Trading Plan for 3/24

Tuesday night’s drop was the ultimate in ill-timed selling… Like Tuesday’s intraday dips, and Monday night’s drop before it, selling was sponsored by weak hands. No-bias selling, bias-up selling – triggering Wednesday morning’s bias-down signal wasn’t bearish, since the bias-down target held its test, too. [pay]

Pattern points… (Setups and technicals)
A buy signal triggered during Wednesday morning’s bias-down environment. After an extra dip back to the 1279.00 low, the rally extended up to 1296.00. The rally was repeatedly expected to resolve each challenge favorably, and it did.

It isn’t surprising that some cracks in the rally’s momentum started appearing. What’s surprising is how many suddenly started appearing after the bias environment started lapsing at 2:30:

– Late start. The 1293.00 target was met by a leg that originated after the bias environment had started lapsing, which means its sponsorship was weak hands.

– Slow finish. The last hour at 3:00 was not entered cleanly above 1293.00, let alone at fresh highs. The weak-handed sponsorship being attracted was thinner, yet.

– False start. The 3:10-3:20 window began by trending up to a fresh high above 1294.50, but ended by retracing back down to it. This setup suggests the next fresh high will be rejected aggressively.

– Wet fuse. A Rising Wedge that formed in the last hour’s uptrend didn’t resolve up. While this resolution isn’t assured, delaying it makes it no less likely.

– Too low. Touching the last productive pullback limit at 1293.00 signaled the rally’s momentum had ended.

Wednesday’s post-close break under 1293.00 extended down to 1289.50. This is a 38.2% retracement of the rally from Wednesday morning’s low. If it now resolves in a recovery to fresh highs, then its sponsorship would not be the strong hands attracted to a 61.8% dip. And impatient buyers tend to produce a final fresh high.

Another reason for visiting fresh highs is Wednesday’s hesitation at 1296.00. Peaking pessimistically just 1-2 ticks under the prior two days’ highs, from a contrary perspective, suggests the pullback will recover. It’s being attempted now by a  surge back up to 1292.25 from the post-close dip touched 1289.50.

What’s Next… (Outlook and opportunities)
Rejecting a fresh high in the same timing window that it appears – whether overnight or Thursday morning – would leave no unfinished business above. Exiting a timing window above prior highs would be likely to extend higher.

First things, first. Recovering 1293.00 would start to target 1297.00 or 1299.00. If not rejected on a timely basis, the next higher objective at 1311.00 could be just the beginning. Regardless of overnight action, opening Thursday under 1287.50 would suggest the next downleg was already underway.

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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.