Trading Plan for 3/28
[pay]Pattern notes.
A funny thing happened on the way to oblivion. Thursday’s late drop under ESm 1338’00 fell to new session lows, closing at least under 1332’50 to signal a new downleg underway. Then around 1327’50, MACD & RSI diverged positively on a probe of lower lows. That was quickly rejected, and then technicals diverged positively again on another brief lower low. It was too late in the day for my rules to allow a buy signal, so I could only warn that the setup would have been a screaming buy had it appeared at any other time of the day. S&Ps did firm after the cash session close, and extended up to 1338’00 by midnight.
Thursday’s buyers seemed to put up a valiant effort intraday – several efforts, actually – and it was only the late dive that broke beyond either end of the overnight range. The overnight range itself was a recovery of ORCL’s earnings reaction, which had offered the potential to reverse the pullback from Monday’s high. Thursday’s repeated efforts didn’t take, for one reason or another, and S&Ps have every right to fall further Thursday night. That they have rallied 10 points instead is encouraging for possibly picking up and running with the baton that was dropped Thursday.
Indicators and internals.
I already noted above Thursday’s last-minute positive divergence at the low. During most of the rally since then, MACD & RSI have been flat to higher. A negative divergence on the 1-min chart at midnight is finally threatening a correction. Thursday’s internals were similar to Wednesday’s, with a far more wider spread between NYSE down and up volume than between the declining and advancing issues it produced. Friday’s session is similarly obligated to reward Thursday’s buyers for their relative productivity.
Friday’s opening setup.
The negative divergence at midnight has room down to ESm 1335’25 before threatening to let sellers gain traction for a reversal, which would be signaled no higher than 1334’25. Otherwise, a short and shallow retracement is next targeting 1340’25, and opening at either 1336’50 or 1340’00 would be enough to reject Thursday’s late downleg. I would find any early strength encouraging. If the overnight rally is instead retraced, then encouragement will turn to disappointment. At this stage of the pattern, each is equally capable of triggering a steep move in either direction with the weekend’s illiquidity just hours away.[/pay]