Trading Plan for 3/3

Corrections come in several flavors. Tuesday’s drop was retraced by 38.2%. A 61.8% retracement would have refueled more sellers. A bigger bounce is still possible while awaiting buyers or sellers gaining new traction.[pay]

Pattern points… (Setups and technicals)
Trending up from a fresh low during Tuesday’s 3:10-3:20 timing window had indicated the next new low would try to bottom. The attempt before Wednesday’s open indicated it would be only a temporary bounce. So the morning’s rally to 1313.75 was retraced into negative territory.

Similarly, Wednesday’s 3:10-3:20 timing window trended down from the afternoon’s 1312.25 high. It’s not a sell signal, but it is context for the next rally attempt. No rally attempt is required, but it would likely be a temporary bounce that launches a downleg. Maybe that’s why Wednesday narrowly avoided closing under 1306.50, which would have merited holding short through the close.

A bounce might be difficult from so close to Wednesday’s oversold RSIs. They make noon’s 1301.50 low require a retest. And its retest could launch a bounce to 1315.00 or 1318.00.

While a bounce would likely fail, it would be vulnerable to gaining traction for something more substantial. Similarly, breaking under 1301.50 support would target 1294.00-1295.00, and then fresh lows down to 1289.50 and 1282.50.

What’s Next… (Outlook and opportunities)
Wednesday’s volatility expended a lot of energy while closing essentially unchanged (relative to Tuesday’s cash session close). That can form equilibrium. Two or three morning trending attempts are attempted, each likely to fail. Gapping beyond a prior high or low (i.e. 1302.00-1312.00) would more likely trend in that direction.[/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.