Trading Plan for 3/4
[pay]About that close (How the prior session ended)
The slide from Wednesday morning’s 1125.00 highs slid to its most pessimistic extreme at 1115.50. Falling any lower would have given buyers a chance to undermine sellers, by recovering back above 1117.25, and trapping shorts.
RSIs were oversold at the 1115.50 low. A retest could have formed a positive divergence, and a durable bottom. Anyway, only weak-handed sellers would have sponsored the bounce’s retracement so late in the day. Even a lower close would have been suspicious, and vulnerable to recovery Thursday.
Pattern points (And technical influences)
Instead, the 1115.50 low’s oversold RSIs still require a retest. The late bounce’s buying was sponsored by weak hands. The bounce neutralized the low’s oversold condition, instead of letting an oversold bounce get the day started bullishly on Thursday. Sellers didn’t gain any traction on the positive close, but they didn’t lose any, either – and buyers didn’t gain any traction that they didn’t already have.
There is no unfinished business above. It has been resolved almost as quickly as it was created – from Tuesday’s pre-open surge to 1122.75 being retested that afternoon, to Tuesday’s opening gap being tested at Wednesday’s open, to any semblance of overbought RSIs Wednesday morning.
Gapping down Thursday under the 1115.00 lows could create new unfinished business back to Wednesday’s ~1118.00 close. Filling it quickly enough would invite durable selling. A gap under 1112.00 would not require filling any gap above 1114.50. By the same token, gapping up would leave open a gap back down to Wednesday’s close, unless the gap were above Wednesday’s 1125.00 highs.
Bottom line (My underlying premise)
There is a cornucopia of econ reports and related items Thursday, so a flat open is unlikely. Some sort of gap will be made, and it will probably influence the initial path to reaching the pattern’s eventual resolution. Regardless, unless the open does gap up above Wednesday’s highs, this pattern is still positioned to resolve down.[/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.