Trading Plan for 3/25

If another gap up reverses down sharply into negative territory… then it won’t be dismissed as expiration related And retesting the highs would be off the table.

Pattern points… (Setups and technicals)[pay]
Monday’s gap up  that reversed down into negative territory duplicated Friday’s pattern. Both duplicated a pattern we’ve observed and discussed during the past couple of weeks. It is distributive, and its ongoing occurrence keeps the door open to revisiting last Sunday night’s 1823.50 low.

If the door down isn’t actually open, then at least it isn’t locked. Failing to recover from a probe under Friday’s 1841.50-1843.00 lows would kick in that door.

Otherwise, the path up remains available, too. Monday’s sellers gained little traction for their effort, closing back above the morning’s bias environment low. The noon hour’s bobble didn’t extend when it could have. And no new downleg exploited the afternoon’s recovery not gaining traction.

Monday’s pattern was a form of “ineffectual pessimism.” Gapping up Tuesday could extend back to and through Friday’s 1876.75 high. Gapping up is the only credible path higher Tuesday since the afternoon’s buyers gained no traction for their efforts.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The week began with extreme sentiment that proved to be a sentiment extreme. That doesn’t tend to repeat on Tuesdays, so gapping up would get be extra credible for extending higher. But we’ll still reiterate being cautious since this is a very distributive area.[/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.