or resolve back up into a bear market rally. But unless Thursday’s open is firming, a pullback is likely regardless. Gapping up would initially target 809’50. [/pay]