Trading Plan for 3/31
Wednesday’s open generally held its pullback limit… And that’s the rally’s bad news. A deeper dip could have been the first since Tuesday morning’s bottom to retest a prior low. Buyers haven’t been refueled for the past 27 point. And rallying through the noon hour reflects weak-handed sponsorship. [pay]
Pattern points… (Setups and technicals)
Wednesday’s noon hour rally peaked at 1327.75 just after the noon hour ended. The balance of the session seems to have trended down to 1323.00. But actually, only the last half-hour dipped back under 1325.00.
The noon hour’s 1325.00 low was tested and retested as support. It had been the morning’s bias-up target and the afternoon’s bias-up signal. Delaying its probe until an irrelevant timing window makes its sponsorship irrelevant.
So, we have a battle between weak-handed buyers (rallying to new highs through the noon hour) and irrelevant sellers (probing support during only the last half-hour). All taking place at the highs of an extended, uncorrected rally (from Tuesday’s low).
Their battle is also developing at Feb 22’s trend change signal around 1324.00-1327.00 (accounting for premium changes). It has held tests before. Recovering it one day could be invalidated by not closing higher the next day. And closing back under 1321.00 would signal that its current test had held.
Timing is also interesting, with Friday’s Employment Situation report fast-approaching. The next higher objective is 1338.00 in a retest of prior highs. Testing into or out of Friday morning would be difficult to extend without a sizable retracement. A retracement that would be vulnerable to sellers gaining traction.
What’s Next… (Outlook and opportunities)
Giving the rally a benefit of the doubt, Wednesday afternoon’s pullback has room down to 1322.00. Touching 1321.00 should be done overnight, if at all, and quickly rejected by a productive recovery. Opening under 1321.00 Thursday would target at least 1308.00. Recovering 1326.00 should resume the rally through the morning, until price action becomes paralyzed by anxiousness ahead of Friday’s pre-open report. [/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.