Trading Plan for 3/28

Retesting last week’s highs… wasn’t just likely. It was likely to reveal pretty quickly whether a new rally leg was underway, or if a top was forming. Tuesday’s action offered some interesting insights…

Pattern points… (Setups and technicals)[pay]
Tuesday’s open maintained a break under its 1413.25 overnight low. This removed any attraction to the 1419.50 overnight high. It also enable putting into play a test of 1408.00. Delaying the target’s test, without using that time for a bounce that might absorb more selling pressure, the target’s test soon had room down to 1406.25.

The session closed while testing 1406.25-1408.00. The pattern’s selling pressure is satisfied. Extending down would require new sponsorship to arrive. Changing sponsorship without an interim correction tends to require gapping open.

Recovering from 1406.25-1408.00 should also begin by gapping open. This resolution might seem likelier since Tuesday’s break under the morning’s lows was too late to be sponsored by strong hands. But that likelihood for a recovery is offset by not already reacting up. Weak hands can be clever, leveraging a late break’s modest traction into a bigger drop.

Meanwhile, the retest of last week’s high has already given its first signal that buyers are not gaining traction: Probing the prior high, then closing under the prior day’s close. Closing back above the 1408.00 prior high would not suffice for reversing momentum up. So, despite still sitting above all prior lows, the burden of proof is on buyers.

[/pay]What’s Next… (Outlook and opportunities)[pay]
A gap down Wednesday has room to 1396.50 before signaling a much more durable downleg underway. A gap up could test 1412.50 resistance. These are not bias targets, but landmarks that would be relevant if tested intraday.[/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.