Trading Plan for 3/3

[pay]About that close (How the prior session ended)
Tuesday afternoon was unlikely to range narrowly because that’s what Monday afternoon did. There’s more to it than that. Both mornings had already tracked the same template, recovering from an opening dip, only to run out of buyers when probing session highs. Setups rarely repeat consecutively.

A slide into the session’s last half-hour fell from new session highs at 1122.75 to new session lows at 1115.25. That barely touched Monday’s high – which was itself only a momentary spike up – conspicuously avoiding the gap back to Monday’s close. It was hardly sufficient for a bottom, but the late timing fostered a slight bounce into the close.

Pattern points (And technical influences)
The noon hour had already attempted to trend down, but was only able to briefly probe its 1120.25 trigger. Its next break came as the afternoon’s no-bias environment was lapsing. This time there was no unfinished business above – the pre-open spike’s overbought RSIswere retested at 1122.75 during the no-bias environment.

Had the afternoon’s slide violated 1117.00 before the session’s last half-hour, the results could have been disastrous. Monday’s session would have been sliced through, on the way to Friday’s highs at 1105.00. Piercing 1117.00 so late helped Monday’s highs to hold as support.

Having closed back within the morning’s range after probing it, sellers did not gain traction. But the impatient bounce at Tuesday’s low suggests that buying isn’t very deep, either. A gap down under Monday afternoon’s 1111.50-1112.00 lows would inject sellers with traction, and put into play 1105.00.

Absent gapping down, Wednesday’s open is likely to retest Tuesday’s 1118.75 opening gap up. There’s room up to 1121.25-1122.00 before buyers gain traction to extend the rally. Even then, Tuesday afternoon’s slid gives cover to absorb much of a rally’s buying pressure. Any rally attempt that doesn’t trigger a breakout would be vulnerable to reversing down.

Bottom line (My underlying premise)
Tuesday’s pre-open surge was odd. There was no basis for it. Despite its complete retracement, after retesting its overbought high, it’s still suspicious. Fresh highs that immediately recover it would be really suspicious. Between the Greek debt crisis, and the administration blatantly managing down expectations ahead of Friday’s Employment report, I wouldn’t entertain shorting if another one of these rogue surges appeared. [/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.