Trading Plan for 3/20
[pay]Pattern notes.
Thursday’s pre-open buying pressure was a head-fake. Mainstream expectations were for the rally to resume, perhaps with the same force as Wednesday’s FOMC reaction. Much of the FOMC reaction had been retraced during Wednesday’s last hour, which the overnight recovery seemed poised to reject. Not so fast, there.
The overnight rejection was itself rejected. Wednesday’s last-hour low at 780’25 required a retest, and it was retested, just before noon. When that bounce began, its optimistic characteristics were identified, and its retest was expected to extend lower. It did, down to 778’00. The market bounced 11 points into mid-afternoon. Had the bounce extended higher into late-afternoon, it would have retested the 800’00 area and perhaps extended up to 821’00-825’00.
Instead the bounce was retraced entirely. Actually, not entirely. Last-hour attacks on the morning’s low stopped 2 ticks short of touching it. The optimism prevented any bounce from gaining traction. Then a last-minute dip probed the morning’s low by 3 whole ticks down to 777’25. But only momentarily, as S&Ps immediately bounced 4 points through the close.
The pattern should have resolved down sharply if it wasn’t going to rally. And it didn’t rally. So, does trading out the day at session lows qualify as resolving down? No, so now the pattern requires Friday’s open to gap down to and through 774’00-777’00 to serve by proxy as if Thursday’s close was under 778’00. Back above 787’00 would be bullish for retest of the highs instead.
Indicators and Internals.
Thursday’s 3-minute technicals were very complacent while 1-minute MACD & RSI fluctuated widely. Option expiration influences can be responsible for this split personality. But expiration’s influence doesn’t shield price action from resolving the split personality in a violent manner. The readings are less likely to repeat Friday.
Friday’s opportunities.
Expiration session characteristics tend to be duplicated the following Monday. If Friday’s openj does gap down and slide sharply then Monday would also be likely to extend down. By the same token, maintaining early strength would set-up a bigger recovery into the week. One thing not expected is a flat narrow range.[/pay]