Trading Plan for 3/25
Pattern notes.
The premise to yesterday afternoon’s decline is that it was not trending or a new downleg, but simply a pullback or noise within the range. The argument for this is that prices only eked their way lower, and only back to prior lows of a consolidation that had yet to really break higher. The result was to create pent-up buying pressure, some of which escaped when S&Ps popped-up several points right after the cash session close. More of that pressure was released several hours later when the bounce had extended to 8-1/2 points.
The premise would be rejected if Tuesday’s open were to maintain a gap under Monday’s last-minute low around ESm 1349’00. So it is interesting that S&Ps have eventually retraced the entire recovery and just touched 1348’00. So either the recovery plans have been scuttled, or else the buying pressure has become pent-up again. Back above 1350’25 would signal that buying pressure was being released again, confirmed above 1353’00. Until confirmation, a corrective drop targeting 1341’00 could still develop.
Indicators and internals.
MACD & RSI had improved into Monday’s last-minute low, but the overnight bounce has already fulfilled this setup. Technicals are improving again as S&Ps make new lows overnight, but not yet diverging positively among several time intervals. Yesterday’s internals were bullish. The ratio of NYSE up volume to down volume was less than 4:1, but the ratio of advancing to declining issues was about 4-1/2:1. The session itself did gain ground, which mitigates the obligation for Tuesday’s session to reward Monday’s buyers for their relative productivity, a reward that might have been delivered already overnight.
Tuesday’s opening setup.
One econ report is due Tuesday, Consumer Confidence at 10:00am ET. The timing tends either to accelerate or to reverse any initial trending, but that probably won’t be of much help if S&Ps had not yet recovered from gapping down under 1349’00, but the timing could make or break a recovery attempt’s test of confirmation. While a recovery attempt would be signaled underway back above 1350’25, that might also be an appropriate stop for shorting a gap down.