Trading Plan for 3/3
[pay]Pattern notes.
The cash session closed high enough to foreclose upon remaining short through the close. S&Ps spiked up right before the futures close, ending above the afternoon’s 703’00 prior lows. Sellers would have been robbed of their traction had the cash session closed this way. The potential for bouncing was enhanced, but potential for maintaining the bounce was undermined. Almost doomed.
A bounce could have retested Monday’s 720’00 opening gap without giving buyers any meaningful traction. Monday’s opening gap could still be retested – we might even posture for its retest this morning. The bounce overnight ultimately peaked at 715’25, and currently a 10-point drop from there is trying to reverse back up. The status of that effort by the time of our Morning Market Tour could define the morning’s direction.
Yesterday afternoon’s price action mostly ranged sideways. Its resolution was vulnerable to resuming the decline, but only probed new lows under 700’00. And the new lows were in no way qualified to serve as a bottom. This might be an attempt to allow a soft landing at the 693’50 target’s test (assuming the target is even tested). It might also be a strategically located refueling effort to enable plunging through 693’50.
We’ll monitor and assess the possibility of either in real-time. But be prepared that a softer approach on the target could suddenly shift gears and accelerate down. Also be prepared that a steep intraday drop could still recover back above the target on a closing basis. And mostly be prepared for the potential – and temporary – upside of any intervention. For now, however, the trend remains down.
Indicators and Internals.
RSI diverged negatively at the overnight bounce’s first test of 715’25. Its retest several hours later hadn’t improved. The eventual 10-point drop saw rotating improvement among MACD & RSI around 706’00-707’00, which has so far produced a bounce probing 709’00. But technicals at the drop’s low didn’t indicate any durable bounce yet possible, and technicals are deteriorating on the bounce being attempted.
Tuesday’s opportunities.
This morning’s econ calendar offers several glimpses into the consumer, which might yield some strong opinions on the stimulus bill’s psychological impact. It’s probably too early to gauge its success or impediment. Having missed its opportunity yesterday to signal a crash, the decline’s early resumption this morning would have a better chance at holding a test of its 693’50 target. Delaying the decline’s resumption past this morning would make that resumption much likelier to have much lower targets on its mind. [/pay]