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Trading Plan for 3/4 – If, Then… Market Timing

Trading Plan for 3/4

By Rod David | March 3, 2011 - 6:03 pm

Thursday’s orphan rally emerged from a session that gained no traction, following an overnight session that suddenly trended, and extended higher without a single pullback. And this is no time to rest. Turning the selling pressure back on here would find little support back to prior lows.

SPECIAL NOTE: Saturday morning’s Open House starts 15 minutes early at 9:15am ET. And the event will be held in a separate chartroom, linked here. [pay]

Pattern points… (Setups and technicals)
Entering the last hour of an uptrending session at new session highs should extend higher into the close. Thursday’s last hour probed up to 1331.75. Not exploiting the opportunity reflects tired sponsorship. And the 3:10-3:20 timing window still had not extended higher.

This told us not to trust any subsequent rally attempt. A bounce from 1329.00 support was fully retraced after retesting 1330.75.

Thursday’s last 90 minutes ranged narrowly at 1329.00-1332.00. Such narrow, extended ranges tend initially to break falsely in one direction, and then reverse more substantially in the opposite direction.

Wednesday’s 3:10-3:20 timing window had projected the next rally leg’s pullback to develop into a new downleg. The next rally leg started at Wednesday’s close, and it has yet to include a pullback. Nothing overnight or intraday to refuel buyers, and now signs that buyers are losing steam.

None of which is a sell signal, leaving open the door to fresh highs Friday. And being a Friday, not rejecting initial strength early can marginalize sellers for the day. By the same token, the Friday morning’s bias signal tends to persist through the noon hour.

What’s Next… (Outlook and opportunities)
Friday’s Employment Situation report is an appropriate catalyst either to aggressively reject Thursday’s rally, or else resume it. Immediately breaking back under 1322.50 would resume Thursday’s rally Tuesday’s decline without leaving any unfinished business above. But a shallower dip back to 1325.00 could still recover well into positive territory. [/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.

Posted in Market Wrap, S&P