Trading Plan for 3/4

[pay]Pattern notes.
The 693’50 target has been long-standing, first identified at November’s low. It was confirmed by being the target of several other major distribution patterns that had formed throughout the interim months. Its repeated testing as support Tuesday morning and the afternoon’s steep rally would have made a recovery credible.

But a recovery needed to stand the test of time – or, more precisely, timing – by extending up above 709’25 through 3:20-3:30. The penalty at this stage of the pattern was a same-day reversal to new lows. After the cash session close, lower lows fell to 688’75.

Lower lows are all but required Wednesday. A bottom setup might yet develop from the resulting price action. They don’t call it “Wreversal Wednesday” for nothing, if not for the weekday’s history of often reversing early trending. But meanwhile, any initial bouncing would not be credible unless it literally gaps up above Tuesday’s 709’25 high.

Indicators and Internals.
RSI deteriorated to the afternoon’s worst levels as the cash session came to a close. Technicals only continued deteriorating as the futures session drove price down sharply further. No unfinished business was left outstanding above.

Wednesday’s opportunities.
I don’t know of any administration officials scheduled to speak, and there hasn’t been any reason to suspect an intervention coming. A Rubin-esque tactic would be to let the market react poorly to ISM or to Beige Book – or after Thursday’s Jobless Claims – and then intervene so Friday’s Employment Situation could be greeted from (presumably) an optimistic bias. Those were the days. Meanwhile, having seen this market willing to punish Tuesday afternoon’s buyers for stopping short, I would expect any other bounce to also fail.[/pay]